Legislature(2013 - 2014)BARNES 124

04/03/2013 01:00 PM RESOURCES


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01:48:48 PM Start
01:49:16 PM SB21
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued at 7:30 p.m. Today --
+= SB 21 OIL AND GAS PRODUCTION TAX TELECONFERENCED
Moved HCS CSSB 21(RES) Out of Committee
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
               SB  21-OIL AND GAS PRODUCTION TAX                                                                            
                                                                                                                                
1:49:16 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  announced that the  only order of business  is CS                                                               
FOR SENATE BILL NO. 21(FIN) am(efd  fld), "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; providing  a tax credit  against the  corporation income                                                               
tax  for qualified  oil and  gas  service industry  expenditures;                                                               
relating to the oil and gas  production tax rate; relating to gas                                                               
used in  the state; relating  to monthly installment  payments of                                                               
the  oil  and  gas  production  tax;  relating  to  oil  and  gas                                                               
production  tax  credits  for certain  losses  and  expenditures;                                                               
relating  to  oil and  gas  production  tax credit  certificates;                                                               
relating  to nontransferable  tax  credits  based on  production;                                                               
relating to the  oil and gas tax credit fund;  relating to annual                                                               
statements by  producers and explorers; establishing  the Oil and                                                               
Gas   Competitiveness  Review   Board;   and  making   conforming                                                               
amendments."  [Before the committee  was HCS CSSB 21, Version 28-                                                               
GS1647\K,   Nauman/Bullock,  4/2/13,   adopted  as   the  working                                                               
document on 4/2/13.]                                                                                                            
                                                                                                                                
1:50:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER moved  to adopt  Amendment 1,  labeled 28-                                                               
GS1647\K.7, Nauman/Bullock, 4/2/13, which read:                                                                                 
                                                                                                                                
     Page 17, following line 11:                                                                                                
     Insert a new bill section to read:                                                                                         
        "* Sec. 24. 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)  2022 [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, 2016,  from at  least one  lease or  property in                                                                    
     the state."                                                                                                                
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, line 6:                                                                                                           
          Delete "sec. 31"                                                                                                      
          Insert "sec. 32"                                                                                                      
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 37"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "28, and 37"                                                                                                   
          Insert "29, and 38"                                                                                                   
                                                                                                                                
     Page 29, line 25:                                                                                                          
          Delete "31"                                                                                                           
          Insert "32"                                                                                                           
                                                                                                                                
REPRESENTATIVE TARR objected.                                                                                                   
                                                                                                                                
REPRESENTATIVE  HAWKER explained  Amendment 1  extends the  small                                                               
producer tax  credit expiration  date from  2016 to  2022.   As a                                                               
balance is sought  to provide an appropriate  suite of incentives                                                               
across  the  entire  spectrum  of  explorers,  producers,  legacy                                                               
producers, and  new producers, it  is appropriate to  extend this                                                               
credit.   The committee  was asked  to allow  this credit  to act                                                               
indefinitely, but  that is  inappropriate.   The credit  for each                                                               
one of those is  a maximum of $12 million a year,  which is not a                                                               
threat to the treasury.                                                                                                         
                                                                                                                                
1:51:31 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE  requested  the   administration  to  comment  on                                                               
Amendment 1.                                                                                                                    
                                                                                                                                
MICHAEL PAWLOWSKI, Oil & Gas  Development Project Manager, Office                                                               
of  the Commissioner,  Department of  Revenue (DOR),  pointed out                                                               
that extension of  the small producer tax credit  was included in                                                               
the governor's  original bill in  the same manner as  proposed in                                                               
Amendment  1  for  the   reasons  articulated  by  Representative                                                               
Hawker.    However,  as  the  bill  moved  through  the  process,                                                               
committees  weighed the  balance  and  made different  decisions.                                                               
This provision fit the concept,  as the governor introduced, that                                                               
benefits come with production.   The small producer tax credit is                                                               
a  non-transferable  credit that  is  taken  when a  company  has                                                               
production.  He offered appreciation  that Amendment 1 is drafted                                                               
in the  same manner as  which it  was considered in  the original                                                               
bill.                                                                                                                           
                                                                                                                                
REPRESENTATIVE TARR  requested further  discussion of  the fiscal                                                               
impacts.                                                                                                                        
                                                                                                                                
REPRESENTATIVE HAWKER replied Amendment  1 extends the tax credit                                                               
under  AS 43.55.024(c).   Subsection  (c) applies  to a  calendar                                                               
year for  which a producer's  tax liability for  production taxes                                                               
exceeds zero.  A producer that  is not producing more than 50,000                                                               
British Thermal  Unit (BTU)  equivalent barrels  may apply  a tax                                                               
credit of  not more than  $12 million for  the calendar year.   A                                                               
formula under (c)(2) provides that  for more than 50,000 but less                                                               
than 100,000 BTU  equivalent barrels, a producer may  apply a tax                                                               
credit  of not  more  than  12 factored  by  a  fraction for  the                                                               
calendar year; the mechanics of that fraction are in statute.                                                                   
                                                                                                                                
1:54:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON surmised  Amendment 1 attempts to ensure                                                               
long-term  as  well  as  short-term  results  because  it  is  on                                                               
exploration.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER replied  extension of  this credit  is all                                                               
about  crafting a  tax  policy that  ensures  the state's  policy                                                               
focus  shifts from  pure spending  by industry  to production  by                                                               
industry.  This credit requires production to receive benefit.                                                                  
                                                                                                                                
REPRESENTATIVE SEATON,  given this  is barrel of  oil equivalent,                                                               
inquired what the effect will be  on gas producers and whether it                                                               
is within  the range of the  amount of natural gas  that would be                                                               
produced by explorers in Cook Inlet now.                                                                                        
                                                                                                                                
REPRESENTATIVE  HAWKER  deferred  to the  Department  of  Revenue                                                               
(DOR) for an answer.                                                                                                            
                                                                                                                                
MR. PAWLOWSKI  responded AS 43.55.024(f)  has two  small producer                                                               
credits.   He said AS  43.55.024(b) is the small  producer credit                                                               
for areas outside  of Cook Inlet and outside of  the North Slope.                                                               
He deferred to the Department of  Law (DOL) to discuss the impact                                                               
in Cook Inlet.                                                                                                                  
                                                                                                                                
1:57:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  reiterated his question to  the Department                                                               
of Law,  asking whether the  50,000 barrel of oil  equivalent per                                                               
day would  mean that just  about everyone producing gas  would be                                                               
tax free.                                                                                                                       
                                                                                                                                
SUSAN  POLLARD, Assistant  Attorney  General, Oil,  Gas &  Mining                                                               
Section,  Civil Division  (Juneau), Department  of Law,  said she                                                               
cannot answer  the economic question,  but the  particular credit                                                               
being  amended is  the small  producer credit,  so, yes,  it does                                                               
apply  statewide.    She  said Mr.  Pawlowski  mentioned  the  AS                                                               
43.55.024(a) credit, which  is just a "Middle  Earth" tax credit,                                                               
and Amendment 1 is for AS 43.55.024(c) small producer credit.                                                                   
                                                                                                                                
1:58:20 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE said  his reading of Amendment 1 is  that it would                                                               
amend AS  43.55.024(d) by extending  the date under which  it can                                                               
be applied for.   He offered his belief  that what Representative                                                               
Seaton is  getting to  is that the  credit under  AS 43.55.024(a)                                                               
applies to south of 68 degrees North [latitude].                                                                                
                                                                                                                                
REPRESENTATIVE SEATON advised he does  not have the statute book,                                                               
but noted that  while 50,000 barrels of oil is  a small producer,                                                               
when the math is done to get  the barrel of oil equivalent in gas                                                               
it could mean  that a much larger gas producer  would qualify for                                                               
this small  producer tax credit.   He  asked where it  covers and                                                               
how much gas production is being talked about.                                                                                  
                                                                                                                                
CO-CHAIR FEIGE  inquired whether Representative Seaton  is trying                                                               
to propose an amendment to AS 43.55.024(c).                                                                                     
                                                                                                                                
REPRESENTATIVE SEATON replied he is trying to understand.                                                                       
                                                                                                                                
CO-CHAIR FEIGE said he does not  think the committee is trying to                                                               
change AS 43.55.024(c).                                                                                                         
                                                                                                                                
MR. PAWLOWSKI  suggested the DOR  staff in Anchorage  address the                                                               
issue of the relationship of  the small producer tax credit under                                                               
AS 43.55.024(d) to gas production in the Cook Inlet.                                                                            
                                                                                                                                
2:00:10 PM                                                                                                                    
                                                                                                                                
LENNIE DEES, Audit Master, Production  Audit Group, Tax Division,                                                               
Department  of  Revenue  (DOR), offered  his  understanding  that                                                               
Representative Seaton  is trying to  determine the size of  a gas                                                               
producer in  Cook Inlet that would  qualify for this credit.   He                                                               
explained  Alaska  statutes  have  a conversion  factor  for  BTU                                                               
equivalent  barrels of  6:1.   So,  essentially,  a gas  producer                                                               
producing less  than "300,000 mcf"  of gas per day  would qualify                                                               
for the  full $12 million.   It is not necessarily  that it would                                                               
be tax  free; it depends  on what the  tax liability is  for that                                                               
particular  producer.    A  producer  could  have  a  big  enough                                                               
production tax value that it could  use this credit and still owe                                                               
tax.  So,  it depends on the  size of the producer  as to whether                                                               
it is  tax free.  A  producer producing "300,000 mcf"  of gas per                                                               
day would  qualify for the full  $12 million or whatever  the tax                                                               
liability is if it is less than $12 million.                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  inquired whether  under AS 43.55.024(a)  it would                                                               
be limited to $6 million for a gas producer in Cook Inlet.                                                                      
                                                                                                                                
MR. DEES responded AS 43.55.024(a)  does not apply to Cook Inlet;                                                               
it only applies  to Middle Earth, the area outside  of Cook Inlet                                                               
that is south of 68 degrees North latitude.                                                                                     
                                                                                                                                
2:02:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  asked  whether   it  is  300,000  or  300                                                               
million.                                                                                                                        
                                                                                                                                
MR. DEES answered 300,000.  In  further response, he said it is a                                                               
6:1 ratio.                                                                                                                      
                                                                                                                                
CO-CHAIR FEIGE understood that to be 50,000 times 6.                                                                            
                                                                                                                                
MR.  DEES stated  "300,000 mcf"  of  gas, or  "300 million  cubic                                                               
feet."                                                                                                                          
                                                                                                                                
REPRESENTATIVE SEATON  said he  thinks it  is "300  million cubic                                                               
feet a day" and  he is trying to compare that to  the size of the                                                               
gas producers in Cook Inlet.                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  pointed out this  is not a new  credit, so                                                               
it  would  not  be  granting  anything that  is  not  already  in                                                               
statute.    It  would  simply   extend  the  current  tax  regime                                                               
statewide with regard to this activity.                                                                                         
                                                                                                                                
2:03:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE asked whether DOR  has an estimated fiscal note on                                                               
the impact of extending this credit.                                                                                            
                                                                                                                                
MR. PAWLOWSKI  replied the rough  estimate for fiscal  years 2017                                                               
and 2018 is  around $25 million a  year.  In fiscal  year 2019 it                                                               
will be  about $50  million in  total, and that  is based  on the                                                               
forecast and  companies expected  to have a  tax liability.   The                                                               
reason this  provision was  included in  the previous  version of                                                               
the  bill is  that 2022  is the  date at  which many  of the  tax                                                               
ceilings expire  and the preferential  treatment for tax  in Cook                                                               
Inlet will transition out.                                                                                                      
                                                                                                                                
2:04:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR maintained her objection to Amendment 1.                                                                    
                                                                                                                                
A roll  call vote  was taken.   Representatives  Hawker, Johnson,                                                               
Olson,  Seaton, P.  Wilson,  Tuck, Saddler,  and  Feige voted  in                                                               
favor  of Amendment  1.   Representative Tarr  voted against  it.                                                               
Therefore, Amendment 1 passed by a vote of 8-1.                                                                                 
                                                                                                                                
2:06:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  moved to  adopt  Amendment  2, labeled  28-                                                               
GS1647\K.20,  Nauman/Bullock, 4/2/13,  [text provided  at end  of                                                               
this document].                                                                                                                 
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  TUCK posited  that Alaska's  Clear and  Equitable                                                               
Share (ACES) may  not be broken and just needs  fixing; a bill to                                                               
fix much of that has been  introduced, but there will not be time                                                               
in this session to address it.   Amendment 2 attempts to keep the                                                               
ACES structure, but caps progressivity  at 55 percent, given that                                                               
progressivity  has  been  cited as  making  Alaska  unattractive.                                                               
Testimony has  been heard that  new investments are  happening on                                                               
the  North  Slope,  employment  is   at  its  highest  ever,  and                                                               
investments do lead  to production.  The ACES  system gives heavy                                                               
tax  credits  to attract  new  competition/new  explorers on  the                                                               
North Slope.   It  has been heard  in the past  that many  of the                                                               
legacy fields are  in a harvest mode.   It is a  matter of trying                                                               
to move the  needle to get those fields into  exploration and new                                                               
development, such  as using  tax credits to  make that  closer to                                                               
the wellhead.                                                                                                                   
                                                                                                                                
2:08:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER,  regarding the preservation of  ACES, said                                                               
the committee  has had  a more than  adequate dialogue  about how                                                               
ACES  is definitely  counterproductive to  the preservation  of a                                                               
good economic  future for Alaska.   Amendment 2  would completely                                                               
remove  the  substantive  core  of  the  legislation  before  the                                                               
committee, which has been discussed  and analyzed and offers up a                                                               
very viable  mechanism and a  very reasonable rate  structure for                                                               
going forward that will  restore Alaska's global competitiveness.                                                               
The issue  in Alaska is  not taxes,  he argued, it  is production                                                               
decline,  and Amendment  2 is  absolutely  counter to  addressing                                                               
production decline.                                                                                                             
                                                                                                                                
REPRESENTATIVE  TUCK,  responding  to Representative  P.  Wilson,                                                               
said  Amendment 2  deletes  a portion  of the  title  so a  title                                                               
amendment will be needed.                                                                                                       
                                                                                                                                
REPRESENTATIVE  TUCK,  responding  to Co-Chair  Feige,  confirmed                                                               
that line  1 would remain  in the  bill's title and  the language                                                               
beginning  at the  end of  line 2  would be  removed down  to the                                                               
semi-colon in  line 11.   Thus, the  Oil and  Gas Competitiveness                                                               
Review Board would be kept in the title.                                                                                        
                                                                                                                                
2:11:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  observed Amendment  2, page 2,  lines 4-9,                                                               
would provide  that above a price  of $92.50 the tax  would still                                                               
be multiplied one-tenth of a percent.                                                                                           
                                                                                                                                
REPRESENTATIVE TUCK  responded correct and noted  it also reduces                                                               
the progressivity  after the tax  rate reaches about  50 percent,                                                               
which  occurs  when  the  profit  is about  $92.50.    Thus,  the                                                               
progressivity is reduced at the top end as well as capped.                                                                      
                                                                                                                                
REPRESENTATIVE  TARR  pointed  out Amendment  2  maintains  those                                                               
credits identified  in testimony as important  to new exploration                                                               
work and the new production that will happen as a result.                                                                       
                                                                                                                                
REPRESENTATIVE P. WILSON inquired  whether Amendment 2 takes away                                                               
credits since it removes the credits from the title.                                                                            
                                                                                                                                
REPRESENTATIVE TUCK answered it removes  the portion of the title                                                               
that deals with credits.                                                                                                        
                                                                                                                                
2:13:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 2.                                                                  
                                                                                                                                
REPRESENTATIVE  TUCK stated  he is  unconvinced that  taxes alone                                                               
are deterring  new production on the  North Slope and the  key is                                                               
to get new production.  He  recalled charts that were provided to                                                               
the committee that demonstrated  how a producer can significantly                                                               
buy  down  its  tax  liability.    The  administration  has  said                                                               
investments do  not necessarily lead  to production;  however, it                                                               
was  heard from  small  and big  producers  that all  investments                                                               
eventually  lead to  production on  the North  Slope.   A lot  of                                                               
natural decline happens  and reversing that on  the legacy fields                                                               
is difficult,  but it can be  slowed down and that  is where much                                                               
additional oil can come from  immediately and quickly.  Long-term                                                               
investments need to  continue being made to ensure  the state has                                                               
brand new oil.   As new oil is discovered,  even those wells will                                                               
have a  natural decline, so  continuous drilling needs  to occur.                                                               
Investments  have  been  made  on  North  Slope  facilities,  and                                                               
facilities are needed  to do additional drilling.   More drilling                                                               
rigs, modules being built, and  new facilities or agreements with                                                               
existing facilities  will result in  more production.   A benefit                                                               
of ACES is that there is  a penalty to taking profits outside the                                                               
state.   The significant buydown  for existing producers  and the                                                               
tax credits along  with the windfall revenues coming  in help the                                                               
state  to invest.   While  it is  a complex  system, it  provides                                                               
balance and gets new investments on the North Slope.                                                                            
                                                                                                                                
2:16:08 PM                                                                                                                    
                                                                                                                                
SENATOR  OLSON asked  whether Representative  Tuck has  submitted                                                               
documentation, such  as charts and  graphs, from  the consultants                                                               
he is referencing.                                                                                                              
                                                                                                                                
REPRESENTATIVE TUCK replied the documents  are the ones that have                                                               
been  previously  submitted  over  the last  four  years  to  the                                                               
resources and finance committees.                                                                                               
                                                                                                                                
SENATOR  OLSON  understood, then,  that  it  was not  a  separate                                                               
consultant but the legislature's consultants.                                                                                   
                                                                                                                                
REPRESENTATIVE  TUCK drew  attention to  page 23  of the  2/13/13                                                               
PowerPoint  presentation provided  to the  committee by  Econ One                                                               
Research, Inc.  He recalled it  being stated at the time that in-                                                               
field projects  are very  lucrative in Alaska.   The  slide shows                                                               
that if a  company increases its investment by 15  percent it can                                                               
buy  down its  taxes  anywhere  from 63  percent  to 95  percent,                                                               
depending on the price of oil.                                                                                                  
                                                                                                                                
REPRESENTATIVE TUCK, responding to  Co-Chair Feige, confirmed the                                                               
2/13/13 presentation was on HB 72,  but pointed out that slide 23                                                               
was  demonstrating the  buydown effect  of existing  ACES at  oil                                                               
prices of $80, $100, and $120.                                                                                                  
                                                                                                                                
2:18:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  said this  is the  argument that  was made                                                               
when ACES  passed, the  argument being the  state can  tax itself                                                               
into productivity with high rates.   This has not proven out, nor                                                               
has it proven anywhere in any tax regime in the world.                                                                          
                                                                                                                                
REPRESENTATIVE TARR disagreed, citing  testimony [by Brooks Range                                                               
Petroleum  Corporation] that  its  Mustang project  is coming  on                                                               
line because the  credits enabled the company  to accelerate that                                                               
project as  well as four or  five others.  While  not sanctioned,                                                               
the other projects  have been considered under  the existing ACES                                                               
structure and show 50,000 barrels of  oil coming on line by about                                                               
2016.  It is  on the record that that part  [of ACES] has worked.                                                               
She expressed her  wish that there was more time  because she has                                                               
been trying  to get dates  aligned with when things  happened and                                                               
when they did not.  The Mustang  oil will be the newest oil going                                                               
into the Trans-Alaska  Pipeline System (TAPS) and  it will happen                                                               
under  ACES.    While  ACES  may   not  be  working  in  the  way                                                               
legislators want it for everyone,  there are parts that have been                                                               
demonstrated to have some positive impact.                                                                                      
                                                                                                                                
CO-CHAIR FEIGE  agreed the aforementioned  was heard  from Brooks                                                               
Range Petroleum  Corporation, but noted there  are companies that                                                               
are no longer in Alaska, such as "FEX, Chevron, Anadarko."                                                                      
                                                                                                                                
2:20:33 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SADDLER recalled  the consultants  stating that  a high                                                               
tax regime and allowing companies  to buydown by spending is less                                                               
attractive  both effectively  and philosophically  than having  a                                                               
more reasonable  base rate.  The  evidence he heard was  that the                                                               
complexity, unpredictability,  and high  government take  was not                                                               
the way to  go.  This evidence, along with  the lack of increased                                                               
production, leads  him to believe  that Amendment 2 is  the wrong                                                               
way to go.                                                                                                                      
                                                                                                                                
REPRESENTATIVE  HAWKER recounted  Mr. Armfield  [of Brooks  Range                                                               
Petroleum Corporation] saying  it is because of  the credits that                                                               
his company is here.  Credits  are where the state gives back and                                                               
makes projects  profitable.  There  is a history of  testimony by                                                               
Mr.  Armfield and  many  other  producers of  all  size that  the                                                               
confiscatory tax rates  existing under ACES are  a huge challenge                                                               
for them  to obtain the capital  they need to come  to Alaska and                                                               
develop any  oil they have found.   Requests have been  made that                                                               
Alaska  Industrial  Development   and  Export  Authority  (AIDEA)                                                               
provide financing  to assist these people  because the commercial                                                               
markets  will  not  provide  it  under  Alaska's  current  fiscal                                                               
structure and the  exigencies of working in the North  Slope.  He                                                               
said he therefore thinks that  question was asked and answered by                                                               
the same person.                                                                                                                
                                                                                                                                
REPRESENTATIVE TARR pointed  out the base rate in  Amendment 2 is                                                               
25 percent and the tax is capped  at 55 percent; so she would not                                                               
characterize it as a high base rate.                                                                                            
                                                                                                                                
CO-CHAIR FEIGE noted there would  be progressivity on top of that                                                               
base rate.                                                                                                                      
                                                                                                                                
REPRESENTATIVE TARR nodded yes.                                                                                                 
                                                                                                                                
2:22:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  reiterated the  progressivity is  reduced to                                                               
25  percent at  a  profit  per barrel  of  $92.50.   He  recalled                                                               
Pioneer  Natural Resources  stating it  would love  to be  paying                                                               
taxes in  Alaska because that would  mean it is making  a profit.                                                               
The  state is  guaranteeing these  companies are  profitable once                                                               
they start  producing, he  argued.  Being  partners with  the oil                                                               
industry,  the  state takes  more  of  its  fair share  as  those                                                               
profits go up.   It is a  finite resource, so the  state does not                                                               
want  to dump  all  of its  production  all at  one  time on  the                                                               
markets.   Rather, there  must be  consistent production  and the                                                               
state  has not  seen that  because production  is declining.   He                                                               
said ACES  is a  good way  for taking  advantage of  today's high                                                               
prices  and   is  combined  with   making  sure  there   are  new                                                               
investments  for long-term  production down  the road.   It  is a                                                               
combination  of expanding  the  current fields  as  well as  more                                                               
fields  in the  future.   He  added it  is  difficult to  compare                                                               
conventional plays to  unconventional plays.  North  Dakota has a                                                               
high production cost of $50 per  barrel, which is higher than the                                                               
cost  in Alaska.   The  advantage in  North Dakota  is the  quick                                                               
return in  that investments  can pay  off as  soon as  18 months.                                                               
However, with shale  the decline is very rapid,  so drilling must                                                               
be  done  constantly  to  keep that  production  up,  unlike  the                                                               
conventional plays  on the North  Slope.   He urged that  ACES be                                                               
retained and refined.                                                                                                           
                                                                                                                                
2:25:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 2.                                                                  
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in favor of Amendment 2.   Representatives Olson, Seaton, Hawker,                                                               
Johnson,  Saddler,  and  Feige  voted  against  it.    Therefore,                                                               
Amendment 2 failed by a vote of 2-6.                                                                                            
                                                                                                                                
2:26:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR  moved to  adopt  Amendment  3, labeled  28-                                                               
GS1647\K.21,  Nauman/Bullock, 4/3/13,  [text provided  at end  of                                                               
this document].                                                                                                                 
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  TARR, referring  to the  different tools  of base                                                               
rate, credits, and  progressivity, noted a variety  of options is                                                               
being considered that manipulate those  different tools to get to                                                               
the  end goal  of more  production.   She  explained Amendment  3                                                               
makes the  $5 per  barrel credit applicable  to all  oil, retains                                                               
the  35 [percent]  base  tax rate,  and adds  a  small amount  of                                                               
progressivity per  dollar of profit  above $55 until it  caps out                                                               
at 50 percent.   She said the 50 percent cap  is reached at about                                                               
$130 profit.  Thus, Amendment 3  is a compromise between ACES and                                                               
SB 21.   She related  she has  heard from constituents  that they                                                               
support progressivity because they like  for the state to receive                                                               
more  as prices  go up.    When constituents  see articles  about                                                               
company profits  being record high, it  is hard to sell  the idea                                                               
that the companies are not doing well.                                                                                          
                                                                                                                                
2:28:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER opposed Amendment  3, saying the difference                                                               
between progressivity  in the tax  calculation and  a progressive                                                               
tax system  must be understood.   Version K is a  progressive tax                                                               
system;  it  provides  progressive taxes,  especially  on  legacy                                                               
fields.  The  genius in the bill's progressivity  feature is that                                                               
it only rewards production; it  does not reward someone who fails                                                               
to produce.   No  matter how  small or  how progressivity  is re-                                                               
crafted that  is based purely  on the  tax rate, no  incentive is                                                               
created  for anyone  to  produce.   All  that  is  created is  an                                                               
incentive to guild  the lily, to increase expenses to  buy down a                                                               
company's  tax  rate.   There  is  no  reason  for a  company  to                                                               
economize and seek  to maximum profits.  Version  K causes people                                                               
to  seek to  maximize production,  not expenditures,  which is  a                                                               
fundamental flaw of Amendment 3.                                                                                                
                                                                                                                                
REPRESENTATIVE  TUCK  reiterated  Amendment 3  maintains  the  35                                                               
percent base  tax rate,  adds progressivity, and  gives a  $5 per                                                               
barrel credit  for all oil.   It is a good  combination of trying                                                               
to take  care of legacy fields  as well as ensuring  a production                                                               
tax credit.   Since the credit is for all  production there would                                                               
be no need to figure out what is  old or new production.  It is a                                                               
good balance because  it needs to be ensured  that facilities are                                                               
maintained  to prevent  shutdowns  due to  equipment or  pipeline                                                               
failures.   The amendment would  provide a stable tax  regime for                                                               
quite a while.                                                                                                                  
                                                                                                                                
2:32:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  inquired whether a  fiscal note is  available for                                                               
Amendment 3.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR replied  time constraints  did not  allow an                                                               
opportunity to work that out.   Regarding Representative Hawker's                                                               
concerns,  she  said  Amendment  3 does  not  maintain  the  ACES                                                               
structure in  terms of  the credits.   It  uses the  structure in                                                               
Version  K for  doing  away with  the credits  and  only the  net                                                               
operating loss (NOL) credit is  retained.  She argued Amendment 3                                                               
does incentivize new production because  it applies the $5 credit                                                               
on all  new barrels.   She  reiterated she  has heard  from folks                                                               
that they  like that  the state  shares in  the upside,  which is                                                               
done by the progressivity that would be capped at 50 percent.                                                                   
                                                                                                                                
2:34:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 3.                                                                  
                                                                                                                                
A roll  call vote was  taken.  Representatives Seaton,  Tarr, and                                                               
Tuck  voted in  favor  of Amendment  3.   Representatives  Olson,                                                               
Hawker,   Johnson,  Saddler,   and   Feige   voted  against   it.                                                               
Therefore, Amendment 3 failed by a vote of 3-5.                                                                                 
                                                                                                                                
2:35:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  moved to  adopt  Amendment  4, labeled  28-                                                               
GS1647\K.25, Nauman/Bullock,  4/3/13, [text  provided at  the end                                                               
of this document].                                                                                                              
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE TUCK  explained Amendment  4 would remove  the per                                                               
barrel credit, replacing  it with a per barrel credit  of $12 for                                                               
all oil,  and would change  the base rate up  to 50 percent  as a                                                               
balance.  It  would establish a minimum tax of  10 percent of the                                                               
gross value at  the point of production, protecting  the state at                                                               
the  lower end  of  prices.   Responding  to  Co-Chair Feige,  he                                                               
confirmed  that Amendment  4 would  maintain the  current minimum                                                               
tax structure of AS 43.55.011(f) until  the end of 2013.  On page                                                               
7, following  line 1, of  the bill, Amendment  4 would add  a new                                                               
section,  Section 15,  defining the  size of  the reservoir.   In                                                               
response to  Co-Chair Feige,  he confirmed  Section 15  would set                                                               
the minimum tax rate at 10 percent of the gross.                                                                                
                                                                                                                                
2:40:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK,  continuing his explanation of  Amendment 4,                                                               
stated page 10, lines 27-31, Version  K, would be deleted and new                                                               
language inserted to set the 10  percent floor in that section of                                                               
the  bill.   Version K,  page 10,  line 17,  would be  amended to                                                               
change the  base tax  rate from  35 percent  to 50  percent; this                                                               
change from  35 percent to  50 percent  would also be  applied to                                                               
page 11, lines  1, 14, and 23  of the bill.  Version  K, page 15,                                                               
line  10, would  be amended  from a  35 percent  to a  50 percent                                                               
carried-forward annual loss.  Version  K, page 17, line 23, would                                                               
be amended from  a tax credit of  $5 to a credit of  $12 for each                                                               
barrel of  oil.  In  addition to the aforementioned,  Amendment 4                                                               
would make conforming amendments.                                                                                               
                                                                                                                                
2:43:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK, in  response  to Co-Chair  Feige, said  the                                                               
fiscal  impact  of  Amendment  4  could  be  seen  on  the  graph                                                               
accompanying the  amendment.  Responding to  Co-Chair Saddler, he                                                               
said  the bottom  axis represents  the price  per barrel  and the                                                               
vertical axis is the percent tax.   With 50 percent tax, $12 [per                                                               
barrel] credit, and  a tax floor, the percent  tax would parallel                                                               
the path of  the tax rate under [Version K]  but would remove the                                                               
stair  steps.   The floor  would set  in when  prices go  down to                                                               
about $65 a barrel, protecting the  state on the bottom since the                                                               
state would no longer be taking windfall profits at the top.                                                                    
                                                                                                                                
CO-CHAIR FEIGE inquired how this would compare to ACES.                                                                         
                                                                                                                                
REPRESENTATIVE TUCK  replied he could  find a chart that  makes a                                                               
comparison  with ACES,  but Amendment  4  would be  significantly                                                               
lower than  ACES.  In  further response, he  said he will  find a                                                               
chart by Econ One Research, Inc.                                                                                                
                                                                                                                                
SENATOR OLSON  believed the  highest model  the committee  has is                                                               
for  $105  per  barrel,  which  makes  it  difficult  to  make  a                                                               
comparison.  Part of the problem  was that no one anticipated the                                                               
price going up to $140 per barrel or higher.                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  responded that even  if the chart  only goes                                                               
up to $105,  the line can just be extended  as it approaches, and                                                               
that is where  a big divide is seen between  ACES and the current                                                               
bill.   The current bill "flat  lines" because 35 percent  is the                                                               
highest the  tax rate gets.   The  proposed 50 percent  tax under                                                               
Amendment 4 would never approach the height seen under ACES.                                                                    
                                                                                                                                
2:47:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE inquired  whether the Department of  Revenue has a                                                               
slide that would help provide some comparison.                                                                                  
                                                                                                                                
MR. PAWLOWSKI answered  he does not have a chart  on an effective                                                               
tax rate  basis under ACES  so as to provide  an apples-to-apples                                                               
comparison.    Additionally,  he  said   he  does  not  know  the                                                               
assumptions that went into Representative Tuck's chart.                                                                         
                                                                                                                                
REPRESENTATIVE  TUCK said  he  is  trying to  locate  a chart  he                                                               
believes the committee has that compares ACES to Version K.                                                                     
                                                                                                                                
2:48:33 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 2:48 p.m. to 2:49 p.m.                                                                       
                                                                                                                                
2:49:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  said it looks  like Amendment 4  is trying                                                               
to preserve the  minimum taxes that apply across  the state until                                                               
January 1,  2014.   Section 15,  page 2, of  Amendment 4,  is for                                                               
after January 2014 and talks  about each lease or property within                                                               
a unit  or nonunitized reservoir  that has  cumulatively produced                                                               
1 billion British  Thermal Unit (BTU) equivalent  barrels of oil.                                                               
He said his recollection is that  there is only one such property                                                               
- Prudhoe  Bay - so  the provisions of  this would apply  only to                                                               
Prudhoe Bay.   This provision says there is a  10 percent minimum                                                               
gross value tax on Prudhoe production, but yet ...                                                                              
                                                                                                                                
CO-CHAIR FEIGE interjected "no minimum tax on anything else."                                                                   
                                                                                                                                
REPRESENTATIVE  HAWKER, continuing,  said  it  seems Amendment  4                                                               
removes  the minimum  tax after  January 1,  2014, on  everything                                                               
else.   Page 3,  Amendment 4, deals  with payment  provisions and                                                               
talks  about how  a company  makes  its deposits,  which are  the                                                               
installment payments of estimated tax.   While it substitutes the                                                               
ten percent  for the zero, one,  two, three, and four  percent as                                                               
applicable, somewhere along  the way it seems the  minimum tax is                                                               
lost as it would apply across the  rest of the world.  He guessed                                                               
that when the  rest of the minimum tax goes  away, that provision                                                               
would still  apply, so  it would  just be  zero, but  Amendment 4                                                               
seems to  take away the minimum  tax provisions from the  rest of                                                               
the North Slope.                                                                                                                
                                                                                                                                
2:52:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK,  in response  to Co-Chair Feige,  stated the                                                               
aforementioned is not the intent,  but concurred it appears to be                                                               
the effect.                                                                                                                     
                                                                                                                                
REPRESENTATIVE HAWKER  further noted that Amendment  4 would also                                                               
increase  the   base  tax  rate   and  the  net   effective  tax.                                                               
Regardless of what Amendment 4 does  to minimum taxes, he said he                                                               
does  not  think  the  committee  should  support  the  amendment                                                               
because it would further increase taxes over Version K.                                                                         
                                                                                                                                
REPRESENTATIVE TUCK responded  the intent is to  increase the tax                                                               
revenue to  offset the revenues that  will be lost.   It protects                                                               
the state on the down end, as was  the intent of Version K; as an                                                               
offset it gives a higher per barrel tax credit.                                                                                 
                                                                                                                                
2:53:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 4.                                                                  
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in  favor  of  Amendment  4.    Representatives  Seaton,  Hawker,                                                               
Johnson, Olson, Saddler, and Feige  voted against it.  Therefore,                                                               
Amendment 4 failed by a vote of 2-6.                                                                                            
                                                                                                                                
2:55:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR moved  to adopt  Amendment  5, labeled,  28-                                                               
GS1647\K.24, Nauman/Bullock,  4/3/13, [text  provided at  the end                                                               
of this document].                                                                                                              
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE TARR advised that  she and Representative Tuck did                                                               
not receive their amendments from  Legislative Legal and Research                                                               
Services until the start of the  meeting, so they have not had an                                                               
opportunity to review  them.  She said Amendment 5  is similar to                                                               
Amendment 4, but has a tax rate  of 45 percent, a $10 credit, and                                                               
a  floor.   She  drew  attention to  the  graph accompanying  the                                                               
amendment  that  compares  the  tax rate  under  Amendment  4  to                                                               
Version K.  She explained the hook  on the left side of the graph                                                               
represents  the tax  floor; the  tax rate  then smooths  out over                                                               
time over many  price ranges and would be a  little bit above the                                                               
35 percent  tax rate  in Version  K.   Amendment 5  would provide                                                               
protection  to the  state at  low  prices because  the tax  would                                                               
never go to zero.   There is one marginal tax  rate, which is the                                                               
base rate, and the other credits and provisions are the same.                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  added that the  sections in Amendment  5 are                                                               
the same as  in Amendment 4, but the amendment  is much closer to                                                               
Version K  and would ensure the  state is protected on  the lower                                                               
end of  prices.  It would  be less regressive than  Version K and                                                               
would help the small producers as well.                                                                                         
                                                                                                                                
2:58:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SADDLER  asked  which  basins  would  qualify  for  the                                                               
cumulative 1 billion  BTUs in production.  He  further asked what                                                               
the aim  is in setting  that parameter for cumulative  and annual                                                               
production.                                                                                                                     
                                                                                                                                
REPRESENTATIVE TUCK answered that  when requesting this amendment                                                               
from  Legislative  Legal  and Research  Services,  he  asked  to:                                                               
remove the  change in  per barrel  credit and  give a  per barrel                                                               
credit  of $10  for  all oil,  change  the base  rate  tax to  45                                                               
percent;  and establish  the minimum  tax  at 10  percent of  the                                                               
gross  value  at  the  point  of production.    The  language  in                                                               
Amendment 5 is what Legislative  Legal and Research Services came                                                               
up with.   He and  Representative Tarr did not  specifically look                                                               
to exclude  any type  of legacy producers  or small  producers in                                                               
the amendment, so  he does not know why this  section was put in.                                                               
He assumed it  was conforming language given there  was no intent                                                               
to exclude anyone in particular.                                                                                                
                                                                                                                                
REPRESENTATIVE HAWKER  reiterated it appears Amendment  5 applies                                                               
the 10  percent alternative minimum  tax only to Prudhoe  Bay and                                                               
would  remove it  from all  other  potential producers.   If  the                                                               
graph is accurate, the amendment  would increase the tax over the                                                               
tax proposed  in Version K.   Increasing taxes beyond what  is in                                                               
Version K is  not wanted, he argued; rather,  the committee might                                                               
want to consider further decreasing them.                                                                                       
                                                                                                                                
3:00:44 PM                                                                                                                    
                                                                                                                                
MR. PAWLOWSKI, responding to Co-Chair  Feige, said the Department                                                               
of Revenue's opinion is that  Representative Hawker is correct in                                                               
the long  term, but  in the  short term  this minimum  would also                                                               
apply to  the Kuparuk  Unit.  However,  according to  the Revenue                                                               
Sources  Book, the  Kuparuk Unit  would fall  out of  the minimum                                                               
qualification  by fiscal  year 2017,  which is  the beginning  of                                                               
calendar year 2016,  because it would not have  100,000 barrels a                                                               
day of production.                                                                                                              
                                                                                                                                
REPRESENTATIVE HAWKER quipped "maybe it is a good amendment."                                                                   
                                                                                                                                
REPRESENTATIVE TARR said she is  unsure that is being interpreted                                                               
in the way intended.  Amendment  5 would protect the state at low                                                               
prices, thereby  sharing on both  the low and  high ends.   It is                                                               
not  a  significant  increase  over  Version  K  and  is  a  more                                                               
reasonable sharing  of the profits from  Alaska's common property                                                               
resource on the North Slope.                                                                                                    
                                                                                                                                
3:02:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 5.                                                                  
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in  favor  of  Amendment  5.   Representatives  Hawker,  Johnson,                                                               
Olson, Seaton, Saddler,  and Feige voted against  it.  Therefore,                                                               
Amendment 5 failed by a vote of 2-6.                                                                                            
                                                                                                                                
3:03:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  moved to  adopt  Amendment  6, labeled  28-                                                               
GS1647\K.11, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 6, line 8:                                                                                                            
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 10, line 17:                                                                                                          
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 11, line 1:                                                                                                           
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 11, line 14:                                                                                                          
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 11, line 23:                                                                                                          
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 15, line 10:                                                                                                          
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
     Page 17, line 21:                                                                                                          
          Delete "new subsections"                                                                                              
          Insert "a new subsection"                                                                                             
                                                                                                                                
     Page 17, line 23:                                                                                                          
          Delete "$5"                                                                                                           
          Insert "$12"                                                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "that meets one or more of the criteria in                                                                     
     AS 43.55.160(f) and"                                                                                                       
                                                                                                                                
     Page 17, line 28, through page 18, line 28:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
3:03:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  explained Amendment 6 removes  the change in                                                               
per barrel  credit and gives a  per barrel credit of  $12 for all                                                               
oil, changes the base tax rate to  50 percent, and does not set a                                                               
floor.  A graph accompanying the amendment was distributed.                                                                     
                                                                                                                                
CO-CHAIR SADDLER  observed Amendment  6 raises  the tax  and said                                                               
that may not be  the direction - as a policy call  - in which the                                                               
committee wants to go.                                                                                                          
                                                                                                                                
REPRESENTATIVE TARR  pointed out  there is no  hook in  the graph                                                               
because there  is no  floor.   This is a  trade-off of  giving up                                                               
protection  at  lower prices  in  return  for sharing  more  when                                                               
prices are high.                                                                                                                
                                                                                                                                
REPRESENTATIVE P. WILSON opposed Amendment  6, saying that if she                                                               
was going to make some changes  she would "bring it down a little                                                               
bit  further on  the top  end so  that it  could go  up a  little                                                               
further on the bottom end."                                                                                                     
                                                                                                                                
3:05:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER said  Amendment 6 would leave  in place the                                                               
low end protections  that currently exist in  statute through the                                                               
minimum tax structure.   But, by removing the  stepped per barrel                                                               
credit, it would  remove the progressivity feature  that is built                                                               
into that credit  for legacy fields.  While  an interesting idea,                                                               
he would  recommend including that progressivity  feature because                                                               
it is a  production-based incentive with that  per barrel credit;                                                               
it is not the policy direction the committee wants to go.                                                                       
                                                                                                                                
REPRESENTATIVE SEATON  stated regardless  of how the  graphs look                                                               
and  whether the  committee likes  them,  he has  a problem  with                                                               
raising  the base  rate too  high.   When people  are considering                                                               
coming to Alaska  the base rate is the first  thing they look at.                                                               
Progressivity  worked  because  it  has a  lower  base  rate  and                                                               
accelerates at higher profits.  But,  when it starts out with too                                                               
high a base  rate, even with deductions from the  base rate it is                                                               
harder for someone trying to make a decision.                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  said Amendment 6  would take away  the stair                                                               
step that  both consultants  had advised  yesterday to  take out.                                                               
There would  still be a  progressive function and it  would solve                                                               
the regressivity  problem for the  oil companies.  At  low prices                                                               
the  state would  not be  making any  money but  would make  more                                                               
money at higher prices.                                                                                                         
                                                                                                                                
3:08:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 6.                                                                  
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in  favor  of  Amendment  6.   Representatives  Hawker,  Johnson,                                                               
Olson, Seaton,  P. Wilson, Saddler,  and Feige voted  against it.                                                               
Therefore, Amendment 6 failed by a vote of 2-7.                                                                                 
                                                                                                                                
3:09:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  moved to  adopt  Amendment  7, labeled  28-                                                               
GS1647\K.22, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 6, line 8:                                                                                                            
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 10, line 17:                                                                                                          
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 11, line 1:                                                                                                           
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 11, line 14:                                                                                                          
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 11, line 23:                                                                                                          
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 15, line 10:                                                                                                          
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 17, line 21:                                                                                                          
          Delete "new subsections"                                                                                              
          Insert "a new subsection"                                                                                             
                                                                                                                                
     Page 17, line 23:                                                                                                          
          Delete "$5"                                                                                                           
          Insert "$10"                                                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "that meets one or more of the criteria in                                                                     
     AS 43.55.160(f) and"                                                                                                       
                                                                                                                                
     Page 17, line 28, through page 18, line 28:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  TUCK explained  Amendment  7 is  very similar  to                                                               
[Amendment 6].   He reported Mr. Janak Mayer [of  PFC Energy] was                                                               
unable to  get a model back  to the committee, but  the graph for                                                               
Amendment 7 would  be close to the graph for  Amendment 5, except                                                               
there would be  no hook.  Yesterday Econ One  Research, Inc. drew                                                               
its line  underneath the  stair steps while  PFC Energy  drew its                                                               
line on top of the stair steps.   Amendment 7 draws the line just                                                               
above the top of the stair steps, so is more of a compromise.                                                                   
                                                                                                                                
REPRESENTATIVE  JOHNSON  offered  a  friendly  amendment  to  the                                                               
amendment to  delete "45"  everywhere it  appears in  Amendment 7                                                               
and insert  "30".  He then  withdrew his amendment saying  he had                                                               
made his statement.                                                                                                             
                                                                                                                                
REPRESENTATIVE TUCK  reiterated Amendment  7 would bring  the tax                                                               
rate closer to the stair step  line of Version K and would smooth                                                               
out that line.                                                                                                                  
                                                                                                                                
3:11:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 7.                                                                  
                                                                                                                                
A roll call vote was taken.   Representatives Tuck and Tarr voted                                                               
in  favor  of  Amendment  7.   Representatives  Hawker,  Johnson,                                                               
Olson, Seaton,  P. Wilson, Saddler,  and Feige voted  against it.                                                               
Therefore, Amendment 7 failed by a vote of 2-7.                                                                                 
                                                                                                                                
3:12:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR moved to adopt Amendment 8, labeled 28-                                                                     
GS1647\K.9, Bullock, 4/3/13, which read:                                                                                        
                                                                                                                                
     Page 1, line 4, following "rate;":                                                                                       
          Insert "providing an additional tax on the                                                                          
     production of  oil when the  production tax value  of a                                                                  
     barrel of oil is more than a certain amount;"                                                                            
                                                                                                                                
     Page 6, line 7, following "2014":                                                                                      
          Insert "the sum of                                                                                                
               (A)"                                                                                                         
                                                                                                                                
     Page 6, line 9, following "percent":                                                                                   
          Insert "; and                                                                                                     
               (B)  the sum, over all months of a calendar                                                                  
     year  after  December 31,  2013,  of  the  tax  amounts                                                                
     determined under (q) of this section"                                                                                  
                                                                                                                                
     Page 7, following line 1:                                                                                                  
     Insert a new bill section to read:                                                                                         
        "* Sec. 14. AS 43.55.011 is  amended by adding a new                                                                
     subsection to read:                                                                                                        
          (q)  In addition to the tax in (e) of this                                                                            
     section, for  a month  in which the  average production                                                                    
     tax value of  a barrel of oil is more  than $150, there                                                                    
     is levied  on the  producer of oil  for each  barrel of                                                                    
     oil produced  and taxable under  (e) of this  section a                                                                    
     tax of $1  for each $10 amount of  production tax value                                                                    
     that exceeds $150. The tax  in this subsection does not                                                                    
     apply to oil the ownership  or right to which is exempt                                                                    
     from  taxation  or  constitutes a  landowner's  royalty                                                                    
     interest. The  tax levied  under this  subsection shall                                                                    
     be paid  at the  time and manner  in which  taxes under                                                                    
     (e) of this section are paid under AS 43.55.020."                                                                          
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, line 6:                                                                                                           
          Delete "sec. 31"                                                                                                      
          Insert "sec. 32"                                                                                                      
                                                                                                                                
     Page 29, line 7:                                                                                                           
          Delete "18 and 20 - 23"                                                                                               
          Insert "19 and 21 - 24"                                                                                               
          Delete "sec. 18"                                                                                                      
          Insert "sec. 19"                                                                                                      
                                                                                                                                
     Page 29, line 9:                                                                                                           
          Delete "Section 19"                                                                                                   
          Insert "Section 20"                                                                                                   
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 37"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "Sections 13, 20 - 23, 28, and 37"                                                                             
          Insert "Sections 13, 21 - 24, 29, and 38"                                                                             
                                                                                                                                
     Page 29, line 25:                                                                                                          
          Delete "sec. 18"                                                                                                      
          Insert "sec. 19"                                                                                                      
          Delete "sec. 31"                                                                                                      
          Insert "sec. 32"                                                                                                      
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
3:13:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  noted that in  Version K the tax  credit per                                                               
barrel scales  down from $8  to $0 by $1  for every $10  of gross                                                               
value at  the point of production.   Amendment 8 would  allow the                                                               
credit to "go  negative" so that if the gross  value at the point                                                               
of production is  $160-$170 there would be a bonus  to the state.                                                               
It would  keep the stair  step going down  and there would  be no                                                               
minimum tax.   The makers of the amendment  are characterizing as                                                               
a bonus a  simplified progressivity at the higher prices.   It is                                                               
similar to the  45 percent base rate, $8 per  barrel credit, with                                                               
a little bit more sharing on the upside for the state.                                                                          
                                                                                                                                
3:13:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER posited that  this overall debate, manifest                                                               
in the  discussion of tax  rates and  shopping for tax  rates and                                                               
shopping  for  metrics,  is  really  not  the  issue  before  the                                                               
committee.  The  issue is production decline.   The committee has                                                               
heard it  repeatedly testified that investment  equals production                                                               
and to attract  investment the folks making  those decisions must                                                               
model  and  compare.    Alaska   has  to  compete  against  their                                                               
alternatives on a worldwide basis  and in that is a probabilistic                                                               
analysis of  future oil  prices and  the taxes  that would  be in                                                               
effect.    Amendment  8 would  directly  exasperate  the  current                                                               
problem with  ACES, which  is that government  take is  more with                                                               
each rise in  price, rather than providing either  a levelized or                                                               
very  predictable staged  and  capped tax  rate  at those  higher                                                               
ends.   Amendment  8  would take  away a  significant  part of  a                                                               
potential  investor's upside  analysis, which  is one  reason why                                                               
Alaska is  not seeing investment  and is  experiencing production                                                               
decline and a reason not to vote for the amendment.                                                                             
                                                                                                                                
3:15:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  pointed out Amendment 8  pretty much "leaves                                                               
the line" seen  [on the graph] for Version K.   The difference is                                                               
that the amendment protects the  state's interests when the price                                                               
goes  above $170  a  barrel.   It  increases  the  same curve  in                                                               
Version K  for prices above $170  a barrel and is  asymptotic, so                                                               
there is  a cap  to it.   Rather than  flat-lining at  35 percent                                                               
when  prices reach  $150  a  barrel, it  continues  once $170  is                                                               
reached.  Also, unlike ACES, it is  a very small curve.  It would                                                               
provide benefits for those times when  prices do get up that high                                                               
versus how much the state expects  to lose when prices drop below                                                               
$100 a barrel.                                                                                                                  
                                                                                                                                
3:17:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR,  while appreciating  Representative Hawker's                                                               
comments, said  she does  not think  anyone would  be complaining                                                               
about  what happens  at  oil  prices of  $170  and above  because                                                               
people would be  swimming in profits at that price.   Amendment 8                                                               
is a  way for the  state to protect  itself at very  high prices.                                                               
She recently heard  from BP that it is doing  its modeling at $90                                                               
a barrel.   In checking with  other sources, it even  may be $80-                                                               
$95 a  barrel.  Looking  at what happens  above $170 a  barrel is                                                               
not a problem  today or likely to  be one in the  next five years                                                               
if one  believes the Futures  Forecast, but this  amendment would                                                               
provide that Alaska shares in  that windfall profit should prices                                                               
reach $170 a  barrel.  The tax rate graph  for Amendment 8 mimics                                                               
the version of the bill that the committee is considering.                                                                      
                                                                                                                                
3:19:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 8                                                                   
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in  favor  of  Amendment  8.   Representatives  Johnson,  Hawker,                                                               
Olson, Seaton,  P. Wilson, Saddler,  and Feige voted  against it.                                                               
Therefore, Amendment 8 failed by a vote of 2-7.                                                                                 
                                                                                                                                
3:20:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  moved to  adopt  Amendment  9, labeled  28-                                                               
GS1647\K.26, Nauman/Bullock, 4/3/13, which read:                                                                                
                                                                                                                                
     Page 18, lines 4 - 11:                                                                                                     
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following paragraphs accordingly.                                                                             
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
3:23:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  explained  Amendment 9  would  protect  the                                                               
state at  low prices by  limiting the credit  to a maximum  of $5                                                               
per barrel  at lower prices.   At an  average gross value  at the                                                               
point  of production  of $110  and above,  the credit  would step                                                               
down as currently written in Version K.                                                                                         
                                                                                                                                
CO-CHAIR  FEIGE noted  there  would be  no  per barrel  exclusion                                                               
below  a  taxable value  of  $100  under  Amendment 9  and  asked                                                               
whether the tax rate would then be the base rate of 35 percent.                                                                 
                                                                                                                                
3:24:27 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 3:24 p.m. to 3:32 p.m.                                                                       
                                                                                                                                
3:32:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK   withdrew  Amendment   9  because   it  was                                                               
incorrectly drafted.                                                                                                            
                                                                                                                                
3:33:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK moved  to adopt  Amendment  10, labeled  28-                                                               
GS1647\K.19, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 17, line 21:                                                                                                          
          Delete "new subsections"                                                                                              
          Insert "a new subsection"                                                                                             
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "one or more"                                                                                                  
          Insert "either or both"                                                                                               
                                                                                                                                
     Page 17, line 28, through page 18, line 28:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
     Page 24, line 14:                                                                                                          
          Delete "one or more"                                                                                                  
          Insert "either or both"                                                                                               
                                                                                                                                
     Page 24, lines 20 - 23:                                                                                                    
          Delete "; (3) the oil or gas is produced from                                                                         
     acreage  that was  added to  an existing  participating                                                                    
     area  by  the  Department of  Natural  Resources  after                                                                    
     December 31,  2012, and  the  producer demonstrates  to                                                                    
     the department that  the volume of oil  or gas produced                                                                    
     is  from acreage  added  to  an existing  participating                                                                    
     area"                                                                                                                      
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE TUCK  explained that  under Amendment 10  the per-                                                               
barrel credit would apply to new oil.   He said he does not think                                                               
"the  field development  should be  counted as  new oil."   If  a                                                               
producer gets the  gross reduction exclusion (GRE)  then it would                                                               
also get the  per barrel credit.  By deleting  in Version K, page                                                               
24, lines 20-23, the amendment  would remove the third section of                                                               
the GRE that was discussed as not having clarity.                                                                               
                                                                                                                                
3:34:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK, in  response to  Co-Chair Feige,  concurred                                                               
the GRE is now called the gross value reduction (GVR).                                                                          
                                                                                                                                
CO-CHAIR FEIGE said on [3/29/13]  the committee changed the third                                                               
GVR  in CSSB  21(FIN) am(efd  fld) to  make it  clearer and  that                                                               
change was included in Version K.                                                                                               
                                                                                                                                
REPRESENTATIVE TUCK  specified Amendment  10 would also  give the                                                               
$5 per  barrel taxable oil  and would remove the  stair stepping.                                                               
In further response to Co-Chair  Feige, he confirmed Amendment 10                                                               
would remove  what would  become subsection  (j) of  AS 43.55.024                                                               
and  would  entirely  remove  the   floating  per  barrel  credit                                                               
provision.                                                                                                                      
                                                                                                                                
3:36:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER opposed  Amendment 10,  saying it  appears                                                               
the intent  of the amendment is  to delete the per  barrel credit                                                               
for legacy fields  and further make it difficult  by removing the                                                               
third gross value reduction, which  in Version K was an important                                                               
clarification  of  intent  to  ensure   that  the  GVR  would  be                                                               
appropriately  applicable to  oil and  gas  that was  added to  a                                                               
participating area.   Amendment 10 would "make  the legacy fields                                                               
pay, eliminate  all future  benefits from  the legacy  fields, or                                                               
severely compromise those  benefits to legacy fields."   It seems                                                               
the  thought is  to  take  that money  and  use  it to  subsidize                                                               
everyone else  as well as  pay for  the future operations  of the                                                               
State of  Alaska.  It  is a false  conception that the  state can                                                               
tax  productivity out  of legacy  fields while  at the  same time                                                               
falling  over   itself  to  incentivize  some   other  mysterious                                                               
definition of new oil and new  fields.  It defeats the purpose of                                                               
trying  to create  a levelized,  predictable, durable  tax system                                                               
that can  be applied  universally across  all spectrums  of those                                                               
that explore and produce in the state.                                                                                          
                                                                                                                                
3:39:16 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE opposed Amendment 10,  stating that taking out the                                                               
third GVR would  take away one of the incentives  to find new oil                                                               
within the  legacy fields.   Eliminating the floating  per barrel                                                               
credit essentially  leaves the  base rate  in effect  on anything                                                               
coming out of the legacy  fields, which would drive investment in                                                               
new oil outside  of the legacy fields.  Testimony  was heard that                                                               
most  new  oil would  come  from  the  legacy fields  because  in                                                               
Prudhoe Bay a 1 percent rise is a significant volume of oil.                                                                    
                                                                                                                                
REPRESENTATIVE TARR clarified the  per barrel credit allowance is                                                               
only specific  to part three of  the [GVR/GRE].  She  recalled it                                                               
was heard  from producers that  they did  not expect to  use part                                                               
three.   If it  qualifies for part  one or part  two of  the GVR,                                                               
then it  would also  apply for  the per barrel  credit, so  it is                                                               
just part three of the GVR that would be removed.                                                                               
                                                                                                                                
3:41:13 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  noted part one and  part two of the  GVR would be                                                               
either  new  units outside  legacy  fields  or new  participating                                                               
areas within.   He understood Representative Tarr  to be assuming                                                               
there would be new participating  areas in the legacy fields, but                                                               
said he does not believe testimony was heard to that effect.                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  said  the  intent of  Amendment  10  is  to                                                               
incentivize  new  oil from  new  areas.   Production  is  already                                                               
planned for  the easy  oil in the  legacy fields  and significant                                                               
reduction  of the  state's tax  income will  help to  incentivize                                                               
those legacy fields.                                                                                                            
                                                                                                                                
3:43:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  maintained his objection to  Amendment 10.                                                               
He understood the amendment would  leave the $5 per barrel credit                                                               
for all fields, including the legacy fields.                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK confirmed that is correct.                                                                                  
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in favor  of Amendment  10.   Representatives Seaton,  P. Wilson,                                                               
Olson,  Hawker, Johnson,  Saddler,  and Feige  voted against  it.                                                               
Therefore, Amendment 10 failed by a vote of 2-7.                                                                                
                                                                                                                                
3:44:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR moved  to adopt  Amendment  11, labeled  28-                                                               
GS1647\K.18, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "one or more of the criteria in                                                                                
     AS 43.55.160(f)"                                                                                                           
          Insert "the criteria in AS 43.55.160(f)(1) or (2)                                                                     
     or both"                                                                                                                   
                                                                                                                                
     Page 17, line 28, through page 18, line 28:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  TARR explained  there is  a series  of amendments                                                               
related  to the  GVR/GRE.   She  said she  likes to  call it  GRE                                                               
because  it  is revenue  exclusion.    The amendments  manipulate                                                               
different portions of  the GVR/GRE to look at  ways to accomplish                                                               
incentivizing  new development.    Like  Amendment 10,  Amendment                                                               
[11] is  specific to part  three, but instead of  eliminating the                                                               
per-barrel credit  and the  GVR/GRE, it  eliminates only  the per                                                               
barrel credit.  The thinking behind  Amendment 11 is that much of                                                               
this may  be planned development  and it is new  development that                                                               
is trying  to be incentivized,  not things already in  the works.                                                               
The GRE would  still be given, so there would  still be incentive                                                               
to do in-field work.   She added it is a policy  call as to where                                                               
to incentivize the behavior of the oil companies.                                                                               
                                                                                                                                
3:46:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 11.                                                                 
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in favor  of Amendment  11.   Representatives Seaton,  P. Wilson,                                                               
Hawker,  Johnson, Olson,  Saddler,  and Feige  voted against  it.                                                               
Therefore, Amendment 11 failed by a vote of 2-7.                                                                                
                                                                                                                                
3:47:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK moved  to adopt  Amendment  12, labeled  28-                                                               
GS1647\K.23, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 17, line 21:                                                                                                          
          Delete "new subsections"                                                                                              
          Insert "a new subsection"                                                                                             
                                                                                                                                
     Page 17, line 28, through page 18, line 28:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  TUCK explained  that  under Amendment  12 if  the                                                               
Department of  Natural Resources determines that  an in-field has                                                               
new oil, then the per barrel credit would apply.                                                                                
                                                                                                                                
REPRESENTATIVE  HAWKER understood  Amendment  12 would  eliminate                                                               
what is  now in  Version K,  which is  a progressive  tax feature                                                               
that is also a production-based  feature that provides a balanced                                                               
benefit to legacy  production.  He said the  amendment is counter                                                               
to everything that is trying to be done.                                                                                        
                                                                                                                                
REPRESENTATIVE TARR  respectfully disagreed, saying that  in this                                                               
case for  a legacy field  if it can  be proved that  it qualifies                                                               
for the third  component of the GVR/GRE, then it  is eligible for                                                               
the credit.                                                                                                                     
                                                                                                                                
3:49:04 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
3:50:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  pointed out  that subsection (i)  of Section                                                               
25, Version  K, would still remain.   Thus, parts one  and two of                                                               
the GVR/GRE  for new oil would  remain, and if the  provisions of                                                               
part  three are  met for  new oil,  both the  credit and  the GRE                                                               
would be received.                                                                                                              
                                                                                                                                
CO-CHAIR  FEIGE opposed  Amendment  12,  stating a  consideration                                                               
while crafting the  floating per barrel exclusion was  that it is                                                               
easy to  identify a drilling  rig and  easy to identify  new oil,                                                               
but  very  difficult to  quantify  the  effects of  a  field-wide                                                               
effort to  enhance production  from the  legacy fields  using new                                                               
technology  or applying  existing technology.   The  floating per                                                               
barrel credit  was chosen  as a  way where  the more  produced in                                                               
those legacy fields, the more of  a tax reduction overall, and at                                                               
lower prices  it is even  more advantageous  in terms of  the per                                                               
barrel credit.   While it can be  argued some of that  oil in the                                                               
legacy  fields would  be produced  anyway because  the wells  are                                                               
there,  the  intent  is  to   incentivize  investment  using  new                                                               
technology  or more  of the  current technology  to increase  the                                                               
extraction  rate and  get more  oil  out of  existing rocks  over                                                               
time.   Putting  Section 25,  subsection (j),  into law  enhances                                                               
that and enhances it in a way that rewards greater production.                                                                  
                                                                                                                                
3:53:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK  argued  government take  is  being  reduced                                                               
significantly  throughout Version  K and  industry is  doing very                                                               
well in  Alaska.  A benefit  of doing business in  Alaska is that                                                               
the finds are  large and very good, unlike in  North Dakota where                                                               
the finds  are small  and give oil  immediately but  quickly die.                                                               
Decline on  the North  Slope is slow  because it  is conventional                                                               
oil.   The intent,  he reiterated, is  to not  incentivize things                                                               
that are already being done.                                                                                                    
                                                                                                                                
3:55:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 12.                                                                 
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in favor  of Amendment  12.   Representatives P.  Wilson, Hawker,                                                               
Johnson,  Olson, Seaton,  Saddler,  and Feige  voted against  it.                                                               
Therefore, Amendment 12 failed by a vote of 2-7.                                                                                
                                                                                                                                
3:55:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR moved  to adopt  Amendment  13, labeled  GS-                                                               
1647\K.12, Nauman/Bullock, 4/2/13, which read:                                                                                  
                                                                                                                                
     Page 24, line 14:                                                                                                          
          Delete "one or more"                                                                                                  
          Insert "either or both"                                                                                               
                                                                                                                                
     Page 24, lines 20 - 23:                                                                                                    
          Delete "; (3) the oil or gas is produced from                                                                         
     acreage  that was  added to  an existing  participating                                                                    
     area  by  the  Department of  Natural  Resources  after                                                                    
     December 31,  2012, and  the  producer demonstrates  to                                                                    
     the department that  the volume of oil  or gas produced                                                                    
     is  from acreage  added  to  an existing  participating                                                                    
     area"                                                                                                                      
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE TARR explained that  under Amendment 13 the credit                                                               
is maintained  for part three of  the GVR/GRE, but the  credit is                                                               
modified  for non-GVR/GRE  oil.   By  taking away  part three  of                                                               
GVR/GRE a  producer could not go  back and add acreage.   Some of                                                               
the uncertainty is  removed.  She understood  from testimony that                                                               
folks did  not anticipate much use  of part three.   Amendment 13                                                               
would add some certainty to how this would be applied.                                                                          
                                                                                                                                
3:57:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER argued this has  nothing to do with credits                                                               
as  stated,  but  has  to   do  specifically  with  the  GVR/GRE.                                                               
Amendment 13  would remove part  three of the GVR/GRE,  which was                                                               
added after a deliberative committee  process.  The whole idea is                                                               
that the GVR/GRE  is to provide benefits for new  oil and new oil                                                               
alone;  the  devil  is  in  the  details  of  defining  new  oil.                                                               
Committee debate identified that a  significant amount of new oil                                                               
might  come  from  an  acreage  that was  added  to  an  existing                                                               
participating area.  The language  originally drafted in the bill                                                               
was  unclear.   [Co-Chair  Feige]  worked  with the  agencies  to                                                               
provide a  great deal  more clarity while  still leaving  a great                                                               
deal of latitude  with the Department of  Natural Resources (DNR)                                                               
to make the  determination that the oil or gas  produced was from                                                               
the added acreage.  It is very  clear and is an important part of                                                               
clarifying  the  intent/applicability  of the  GVR/GRE.    It  is                                                               
absolutely  consistent  with  the  intent  to  provide  an  extra                                                               
benefit and incentivize new oil, no matter where it comes from.                                                                 
                                                                                                                                
3:59:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON supported Amendment  13, saying he does not                                                               
think part  three is clear.   A new reservoir or  a new reservoir                                                               
at  a different  vertical level  is clearly  a new  participating                                                               
area.   Making a  determination for  acreage that  is added  to a                                                               
participating area  will add  much work for  [DNR].   The Prudhoe                                                               
Bay operator  testified it  does not  foresee using  expansion of                                                               
participating areas.   While an effort  was made to clean  up the                                                               
language, the demonstration process was not cleaned up.                                                                         
                                                                                                                                
4:02:04 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  asked whether the  administration has  a position                                                               
on Amendment 13.                                                                                                                
                                                                                                                                
JOE  BALASH, Deputy  Commissioner,  Office  of the  Commissioner,                                                               
Department    of   Natural    Resources   (DNR),    replied   the                                                               
administration  is quite  pleased  with the  current language  in                                                               
Version K.   It is much clearer  and will be less of  a burden on                                                               
the department's staff  to go through these  discussions with the                                                               
operators on  whether a given  sub-participating area is  in fact                                                               
contributing to  production in  the main  reservoir.   Having the                                                               
bright line of  whether the particular acreage is  an addition to                                                               
the existing  PA makes  it clear.   That is just  one step.   The                                                               
second step  is the one  the Department  of Revenue will  take in                                                               
determining  whether   there  is  a  reasonable   accounting  for                                                               
production  from that  addition.   Under  this  language not  all                                                               
expansions of  participating areas  will qualify for  the GVR/GRE                                                               
because not all  will be able to account for  the production from                                                               
the  expanded  area.    Responding   further,  he  confirmed  two                                                               
elements must  be proven  to both  DNR and DOR:   1)  the company                                                               
must prove  it is an  addition to the  existing area, and  2) the                                                               
company must prove it can be accounted for separately.                                                                          
                                                                                                                                
4:03:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  recalled the deputy  commissioner previously                                                               
stating that he did not expect  this part of the GVR/GRE would be                                                               
widely  used, which  led  her to  believe that  this  was not  as                                                               
important a provision as the  first two in terms of determination                                                               
and help in clarity.                                                                                                            
                                                                                                                                
MR. BALASH agreed there will not  be many instances in which this                                                               
would be of benefit.  However,  he continued, based on the review                                                               
done and  work that is  currently out  there, it is  expected the                                                               
number of  barrels that would be  able to take advantage  of this                                                               
is material.   Potential examples  include "Ipad,"  expansions at                                                               
West Sac,  Sharktooth prospect  at Kuparuk,  and CD-5  at Alpine.                                                               
These are material and are things the state will want to happen.                                                                
                                                                                                                                
MR. PAWLOWSKI  added it is  important to distinguish  between the                                                               
starting language of this provision  versus the current language.                                                               
The starting  language was on  an individual  well-by-well basis,                                                               
whereas  [Version K]  goes back  to  the actual  acreage and  the                                                               
leases  and the  tracts  that  are added.    That  is a  material                                                               
difference  from the  department's  perspectives  about how  this                                                               
process might play out.  It was  heard last night from one of the                                                               
operators of  the non-Prudhoe Bay unit  that future opportunities                                                               
are seen to perhaps use this.   He concurred with Mr. Balash that                                                               
those  volumes  are  currently  not  being  developed  and  could                                                               
provide meaningful additions to the state.                                                                                      
                                                                                                                                
4:06:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR inquired  whether the  fiscal impact  of the                                                               
provision has been appropriately assessed in the fiscal note.                                                                   
                                                                                                                                
MR. PAWLOWSKI replied he believes  it has because the majority of                                                               
these expansions  of PAs are  prospective going forward,  so they                                                               
are  new  additions that  are  not  necessarily included  in  the                                                               
department's revenue forecasts.                                                                                                 
                                                                                                                                
CO-CHAIR  FEIGE  interjected  that  any new  oil  would  actually                                                               
decrease the impact of the fiscal note, which would be good.                                                                    
                                                                                                                                
REPRESENTATIVE  TARR  said  it  is  a policy  call  on  where  to                                                               
incentivize activity.   Some changes  made in the bill  have been                                                               
characterized in the  public as a giveaway.  There  is a question                                                               
about  how  much to  give  and  whether  the changes  are  giving                                                               
opportunities  for manipulating  the system  for production  that                                                               
was already planned.                                                                                                            
                                                                                                                                
4:07:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 13.                                                                 
                                                                                                                                
A  roll call  vote was  taken.   Representatives Tarr,  Tuck, and                                                               
Seaton voted in  favor of Amendment 13.   Representatives Hawker,                                                               
Johnson, Olson, P.  Wilson, Saddler, and Feige  voted against it.                                                               
Therefore, Amendment 13 failed by a vote of 3-6.                                                                                
                                                                                                                                
4:08:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   TUCK   withdrew   Amendment  14,   labeled   28-                                                               
GS1647\K.17, Bullock, 4/3/13.                                                                                                   
                                                                                                                                
4:09:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR moved  to adopt  Amendment  15, labeled  28-                                                               
GS1647\K.15, Bullock, 4/3/13,  [text provided at the  end of this                                                               
document].                                                                                                                      
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  TARR explained  Amendment  15  would protect  the                                                               
state's interests  by providing that  the state would go  back to                                                               
[ACES]  if, by  close  of  the 2017  calendar  year, North  Slope                                                               
production  does  not increase  at  least  10 percent  over  2012                                                               
levels.   While the state  is unable  to get any  guarantees from                                                               
the  "big three"  about  what  their plans  are  should this  tax                                                               
change  be  made,  this  amendment  would  give  the  state  some                                                               
protections to encourage activity to start quickly.                                                                             
                                                                                                                                
4:10:55 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE noted  Amendment 15, page 1, line  16, would amend                                                               
Version K  to make a  reference to  AS 43.55.011(g).   He offered                                                               
his belief  that this subsection pertaining  to progressivity has                                                               
been deleted.                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER  said the  conditional effect is  about the                                                               
volume of oil  being produced in 2017 that exceeds  the volume of                                                               
oil  produced in  the 2012  calendar  year.   However, the  issue                                                               
before the state  is about stemming decline.  There  is a natural                                                               
decline rate  in the fields, so  it is an affirmative  10 percent                                                               
increase over 2012.   For this legislation to  actually result in                                                               
more  revenue to  the  State  of Alaska,  an  increase of  40,000                                                               
barrels  [per day]  is needed  [3/25/13  PowerPoint testimony  by                                                               
Econ One  Research, Inc., slide  20].   Amendment 15 would  set a                                                               
hurdle  of  10 percent  more  than  the  2012 calendar  year  and                                                               
putting  in this  kind of  artificial hurdle  is exactly  what is                                                               
wrong.  This  short timeframe and sort of absolute  are not going                                                               
to result in any increased  investment and will probably decrease                                                               
investment because this is all  about aggregate production across                                                               
the North  Slope.   When the majority  of that  production likely                                                               
has to come  from legacy producers, or one small  guy hitting the                                                               
mega-find, it  is discriminatory.   It does not represent  how to                                                               
incentivize and  create a balanced and  durable incentive program                                                               
across  all tranches  of people  the state  wants working  on the                                                               
North Slope.   The  objective is to  recognize market  forces and                                                               
the laws  of economics, and put  in place what is  believed to be                                                               
an economic environment that will  result in the desired increase                                                               
in production across all spectrums.   Another legislature will be                                                               
sitting here in 2017 and if it does  not like what it sees it can                                                               
make changes.                                                                                                                   
                                                                                                                                
4:14:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   TARR,   addressing  Co-Chair   Feige's   earlier                                                               
statement  regarding Amendment  15,  page 1,  line 16,  explained                                                               
that that language needs to  be included in the amendment because                                                               
if the  tax regime reverts back  to the ACES structure  then that                                                               
language  will  be  relevant.     Responding  further,  she  said                                                               
additional language  related to this  provision is on page  16 of                                                               
the amendment.   She  reminded members  that today's  meeting was                                                               
delayed while  Legislative Legal  and Research  Services prepared                                                               
the amendments, so  she was unable to proof  this amendment prior                                                               
to the start of the meeting, which  is one of the problems with a                                                               
rushed process.   If the  amendment is incorrect,  she continued,                                                               
she can offer a conceptual amendment.                                                                                           
                                                                                                                                
4:19:09 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:19 p.m. to 4:21 p.m.                                                                       
                                                                                                                                
4:21:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR noted  Amendment 15 has a  drafting error and                                                               
moved to adopt Amendment 1 to Amendment 15:                                                                                     
                                                                                                                                
     Page 1, line 16, following "AS 43.55.011":                                                                             
          Delete "(g)"                                                                                                      
          Insert "(q)"                                                                                                      
                                                                                                                                
The  language on  line  16  would therefore  read:   "during  the                                                               
previous calendar year  under AS 43.55.011(q) ...".   There being                                                           
no objection, the Amendment 1 to the Amendment 15 passed.                                                                       
                                                                                                                                
REPRESENTATIVE TARR  said Amendment  15 would provide  a timeline                                                               
to  prove that  there  is  new production.    She agreed  another                                                               
legislature could come back, but said  she would not rely on that                                                               
given the  amount of time  it has  taken this legislature  to get                                                               
this far.   She stressed  she is  getting dozens of  e-mails that                                                               
the proposed  bill is  a giveaway  with no  guarantee of  any new                                                               
production.   The public  would be much  more comfortable  if the                                                               
bill  included  a  timeline  and  performance  expectations,  she                                                               
stressed, since  the legislation gives  up nearly $1  billion [in                                                               
revenue] which could result in  Alaskans making sacrifices due to                                                               
lack of funding for schools, roads, and public safety.                                                                          
                                                                                                                                
4:24:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON disagreed,  saying Version K,  pages 17                                                               
and  24, provide  that no  allowances are  given unless  there is                                                               
production; thus, something is being done to ensure production.                                                                 
                                                                                                                                
REPRESENTATIVE JOHNSON  recounted when  ACES was first  passed it                                                               
was thought  to be the best  thing that had ever  happened to the                                                               
state; only about  12 people in the  House said it was  not.  The                                                               
next year  a bill was  introduced and  about 14 people  said ACES                                                               
was not what it was supposed  to be.  Today, nearly everyone says                                                               
ACES either  needs to be tweaked  or totally disregarded.   It is                                                               
almost universally recognized that ACES  is flawed.  To return to                                                               
what is, in  his opinion, the most flawed tax  plan on the planet                                                               
is  unconscionable.   He recalled  his reference  to ACES  on the                                                               
House floor when it first passed  as being a hurricane that would                                                               
devastate Alaska's  economy and  said he  believes that  is where                                                               
the state is now.                                                                                                               
                                                                                                                                
4:26:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  argued the  change proposed by  Amendment 15                                                               
promotes  more production,  but provides  protection should  that                                                               
not  happen by  returning  to the  system  that protected  Alaska                                                               
during  a time  when the  rest of  the U.S.  was going  through a                                                               
recession.   There are more  jobs and  more players on  the North                                                               
Slope.   Referring to statements  that the fastest way  to making                                                               
more production happen  is to make it happen  on existing fields,                                                               
he said he has not seen  where any existing fields have had their                                                               
declines reversed.  While natural  decline can be slowed, it will                                                               
take new oil  from other areas.  Amendment 15  is a safeguard for                                                               
the state's future.                                                                                                             
                                                                                                                                
4:28:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 15.                                                                 
                                                                                                                                
REPRESENTATIVE  TARR, responding  to  Representative P.  Wilson's                                                               
earlier comment, drew  attention to the bill's  fiscal note which                                                               
has one  portion tied  to new production  through the  $5 credit.                                                               
She  said this  pales in  scale to  the loss  of the  progressive                                                               
portion of the tax and this  give away of hundreds of millions of                                                               
dollars  with no  guarantee of  production is  of concern  to the                                                               
public.   The  public expects  the legislature  to play  hardball                                                               
like  the  industry  does  in  its board  rooms  to  advance  its                                                               
interests;  therefore,  it  is  not  inappropriate  to  put  some                                                               
expectations in place.  The state  will be taking a budget hit of                                                               
nearly $1 billion  [per year] at least through  fiscal year 2019.                                                               
It  will  take  the  state's  savings  in  its  statutory  budget                                                               
reserve, which  is from the  ACES tax,  to get through  this time                                                               
period.   The people of  Alaska are  being asked to  shoulder the                                                               
burden of  a tax break for  the most profitable oil  companies in                                                               
the world.                                                                                                                      
                                                                                                                                
4:30:33 PM                                                                                                                    
                                                                                                                                
A roll call vote was taken.   Representatives Tuck and Tarr voted                                                               
in  favor  of Amendment  15.    Representatives Hawker,  Johnson,                                                               
Olson, Seaton,  P. Wilson, Saddler,  and Feige voted  against it.                                                               
Therefore, Amendment 15 failed by a vote of 2-7.                                                                                
                                                                                                                                
4:31:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TUCK moved  to adopt  Amendment  16, labeled  28-                                                               
GS1647\K.16, Bullock, 4/3/13,  [text provided at the  end of this                                                               
document].                                                                                                                      
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE TUCK explained Amendment  16 deals with Section 11                                                               
and, as heard  from the administration, Section  11 would include                                                               
both Prudhoe  Bay and  Kuparuk.   The proposed  legislation would                                                               
reduce government  take at high  oil prices where things  tend to                                                               
be most profitable.  Amendment 16  would protect the state at low                                                               
prices by putting in a floor of  10 percent of gross value at the                                                               
point of production and this would apply to the legacy fields.                                                                  
                                                                                                                                
4:32:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  said Amendment 16 repeals  and reenacts AS                                                               
43.55.011(f), which  is the minimum  tax subsection  that applies                                                               
to all  oil and gas produced  north of 68 degrees  North latitude                                                               
other than oil  and gas production that is  essentially a private                                                               
royalty interest.  It would  eliminate the minimum tax provisions                                                               
on  everyone except  Prudhoe Bay  and  Kuparuk, although  Kuparuk                                                               
would soon  not be  subject to  this minimum  tax because  of its                                                               
production decline.   Thus, the minimum tax level  on Prudhoe Bay                                                               
will be raised to 10 percent.  Lines  12-14 make no sense.  It is                                                               
not  good  public  policy  to  increase  the  minimum  taxes  on,                                                               
essentially,  only Prudhoe  Bay, and  to remove  the minimum  tax                                                               
levels on all other producers today and in the future.                                                                          
                                                                                                                                
REPRESENTATIVE TUCK  added Amendment  16 attempts to  ensure that                                                               
the state does not go  into negative production tax after credits                                                               
when oil prices dip to roughly  $65 per barrel.  It would protect                                                               
the state's interests by ensuring revenue at low prices.                                                                        
                                                                                                                                
4:35:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 16.                                                                 
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in  favor  of  Amendment  16.   Representatives  Johnson,  Olson,                                                               
Hawker, Seaton, P.  Wilson, Saddler, and Feige  voted against it.                                                               
Therefore, Amendment 16 failed by a vote of 2-7.                                                                                
                                                                                                                                
4:36:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR moved  to adopt  Amendment  17, labeled  28-                                                               
GS1647\K.8, Nauman/Bullock, 4/2/13, which read:                                                                                 
                                                                                                                                
     Page 24, line 22:                                                                                                          
          Delete "2014"                                                                                                         
          Insert "2017"                                                                                                         
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE TARR  stated she has had  trouble with application                                                               
of  the GVR/GRE  - what  it  would apply  to, when  it would  not                                                               
apply, and whether  it should apply in circumstances  where it is                                                               
oil that  is already in  the plans for the  next few years.   The                                                               
legislature  is basing  a lot  of  its decisions  on the  revenue                                                               
forecasts, so there  is some idea of the plan  development in the                                                               
near  term.   Amendment  17 would  delay  implementation of  part                                                               
three of the GVR/GRE from 2014  to 2017, which would increase her                                                               
comfort level  in regard  to ensuring it  is really  new activity                                                               
and  new  production that  is  being  incentivized and  not  just                                                               
things that were going to happen in the next couple years.                                                                      
                                                                                                                                
4:38:06 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  said he does  not understand why  it would                                                               
be wanted  to delay someone wishing  to pursue an addition  to an                                                               
existing participating area  - an addition that  must be approved                                                               
by,  and demonstrated  to, the  Department  of Natural  Resources                                                               
that it results  in production from that added acreage.   This is                                                               
a  "slow-it-down" amendment,  he  argued, because  if  he were  a                                                               
producer he  would ensure that  his decisions  and determinations                                                               
were   slowed  down   until  2017   rather  than   pursuing  them                                                               
immediately.   He  said he  opposes  Amendment 17  because it  is                                                               
immediate and expeditious results that are wanted from the bill.                                                                
                                                                                                                                
CO-CHAIR  FEIGE agreed  with Representative  Hawker, saying  this                                                               
would be for new oil and new oil  is exactly what is trying to be                                                               
found.   If a  producer adds to  an existing  participating area,                                                               
that  is  an  additional  reservoir that  will  have  production.                                                               
There  will be  natural logistical  challenges to  increasing the                                                               
activity  on  the   North  Slope,  but  it  should   not  be  the                                                               
legislature's objective  to put  an artificial  limit on  that by                                                               
having an  effective date  for this GVR/GRE  of three  more years                                                               
into the future.                                                                                                                
                                                                                                                                
4:40:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR argued it depends  on how one feels - whether                                                               
one  is "comfortable  with  a substantial  giveaway  to the  most                                                               
profitable companies  ... in  the world for  work that  they were                                                               
already going to do."  She said  this is an area for which she is                                                               
receiving much  constituent communication -  people uncomfortable                                                               
about the idea of the state  not getting anything new for what is                                                               
being  given away.   Amendment  17 would  take into  account that                                                               
producers have  already planned what  they will be doing  for the                                                               
next few years.  Incentive  would still be provided for producers                                                               
to continue doing  work that would qualify for parts  one and two                                                               
of the GVR/GRE.   She allowed that in practical  terms it may not                                                               
have  an  impact because  of  the  time  it  would take  for  the                                                               
application process to  add acreage to a participating  area.  It                                                               
is a  policy call on  whether to give a  tax break for  work that                                                               
was already going to  be done in addition to a  tax break with no                                                               
guarantees or whether to incentivize new efforts.                                                                               
                                                                                                                                
CO-CHAIR  FEIGE  posited that  lowering  the  tax rate  makes  it                                                               
possible for an  investment to go forward and  this is investment                                                               
that would be new oil.                                                                                                          
                                                                                                                                
4:42:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 17.                                                                 
                                                                                                                                
A roll call vote was taken.   Representatives Tarr and Tuck voted                                                               
in  favor  of  Amendment  17.   Representatives  Johnson,  Olson,                                                               
Seaton, P. Wilson,  Hawker, Saddler, and Feige  voted against it.                                                               
Therefore, Amendment 17 failed by a vote of 2-7.                                                                                
                                                                                                                                
4:43:14 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE recessed the meeting to a call of the chair.                                                                     
                                                                                                                                
7:33:53 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE called  the meeting  back to  order at  7:33 p.m.                                                               
Representatives  Seaton,   P.  Wilson,  Tuck,   Hawker,  Johnson,                                                               
Saddler,  and Feige  were  present  at the  call  back to  order.                                                               
Representatives  Olson and  Tarr arrived  as the  meeting was  in                                                               
progress.                                                                                                                       
                                                                                                                                
7:33:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  moved to  adopt Amendment 18,  labeled 28-                                                               
GS1647\K.29, Nauman/Bullock,  4/2/13, [text  provided at  the end                                                               
of this document].                                                                                                              
                                                                                                                                
REPRESENTATIVE HAWKER objected for discussion purposes.                                                                         
                                                                                                                                
REPRESENTATIVE SEATON  explained Amendment 18 addresses  the need                                                               
on  the  North Slope  for  investment  opportunities for  getting                                                               
production in  the pipeline.  Brooks  Range Petroleum Corporation                                                               
has spoken about staying on  track with production coming on line                                                               
of 15,000 barrels a day, the  first new oil the state would have.                                                               
Last  year  the  committee  heard a  presentation  regarding  the                                                               
Alaska  Industrial  Development   and  Export  Authority  (AIDEA)                                                               
having the ability  to loan money at terms that  would make money                                                               
for the state.   An interest rate of 10 percent  for 10 years was                                                               
discussed  for  up  to $200  million  on  production  facilities.                                                               
Those  production  facilities  were intended  to  be  constructed                                                               
within Alaska  and trucked to the  North Slope.  Amendment  18 is                                                               
an  amendment the  committee included  in last  year's bill.   It                                                               
would accelerate production,  increase jobs in Alaska  and, at 10                                                               
percent interest,  would make more  money than the  state's other                                                               
investments.  It  is for production facilities  and is applicable                                                               
to many of the small producers.                                                                                                 
                                                                                                                                
7:37:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER said  he  has some  trepidation about  the                                                               
amendment because  this issue may  have been largely  resolved by                                                               
other bills that  have moved through the  committee this session.                                                               
He has some  worry about expanding the scope of  a production tax                                                               
revision bill, but is comfortable  when looking at it through the                                                               
ultimate  objective,  which  is to  increase  production  without                                                               
placing the  state's treasury  at undue  risk.   He said  he will                                                               
therefore  remove  his  objection  to  the  amendment  when  that                                                               
opportunity comes.                                                                                                              
                                                                                                                                
REPRESENTATIVE JOHNSON liked the  concept, but questioned whether                                                               
Amendment  18 would  positively  or  negatively affect  someone's                                                               
ability to  raise capital given  that money is usually  raised in                                                               
the private market.  Responding  to Co-Chair Feige, he agreed the                                                               
state  might be  competing with  the private  sector and  said he                                                               
would like to  talk with someone who has tried  to raise money as                                                               
to whether the amendment would be of help.                                                                                      
                                                                                                                                
7:39:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER  shared  that   when  talking  with  folks                                                               
interested in this  sort of legislation he was  not excited about                                                               
the idea of AIDEA getting involved  in oil and gas field finance.                                                               
However, after thinking  about it he has  become comfortable with                                                               
the concept  and has  a bit  different stand.   Because  the bill                                                               
will  receive   a  thorough  financial  review   in  the  finance                                                               
committee, he  will support the amendment.   It is a  good policy                                                               
statement  from this  committee that  helping develop  facilities                                                               
could be  as helpful in  increasing production as  an appropriate                                                               
economic fund.                                                                                                                  
                                                                                                                                
CO-CHAIR FEIGE noted the amendment  includes a title change, so a                                                               
title change resolution will be required.                                                                                       
                                                                                                                                
REPRESENTATIVE  JOHNSON  concurred  it   would  require  a  title                                                               
change.   In further response,  he said  the House would  have to                                                               
vote for  the change  and then  the Senate would  need to  do the                                                               
same.  He confirmed it would take a majority vote to accept.                                                                    
                                                                                                                                
7:41:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  asked whether the intent  of Amendment 18                                                               
is to eliminate bottlenecks for small or for large producers.                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  replied there  would be no  restriction on                                                               
this money for  naming participants or the  size of participants.                                                               
Members were approached  last year by producers  that were trying                                                               
to rapidly move  forward with production into the  pipeline.  The                                                               
Brooks Range project will come  on line long before Point Thomson                                                               
or any of  the other major projects.  The  bottlenecks that occur                                                               
in  the production  facilities of  gas  and oil  handling can  be                                                               
significant  and challenging  to work  out, so  this would  be an                                                               
alternative  method.   Getting production  into the  Trans-Alaska                                                               
Pipeline System (TAPS) is not just  the fiscal system.  While the                                                               
fiscal  system is  a challenge  for  some, it  is the  regulatory                                                               
system that  is a challenge  for others and this  amendment would                                                               
help with that bottleneck.                                                                                                      
                                                                                                                                
7:43:24 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SADDLER recalled  industry cautioning  that legislators                                                               
should try  not to drive  from the back  seat.  He  inquired what                                                               
assurance the maker  of the amendment has that this  is the exact                                                               
place where  this money will  be most efficacious  in eliminating                                                               
bottlenecks.   He  further inquired  whether the  fund should  be                                                               
made available to any purpose and  let people borrow and spend as                                                               
they will.                                                                                                                      
                                                                                                                                
REPRESENTATIVE SEATON responded this  is an identified bottleneck                                                               
that would accelerate production getting  into TAPS and the state                                                               
would  make money  doing it.   He  said he  does not  support the                                                               
state loading  money to  be used for  anything.   This discussion                                                               
was had  last year with  AIDEA and with producers;  the amendment                                                               
was not  crafted at  the last  minute, it  is basically  what the                                                               
committee had  last year.   It  would move  the state  toward its                                                               
goal of  production.  He  agreed with Representative  Hawker that                                                               
the  finance  committee  could   remove  the  provision  if  that                                                               
committee dislikes it.                                                                                                          
                                                                                                                                
CO-CHAIR FEIGE asked whether AIDEA is currently able to do this.                                                                
                                                                                                                                
REPRESENTATIVE  SEATON answered  AIDEA  does  not currently  have                                                               
specific  authority for  oil and  gas  production facilities,  so                                                               
Amendment 18 would  allow that.  He further noted  that AIDEA has                                                               
a $400 million bond limit.                                                                                                      
                                                                                                                                
7:46:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON,  responding to Co-Chair  Saddler regarding                                                               
Amendment 18, page  3, lines 9 and 17, he  explained $400 million                                                               
is AIDEA's bonding limit currently,  so taking up to $200 million                                                               
out of  AIDEA's current authority for  economic development would                                                               
be  problematic.   Amendment  18  would  put  [a limit]  of  $200                                                               
million  so  it does  not  restrict  or  take away  from  AIDEA's                                                               
current ability.                                                                                                                
                                                                                                                                
CO-CHAIR  SADDLER  therefore understood  it  is  not a  per  bond                                                               
issue,  but  is  the  entire bonding  authority.    He  requested                                                               
elaboration  on  how the  flow  of  money  would go  through  the                                                               
financing and why that would be savings to the state.                                                                           
                                                                                                                                
REPRESENTATIVE SEATON explained last  year's negotiations were in                                                               
the range  of 10 percent interest  over a 10 year  period for pay                                                               
back.   Currently, the  state is  not making  near 10  percent on                                                               
most of  the things that it  is investing.  The  facilities would                                                               
be built  in Alaska so  the jobs would be  in Alaska.   While the                                                               
facilities could  still be built  in Alaska using  someone else's                                                               
money, this amendment would assure  that the facilities are built                                                               
in Alaska.  Responding further, he  said if AIDEA made a loan of,                                                               
say, $100  million, it  would negotiate  for 10  percent interest                                                               
with a  10-year payback.   Originally, the  company that  came to                                                               
the committee  was willing to do  a much shorter time,  but AIDEA                                                               
said it wanted a longer duration  at that interest rate, and that                                                               
was acceptable to everybody.                                                                                                    
                                                                                                                                
7:49:04 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE  requested  the   administration  to  comment  on                                                               
Amendment 18.                                                                                                                   
                                                                                                                                
MR. PAWLOWSKI  noted AIDEA has  broad powers currently  to engage                                                               
in financing, development, and infrastructure  in the state.  The                                                               
administration  is  trying  to  understand  the  section  of  the                                                               
amendment  on page  2,  lines 12-28,  about  the actual  separate                                                               
establishment of an oil and  gas infrastructure fund within AIDEA                                                               
itself and the  relationship of that to  the bond authorizations.                                                               
Being  unable to  consult  directly with  AIDEA,  he offered  his                                                               
belief that  AIDEA is  already engaged  in conversations  and has                                                               
stepped  forward   in  regard  to  the   aforementioned  project.                                                               
Without  input  from  AIDEA,  the  administration  is  relatively                                                               
uncomfortable with understanding the  difference between the fund                                                               
and  the bond  authorizations and  the total  project.   However,                                                               
because it is the will  of the committee, the administration will                                                               
continue working with members on all of these issues.                                                                           
                                                                                                                                
REPRESENTATIVE  SEATON   explained  it  was  brought   up  during                                                               
discussions with  AIDEA that the legislature  may not necessarily                                                               
want  AIDEA to  sell bonds  and might  instead prefer  depositing                                                               
money into a fund that AIDEA  could loan because the state is not                                                               
making 10 percent  money in its statutory budget  reserve nor its                                                               
other  accounts.   While AIDEA  is using  some of  its money  for                                                               
helping in the construction of that  road and pad, AIDEA has said                                                               
it  does  not  have  authority  to  do  oil  and  gas  production                                                               
facilities without a  change in statute.  If  the legislature did                                                               
not appropriate money into the  fund, AIDEA would use the bonding                                                               
authority being grant to it.                                                                                                    
                                                                                                                                
7:52:38 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  supported Amendment 18, saying  that even if                                                               
AIDEA could do  this already it would  be nice to have  it in the                                                               
regulations and laws  for oil and gas so people  are aware of it.                                                               
The processing  facilities could  potentially be a  bottleneck on                                                               
the  North  Slope if  a  small  producer  cannot get  a  facility                                                               
sharing agreement with a big producer.   This would allow a small                                                               
producer  to  build its  own  facilities  or  would allow  a  big                                                               
producer to expand its facilities.                                                                                              
                                                                                                                                
CO-CHAIR FEIGE drew attention to  Amendment 18, page 2, lines 21-                                                               
24,  which read  "the state  or  a political  subdivision of  the                                                               
state  may levy  a tax  or special  assessment on  an oil  or gas                                                               
processing facility ...."  He asked  what would be the purpose of                                                               
the tax.                                                                                                                        
                                                                                                                                
REPRESENTATIVE SEATON  replied the language  is to make  it clear                                                               
that just  because the  state is  participating in  the financial                                                               
arrangement  in  these facilities,  the  facilities  do not  then                                                               
escape  property tax.   There  became  this question  of at  what                                                               
point in the  financing does it become a state  facility and then                                                               
escape tax.   There is  no intent  to have the  state's financing                                                               
ability change the property tax status.                                                                                         
                                                                                                                                
MR. PAWLOWSKI understood that AIDEA's  statutory problem in being                                                               
involved  in   the  proposed  North   Slope  project,   at  least                                                               
initially, is  really related to  page 3  of the amendment  - the                                                               
authorization to issue  the bonds.  Currently, AIDEA  has a broad                                                               
range of statutory ability to  be involved in different projects,                                                               
but AIDEA  does not have  the actual authorization to  issue that                                                               
large amount of  debt to go into a project.   That typically goes                                                               
to the  AIDEA board  for review  and then it  is released  to the                                                               
legislature for  approval; it is the  legislature that authorizes                                                               
the issuance  of that debt.   He said would  need to talk  to the                                                               
department  and to  AIDEA  to understand  their  feelings on  the                                                               
creation of the fund.                                                                                                           
                                                                                                                                
7:55:56 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 7:55 p.m. to 7:58 p.m.                                                                       
                                                                                                                                
7:58:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER removed  his  objection  to Amendment  18.                                                               
There being no further objection, Amendment 18 passed.                                                                          
                                                                                                                                
7:58:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON moved to adopt Amendment 19, labeled 28-                                                                  
GS1647\K.27, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 1, lines 2 - 4:                                                                                                       
          Delete "providing a tax credit against the                                                                          
        corporation income tax for qualified oil and gas                                                                      
     service industry expenditures;"                                                                                          
                                                                                                                                
     Page 4, line 5, through page 5, line 11:                                                                                   
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, line 5:                                                                                                           
          Delete "Section 13"                                                                                                   
          Insert "Section 12"                                                                                                   
                                                                                                                                
     Page 29, line 6:                                                                                                           
          Delete "sec. 31"                                                                                                      
          Insert "sec. 30"                                                                                                      
                                                                                                                                
     Page 29, line 7:                                                                                                           
          Delete "Sections 18 and 20 - 23"                                                                                      
          Insert "Sections 17 and 19 - 22"                                                                                      
          Delete "sec. 18"                                                                                                      
          Insert "sec. 17"                                                                                                      
                                                                                                                                
     Page 29, line 9:                                                                                                           
          Delete "Section 19"                                                                                                   
          Insert "Section 18"                                                                                                   
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 35"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "Sections 13, 20 - 23, 28, and 37"                                                                             
          Insert "Sections 12, 19 - 22, 27, and 36"                                                                             
                                                                                                                                
     Page 29, line 25:                                                                                                          
          Delete "sec. 18"                                                                                                      
          Insert "sec. 17"                                                                                                      
          Delete "sec. 31"                                                                                                      
          Insert "sec. 30"                                                                                                      
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
7:59:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON explained  Amendment 19  would delete  the                                                               
section  providing a  tax credit  against the  corporation income                                                               
tax for qualified oil and  gas service industry expenditures.  He                                                               
said  the  problem  is  that  there are  other  tax  credits  for                                                               
workforce development  and educational purposes.   It really does                                                               
not have  anything to do with  the production of oil  and gas; it                                                               
is service  companies.  While the  fiscal note says a  maximum of                                                               
$25 million,  a good number  was not available.   In the  last 10                                                               
years the maximum  paid was about $10 million for  the entire oil                                                               
and gas  service industry sector.   Thus, this 10 percent  or $10                                                               
million  per   company  would  probably  eliminate   all  of  the                                                               
corporate income  tax.  There  is also a five-year  carry forward                                                               
provision.  The  committee has looked at trying  to stimulate oil                                                               
and  gas   production  workforce  training.     "Processing  tech                                                               
facilities"  can be  done through  the  state's universities  and                                                               
colleges.  Amendment  19 would have no effect on  the bottom line                                                               
of the  producers or anybody that  is going to be  putting oil in                                                               
TAPS.   Responding to  Co-Chair Feige,  he confirmed  the section                                                               
that  would be  deleted  was  added to  the  bill  in the  Senate                                                               
Resources Committee by Senator Bishop.                                                                                          
                                                                                                                                
8:01:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER requested clarification  on whether Amendment 19                                                               
would  eliminate  or  supplant   the  workforce  development  and                                                               
educational tax credits.                                                                                                        
                                                                                                                                
REPRESENTATIVE SEATON  responded if there is  no corporate income                                                               
tax  liability  for   any  of  these  companies   then  there  is                                                               
absolutely no tax credit that  they can take by doing educational                                                               
tax  credits.   Educational tax  credits  are 50  percent of  the                                                               
first  $100,000 and  100 percent  of the  second $100,000  and 50                                                               
percent of  the amount up to  $5 million.  That  upper amount has                                                               
not been  used, but  smaller amounts  have.  If  there is  no tax                                                               
liability  there is  no  incentive to  earn a  tax  credit to  do                                                               
workforce  development issues  because 100  percent of  the money                                                               
would be taken  out of the corporation rather  than diverting tax                                                               
money that  would have been paid  to the state to  an educational                                                               
institution.  Therefore, the tax incentive goes away.                                                                           
                                                                                                                                
8:03:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON commented the  training is used  by the                                                               
mining companies  to ensure  there are  people who  are qualified                                                               
and trained  before hire.  The  companies donate to the  three or                                                               
four schools in the state that provide this training.                                                                           
                                                                                                                                
MR. PAWLOWSKI called  attention to the fall  2012 Revenue Sources                                                               
Book, page 113,  which describes the credits  that are applicable                                                               
under multiple programs.   The education credit  in particular is                                                               
applicable to  the corporate  income tax, he  said.   Other taxes                                                               
having a  credit for  education are  the fisheries  business tax,                                                               
fishery  resource  landing  tax,  insurance  premium  tax,  title                                                               
insurance  premium   tax,  mining   license  tax,  oil   and  gas                                                               
production tax, and  oil and gas property tax.   The total amount                                                               
used in 2012 was $4 million.   Recognizing that a healthy service                                                               
industry  supports a  healthy oil  industry,  this provision  was                                                               
added  in the  Senate to  provide incentive  for work  being done                                                               
within the state that does not  necessarily have to be done here,                                                               
which is  the manufacture and  modification of  tangible personal                                                               
property that  then is used  in the  oil and gas  and exploration                                                               
industry.   The administration has  supported the intent  of this                                                               
provision,  as well  as the  provision,  throughout the  process.                                                               
The education  credit can be  taken against lots of  other taxes,                                                               
and the  importance of this to  the overall perspective is  a key                                                               
part of building a vibrant oil and gas industry in Alaska.                                                                      
                                                                                                                                
8:05:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE understood  this  credit would  enable a  service                                                               
company to  put in  a lower bid  and improve  its competitiveness                                                               
against outside suppliers of those manufactured items.                                                                          
                                                                                                                                
MR. PAWLOWSKI  concurred, saying the intent  behind the provision                                                               
is to  improve the economics for  the type of work  being done in                                                               
state.    Manufacturing   and  modification  companies  testified                                                               
before other committees  that this would be a  valuable credit to                                                               
them in their  ability to compete against  infrastructure that is                                                               
built out of state and shipped here.                                                                                            
                                                                                                                                
8:06:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER pointed  out the  language being  proposed                                                               
for removal  from statute is that  $10 million credit, but  it is                                                               
against Chapter 20,  the Alaska Net Income Tax Act,  so it is the                                                               
corporate income tax.   He said he was concerned  when the Senate                                                               
first  included this  section because  he was  uncomfortable with                                                               
going that far down into the  economy when he really thought this                                                               
legislation should  be specifically  looking at the  upstream oil                                                               
and gas  economy.  However, after  thinking about it, he  came to                                                               
see it  as an equalizer  or leveling of  the playing field.   For                                                               
example, limited liability corporations  and S corporations enjoy                                                               
the benefits of legal protection  of corporations but yet any tax                                                               
liability  flows  to  the  individual.   Because  Alaska  has  no                                                               
personal income  tax it is  extremely advantageous to  organize a                                                               
business as a  tax pass-through entity.  This provision  is a tax                                                               
equalizer for  regional and Native-owned corporations  and others                                                               
that  are  C corporations  because  C  corporations cannot  avail                                                               
themselves  of the  ability  to organize  in  a tax  pass-through                                                               
entity.    Testimony  regarding the  state's  perceived  exposure                                                               
indicated this  provision would not  be a threat to  the treasury                                                               
but would aid in the  long-term and overall objective of creating                                                               
an  economic  environment  across  the state  to  facilitate  and                                                               
increase oil and gas production.   Reiterating that he has worked                                                               
his way  from not liking this  section in the bill  to liking it,                                                               
he said he will maintain his objection to the amendment.                                                                        
                                                                                                                                
8:10:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  allowed he had  not thought about  the equalizing                                                               
between C  corporations and  S corporations;  rather he  had been                                                               
thinking about it  from the viewpoint of  Alaskans versus Outside                                                               
and anything  that gives  Alaska businesses  an advantage  to get                                                               
more business,  especially the increase  in business  that should                                                               
come as  a result of  this bill lowering taxes.   In the  end the                                                               
revenue  from  the  corporate  tax,  even  with  the  10  percent                                                               
deduction, may  still exceed  what the  state is  receiving under                                                               
its current tax regime.  He  said he would therefore like to keep                                                               
Section 8 in the bill.                                                                                                          
                                                                                                                                
REPRESENTATIVE TUCK said he would like  to ensure that as much of                                                               
the new  investment on the North  Slope is built in  Alaska as is                                                               
possible.   The  aforementioned  provision is  an opportunity  to                                                               
offer credits for value-added industries within the state.                                                                      
                                                                                                                                
REPRESENTATIVE SEATON,  in response to Representative  P. Wilson,                                                               
said the definition  of "qualified" oil and  gas service industry                                                               
expenditures is found in Version K, page 5, beginning on line 7.                                                                
                                                                                                                                
8:13:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON stated  if the committee's mood  is to make                                                               
C corporations on par with  limited liability corporations it can                                                               
do  that.   This is  the  only tax  that C  corporations have  to                                                               
receive that tax  credit.  According to Version K,  page 5, lines                                                               
10-11,  components or  equipment used  for or  in the  process of                                                               
manufacturing are not included,  meaning welding equipment is not                                                               
included but  pipe that is  welded would be included.   Inventory                                                               
activities  would also  not be  included.   It  appears from  the                                                               
modification language  in Version  K, page 5,  line 3,  that most                                                               
things will  be included because  almost everything has  a useful                                                               
life of  three years.   Given  the will of  the committee  to not                                                               
move this way, he withdrew Amendment 19.                                                                                        
                                                                                                                                
8:14:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  moved to  adopt Amendment 20,  labeled 28-                                                               
GS1647\K.30, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 1, line 11, following "properties;":                                                                                
          Insert "relating to the additional conservation                                                                     
     surcharge on oil;"                                                                                                       
                                                                                                                                
     Page 25, following line 20:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec. 33. AS 43.55.300(a) is amended to read:                                                                       
          (a)  Every producer of oil shall pay a surcharge                                                                      
     of  $.07 for  each [$.04  PER] barrel  of oil  produced                                                                
     from each lease or property  in the state, less any oil                                                                    
     the  ownership  or  right  to   which  is  exempt  from                                                                    
     taxation."                                                                                                                 
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 37"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "37"                                                                                                           
          Insert "38"                                                                                                           
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  SEATON  explained  Amendment 20  deals  with  the                                                               
spill prevention  account.  He  provided a two-page  handout from                                                               
the  House  finance  subcommittee's   2/7/2013  overview  of  the                                                               
Department  of Environmental  Conservation (DEC).   He  noted the                                                               
graph in the  handout shows this account will  become bankrupt in                                                               
fiscal year  2015.  At the  current surcharge of $.04  per barrel                                                               
for this  account, the  projected annual  revenue in  fiscal year                                                               
2018   is  $8,800,000   and  the   expenses   are  projected   at                                                               
$15,455,000.  Amendment  20 would increase the  surcharge to $.07                                                               
per barrel to  ensure the spill prevention and  response fund has                                                               
funding for the future and provides for a safe industry.                                                                        
                                                                                                                                
8:17:55 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE noted there are two  surcharges:  the one under AS                                                               
43.55.300 that  would be  affected by Amendment  20, and  the one                                                               
under AS 43.55.201 that is a levy of $.01 per barrel.                                                                           
                                                                                                                                
REPRESENTATIVE SEATON  said the  response fund [AS  43.55.201] is                                                               
capped at $50 million and right now  it is capped, so the $.01 is                                                               
not  being  charged.   Amendment  20  applies to  the  prevention                                                               
account [AS 43.55.300], which includes inspection activities.                                                                   
                                                                                                                                
8:18:55 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE understood  the account  under [AS  43.55.201] is                                                               
money  in the  bank  to  cover an  event,  and  the account  that                                                               
Amendment 20  would apply to  [AS 43.55.300] runs  the operations                                                               
of that division of DEC.                                                                                                        
                                                                                                                                
REPRESENTATIVE  SEATON answered  correct,  saying [AS  43.55.300]                                                               
runs  all of  the activities  for spill  prevention and  response                                                               
oversight and it is running dry.                                                                                                
                                                                                                                                
CO-CHAIR SADDLER observed  that in fiscal year  2013 the category                                                               
of cost  recovery/fines/penalties was at $976,400,  but in fiscal                                                               
year 2014 it jumps to $11,500,000.                                                                                              
                                                                                                                                
REPRESENTATIVE  SEATON said  this  is from  a lawsuit  settlement                                                               
with a company coming due.                                                                                                      
                                                                                                                                
8:20:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON recalled  that  when  she was  on  the                                                               
finance subcommittee  there was  discussion about  increased ship                                                               
traffic  due to  the  Arctic  Ocean opening  up  and concern  was                                                               
expressed  about  spills, having  to  cover  more territory,  and                                                               
running out of money.                                                                                                           
                                                                                                                                
REPRESENTATIVE  HAWKER recounted  his experience  on the  finance                                                               
committee was that this fund was  always said to be out of money.                                                               
The fund was  examined and some of the applications  of the money                                                               
were  questioned.   He maintained  it is  a management  issue and                                                               
said the  surcharge ultimately gets  transferred and can  be used                                                               
under AS  46.08.040, which  is "the  oil and  hazardous substance                                                               
release  prevention   ...  mitigation  account."     The  statute                                                               
includes two pages of what this money  can be used for.  A lot of                                                               
good is  intended here, but it  is a shadow appropriation,  it is                                                               
unaccountable  money.   Statutorily,  so much  latitude has  been                                                               
granted that  these funds can be  used in far too  many ways that                                                               
are  not  necessarily  directly  related   to  the  oil  and  gas                                                               
producers.  A  larger question, in his opinion, is  about how the                                                               
prevention  and response  accounts are  established in  statutes,                                                               
and  he  is unsure  he  wants  to give  more  money  that is  not                                                               
accountable to the legislature.  When  money is needed for one of                                                               
these purposes,  the agency can  come to the legislature  and ask                                                               
for it through appropriations.                                                                                                  
                                                                                                                                
REPRESENTATIVE P. WILSON  said the agency did ask  for this money                                                               
but the money was not given.                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained that that  is the proper way for                                                               
a funding request to occur; so, if  it was not honored, he is not                                                               
sure he wants  to second guess the budgeting  decisions that were                                                               
made in the budgeting process.                                                                                                  
                                                                                                                                
8:25:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE pointed  out the penny per barrel tax  goes to the                                                               
[response  fund] that  is capped  at $50  million and  is for  an                                                               
event.   Looking  ahead to,  hopefully, increases  in production,                                                               
exploration  in  other areas,  and  development  in some  of  the                                                               
offshore  areas,  he posited  it  might  be prudent  to  consider                                                               
increasing  the  amount  in  the  response  fund.    Rather  than                                                               
changing  the penny  per barrel,  the cap  on the  fund could  be                                                               
raised.   Responding  to Representative  P. Wilson,  he disagreed                                                               
with removing the cap.  He requested Mr. Pawlowski to comment.                                                                  
                                                                                                                                
MR.  PAWLOWSKI, referring  to the  second page  of Representative                                                               
Seaton's  handout, noted  the prevention  account balance  starts                                                               
off  at $7  million  in fiscal  year 2014  and  declines to  $4.7                                                               
million in fiscal  year 2022, while expenditures are flat.    The                                                               
$.04  per barrel  is based  on production  and the  bill, at  its                                                               
root,  is about  increasing  production.   So,  that increase  in                                                               
production will increase  the revenues at $.04  per barrel, which                                                               
will therefore do  something to support this  program.  Regarding                                                               
the bigger  question about changing the  rate, he said he  is not                                                               
sure he can comment at this point.                                                                                              
                                                                                                                                
8:27:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  stressed the  importance of  ensuring that                                                               
facilities are well-kept  and that one would  think the companies                                                               
should  do  that  on  their  own  without  oversight.    However,                                                               
industry does  require some oversight.   Numerous  companies will                                                               
hopefully come  on to  production and it  should be  ensured that                                                               
they are  all using  best practices.   He  concurred there  are a                                                               
number of  statutory uses  for this money,  but pointed  out that                                                               
this year  there were no  increases in  DEC's budget for  this or                                                               
for  anything  else.   While  the  state  is hoping  to  increase                                                               
production, just  stemming the decline  will take a while  to do.                                                               
In  the meantime,  it  can be  seen what  is  happening with  the                                                               
state's liability.   Through  this fund,  this committee  has the                                                               
ability to  ensure the state  protects itself from  liability and                                                               
protects the way things are done across the entire state.                                                                       
                                                                                                                                
REPRESENTATIVE TUCK  supported Amendment  20, citing  the decline                                                               
of the  fund's revenues.  Alaska  is unique because of  its short                                                               
construction seasons  on the North  Slope, it logistics,  and its                                                               
supply-chain issues.   It  takes many years  for projects  to get                                                               
off the  ground and for oil  to get on  line, so it may  be quite                                                               
some  time before  increased production  is  seen.   Even if  the                                                               
decline is stopped and flat-lined, the fund will go backwards.                                                                  
                                                                                                                                
8:31:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOHNSON understood  this is  not out  of the  oil                                                               
companies' pockets,  but rather  is something  that comes  out of                                                               
the state's  treasury.  However,  it looks like fuel  storage and                                                               
other things are  being carried on the back of  one industry.  He                                                               
posited it  might be appropriate  to add a  penny per ton  of ore                                                               
delivered   or  three   cents  per   fish  since   spills  happen                                                               
everywhere, not just in the oil industry.                                                                                       
                                                                                                                                
CO-CHAIR  FEIGE  said  Representative  Johnson's  suggestion  has                                                               
merit,  given the  many different  applications  both inside  and                                                               
outside of the oil  industry that the fund may be  used for.  For                                                               
example, there have  been fuel truck incidents  along the state's                                                               
highways that have drawn from the fund for cleanup.                                                                             
                                                                                                                                
REPRESENTATIVE JOHNSON interjected there  is also marine shipping                                                               
and the railroad for which this fund is used.                                                                                   
                                                                                                                                
CO-CHAIR FEIGE, continuing, said it  does not strike him as being                                                               
fair  to put  this  increase squarely  on the  backs  of the  oil                                                               
producers and not necessarily the spillers of the oil.                                                                          
                                                                                                                                
8:33:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON noted  the bill  will be  going on  to the                                                               
House Finance Committee, so this  provision could be broadened in                                                               
that committee  when time allows  it to consider  what proportion                                                               
for other  industries would be  appropriate.  He  therefore urged                                                               
that the committee go forward with this mechanism at this time.                                                                 
                                                                                                                                
REPRESENTATIVE JOHNSON said he is  confident the finance co-chair                                                               
will be happy to  add a commercial fish tax under  this.  He said                                                               
he  opposes Amendment  20,  however, because  he  thinks this  is                                                               
budgetary and should  be done through the budgeting  process.  If                                                               
the  amendment passes,  he advised  he will  pursue adding  other                                                               
industries for contributing to this fund.                                                                                       
                                                                                                                                
CO-CHAIR  FEIGE  inquired  whether Representative  Johnson  would                                                               
consider raising the total amount of the fund.                                                                                  
                                                                                                                                
REPRESENTATIVE  JOHNSON replied  he  would have  no problem  with                                                               
that, but said Amendment 20 does not apply to the $50 million.                                                                  
                                                                                                                                
8:35:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON  supported Amendment  20,  saying  she                                                               
thinks it  is appropriate.   She  added she  would be  willing to                                                               
reduce it  from the $.07  and said the committee  should consider                                                               
that  it  is not  going  to  get funded  any  other  way.   Other                                                               
industries already  tax themselves  to take  care of  things; for                                                               
example, commercial  fishers tax themselves 3  percent to provide                                                               
money for other  things.  This is important and  is something the                                                               
state has to do whether or not it likes it.                                                                                     
                                                                                                                                
CO-CHAIR  SADDLER understood  money from  other sources,  such as                                                               
federal  funds and  penalties, can  be put  into this  fund.   He                                                               
asked whether this  tax is the only source of  money for the fund                                                               
or could money be directly appropriated from general funds.                                                                     
                                                                                                                                
MR.  PAWLOWSKI  responded the  $.04  surcharge  is not  the  only                                                               
revenue  that goes  into  the fund.   He  recounted  that in  his                                                               
previous work he was involved  in some appropriations directly to                                                               
this account  at the  finance committee level  to help  carry the                                                               
fund through.   In further  response, he said  that appropriation                                                               
was  in   response  to  declining   revenues  due   to  declining                                                               
production and to increasing expenditures.                                                                                      
                                                                                                                                
8:38:29 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE inquired  whether Representative  Seaton has  any                                                               
data on how much of the fund  has been spent on issues created by                                                               
the oil industry versus issues created by other industries.                                                                     
                                                                                                                                
REPRESENTATIVE SEATON answered he does  not have a breakdown, but                                                               
most all of  the designations that he is aware  have gone to fuel                                                               
clean up, whether processed or  bulk fuel; for example, the Exxon                                                               
Valdez.  Tankers have rolled over,  which is a fuel spill that is                                                               
not a  crude oil spill.   The purpose of this  prevention account                                                               
is to protect  the State of Alaska and to  protect its resources.                                                               
If the committee desires  it can decide to let it  go so the fund                                                               
does  not have  money  to  operate, but  this  is  what has  been                                                               
established in  statute as  the funding mechanism.   He  said the                                                               
committee does  not have the  ability through any other  bills to                                                               
ensure that this fund is stable  and protects the State of Alaska                                                               
and the industry.                                                                                                               
                                                                                                                                
8:40:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER  contended this  is  not  an account  into                                                               
which money just goes  and then gets paid out in  the event of an                                                               
oil spill.  Generally the spiller  of crude oil has some depth of                                                               
pocket and  assets.  The  State of Alaska  does not just  step up                                                               
and remediate  a spill without  wanting to be reimbursed.   Under                                                               
AS  46.08.075 the  state can  put  a lien  against the  spiller's                                                               
assets.  Under  AS 46.08.070 the commissioner  must promptly seek                                                               
reimbursement of any  funds spent from the account  for spills by                                                               
a major  oil producer in  the state.   The good and  noble reason                                                               
for establishing the  account was to ensure the  state could have                                                               
an immediate emergency  response to a circumstance  and the state                                                               
intends to bill and collect those  costs back.  It is his opinion                                                               
that over time this has become a  slush fund for DEC and DEC uses                                                               
it for  far more than  what he  believes it should,  although, he                                                               
allowed,  there is  that broad  statutory authority.   There  has                                                               
been  tax creep  and the  burden of  supporting DEC's  slush fund                                                               
activities is  on the oil  industry, so  he is hesitant  to raise                                                               
the amount of money given to DEC's slush fund.                                                                                  
                                                                                                                                
8:44:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   P.  WILSON   recounted  that   during  [finance]                                                               
subcommittee deliberations,  it was brought  up that lots  of oil                                                               
has been  spilled by the  federal government.  Responding  to Co-                                                               
Chair Feige,  she confirmed  she is  talking about  legacy wells.                                                               
She added those wells are all  over the North Slope and the state                                                               
does not have the money.                                                                                                        
                                                                                                                                
REPRESENTATIVE   TARR  stated   she   sat  on   the  DEC   budget                                                               
subcommittee  and  she believes  there  is  some confusion  about                                                               
this.   As  far  as the  spill prevention  and  response, only  1                                                               
percent of this  funding goes to staffing, so she  does not think                                                               
it can  be considered  a slush fund  for DEC.   The rest  goes to                                                               
contaminated  sites,  of which  there  are  thousands yet  to  be                                                               
cleaned up.   The cost of  cleaning them up far  exceeds what has                                                               
been brought into  the fund even though DEC has  been diligent in                                                               
its  actions.   Referring  to  a  letter  from the  Senate  Rules                                                               
Committee chairman,  she said  she is  concerned that  failing to                                                               
address the  coming shortfall threatens to  undermine the state's                                                               
reputation as a  diligent regulator of the oil  and gas industry.                                                               
The estimated  fiscal impact will be  at least $6 million  out of                                                               
the general fund  for next year.  She noted  that the big deposit                                                               
[in fiscal  year 2014] is  coming from spills  in 2006 by  BP, so                                                               
there is  quite a lag  in time  for collecting the  money despite                                                               
the state's efforts.  She referenced  a letter from the Office of                                                               
Management & Budget (OMB) which  discusses the legislative intent                                                               
of the fund.                                                                                                                    
                                                                                                                                
8:47:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK said he sees  the fund as an insurance policy                                                               
for the State of Alaska.   It protects the state's reputation and                                                               
shows the world the state is doing  it right.  The state needs to                                                               
be  able to  act  quickly if  there are  mistakes  and this  fund                                                               
allows that to happen, rather than relying on court proceedings.                                                                
                                                                                                                                
REPRESENTATIVE  SEATON  listed  some   of  the  outstanding  open                                                               
balances  for the  fund:   River Terrace  Laundromat -  $391,000;                                                               
U.S. Department of Transportation for  Forest Service road 3030 -                                                               
$284,000; ConocoPhillips  Alaska, Inc.  for CPADS1L22  - $35,000;                                                               
BP Exploration (Alaska)  Inc. for Lisburne common  line release -                                                               
$24,000;  Flint Hills  Resources for  the North  Pole refinery  -                                                               
$792,000;  BP Exploration  (Alaska)  Inc. for  ES1L11 -  $25,000;                                                               
Repsol for  Q2 shallow  gas kick -  about $1,000;  BP Exploration                                                               
(Alaska) Inc.  for BPXAL1  - $17,000;  Oil Spill  Liability Trust                                                               
Fund  for  St.  Lawrence  oiled wildlife  -  $19,000;  oil  spill                                                               
liability for  a drill  rig on  the Kulluk -  $175,000.   He said                                                               
most of  these have to do  with oil and gas  production, although                                                               
not all.  About  $2 million is owed to the  fund because it takes                                                               
a long time to collect.                                                                                                         
                                                                                                                                
8:50:32 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER argued  this appears to be a  hard dedication of                                                               
money which violates the intent  of the constitution.  The system                                                               
is predicated on the legislature  having the power to appropriate                                                               
general funds with maximum flexibility.   The course is either to                                                               
eliminate  all hard  dedications like  this fund  or more  fairly                                                               
allocate the  costs amongst all  the spillers.   He said  he must                                                               
oppose  Amendment 20  on principle  of legislative  discretion as                                                               
opposed to dedication of funds.                                                                                                 
                                                                                                                                
REPRESENTATIVE OLSON opposed  Amendment 20, saying he  sat on the                                                               
DEC budget subcommittee for six  years and two notable groundings                                                               
occurred up north:  a ship  full of soybeans that was rotting and                                                               
a ship full of king crab that  was rotting.  Virtually all of the                                                               
money  that came  out  of this  fund went  into  cleaning up  the                                                               
cargo, not petroleum  leakage.  An underground storage  leak at a                                                               
mini-mart in  Sterling was over  $1 million, but those  funds may                                                               
have been recovered.  Another  problem is foreign-flagged vessels                                                               
in  that the  state  has never  recovered  anything from  foreign                                                               
vessels.   He  understood  DEC  has used  the  fund for  training                                                               
purposes for  spill cleanup as  well as other  purposes unrelated                                                               
to the fund, such as travel.                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE opined  it is  a fairness  issue.   The surcharge                                                               
puts the  financial burden on  one particular industry  while the                                                               
expenses  are being  distributed throughout  all the  industries.                                                               
The revenue  for the  fund should  be across  a broader  range of                                                               
industry.                                                                                                                       
                                                                                                                                
8:54:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 20.                                                                 
                                                                                                                                
A roll call  vote was taken.  Representatives  Seaton, P. Wilson,                                                               
Tarr, and Tuck  voted in favor of Amendment  20.  Representatives                                                               
Olson,  Hawker, Johnson,  Saddler,  and Feige  voted against  it.                                                               
Therefore, Amendment 20 failed by a vote of 4-5.                                                                                
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
8:56:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  moved to  adopt Amendment 21,  labeled 28-                                                               
GS1647\K.31, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 24, line 13, following "section,":                                                                                    
          Insert "for the first five years immediately                                                                          
      following the commencement of production subject to                                                                       
     tax under AS 43.55.011(e),"                                                                                                
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE  SEATON explained  Amendment 21  would sunset  the                                                               
GVR/GRE five  years after production  begins.  Since  the purpose                                                               
of the GVR/GRE  is to enhance the economics of  a project for new                                                               
oil, it  will mostly be  going to where facilities  and pipelines                                                               
need to  be built.   Because  production declines,  a significant                                                               
portion of  the production  will have  occurred five  years after                                                               
production was begun.  The  costs will have been recovered during                                                               
this  time  and  from  there  onward  the  wells  are  much  more                                                               
profitable  because those  capital expenses  are no  longer being                                                               
written off.   Amendment 21 would ensure that new  oil is not new                                                               
oil  forever.   After receiving  a  tax break  that succeeded  in                                                               
bringing that new  oil on line, it will at  some point become old                                                               
oil.   If there  is not  a change, then  over time  everything is                                                               
going to  become new  oil and  the state will  have a  tax system                                                               
that  no longer  has  a balance  of  old and  new  oil.   Revenue                                                               
analyses have not  included what revenues are going  to look like                                                               
to the state  or to the companies after  the capital expenditures                                                               
are  all paid  off  and  also what  happens  over  time when  the                                                               
majority of production becomes new oil.                                                                                         
                                                                                                                                
8:58:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER spelled  out his  concern with  sunsetting                                                               
the GVR/GRE.  He noted the  GVR/GRE is structured with parts one,                                                               
two, and  three that are intended  to be new oil,  places that do                                                               
not contain  a reservoir that has  been previously participating.                                                               
The statement  that this will  ultimately transition  the state's                                                               
entire future to  new oil seems to contradict  the statement that                                                               
has been  heard over  and over from  industry and  state agencies                                                               
that the best place  to find oil is in an oil  field, and that is                                                               
why there is the old oil  classification.  The majority of future                                                               
oil  will  continue to  come  from  those older  legacy-producing                                                               
areas.   Enhancing future and  new production is what  is wanted.                                                               
He also  cited his concern  about the sunset's application.   For                                                               
example,  if somebody  has a  lease that  was not  in a  lease on                                                               
January  2003 -  it was  new  - he  asked whether  that means  it                                                               
sunsets after the very first day  that a well starts producing in                                                               
the  area  that qualifies.    He  further  asked about  the  next                                                               
several   wells  that   were  developed   and  whether   this  is                                                               
essentially  a  reinstallation  of  the  metering  and  measuring                                                               
requirement that  the committee discussed as  being an unworkable                                                               
requirement.    The  premise  of   sunsetting  one  of  the  most                                                               
fundamental aspects  of this  legislation, which  is to  create a                                                               
long-term  and  durable incentive  for  companies  to invest  and                                                               
create  new  oil,  is  troublesome, let  alone  the  question  of                                                               
interpretations.   He further  noted that he  has had  some great                                                               
disagreements  with DOR's  and DNR's  interpretation of  statutes                                                               
via regulation.   Unless the legislature ties  it down absolutely                                                               
rock solid and clear, something  that is as vague a qualification                                                               
as in this amendment is of  concern.  He maintained his objection                                                               
to Amendment 21.                                                                                                                
                                                                                                                                
9:01:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  reiterated that  under Amendment  21 there                                                               
would be five  years of gross revenue exclusion after  a new well                                                               
begins production.   Due to  production decline, most of  the oil                                                               
from a  well is  produced in  the well's first  five years.   The                                                               
companies  would know  there  is a  transition  after those  five                                                               
years.     Metering  from  well   expansions  or   expansions  of                                                               
participating  areas  would  be  no  more  of  a  challenge  than                                                               
currently.   It makes sense to  give a leg up  for new production                                                               
because there are new facilities and  many things that need to be                                                               
paid  for, but  when  the  capital costs  are  recovered then  it                                                               
should  be just  like  any of  the  other old  oil  that has  the                                                               
production facilities  paid off.   Any company  will know  how to                                                               
gauge this  and how to  analyze the field.   This would  make the                                                               
tax system more durable because  the legislature will not have to                                                               
come back  and re-do the  tax system  because of a  transition to                                                               
more and more oil that is taxed forever at less value.                                                                          
                                                                                                                                
9:04:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SADDLER requested  an estimate  as to  what the  fiscal                                                               
impact might be of Amendment 21.                                                                                                
                                                                                                                                
MR. PAWLOWSKI  replied that off the  top of his head  he does not                                                               
have  a concept  of the  fiscal impact  of the  limitation.   The                                                               
impact of  the gross revenue  exclusion throughout  the [current]                                                               
fiscal note  is in the range  of $25-$50 million because  this is                                                               
geared toward the  definitively new oil that is  not currently in                                                               
the  forecast.    The  fiscal  impact  of  limiting  it  is  less                                                               
concerning to  the administration than  the actual impact  of the                                                               
limitation  in and  of  itself;  it is  an  issue  that has  been                                                               
debated throughout the process of this legislation.                                                                             
                                                                                                                                
9:05:35 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE  inquired  whether  the  administration  believes                                                               
there would be a behavior change  on the part of the investors if                                                               
this five-year limitation was put on the GVR/GRE.                                                                               
                                                                                                                                
MR.  BALASH confirmed  that the  administration  has concerns  in                                                               
terms of the  distortions it would have and the  impacts it would                                                               
have on  drilling behavior.   If it is  going to be  triggered by                                                               
the first production  that comes from a given well,  it has "some                                                               
real hair on it" in terms of  the incentive it would create for a                                                               
company to  game the system  by shutting in a  particular portion                                                               
of  a  well  or  well  bore.   It  would  potentially  result  in                                                               
inefficient behavior  that would not  be in the  state's interest                                                               
and  would  not achieve  what  is  trying  to  be done  with  the                                                               
GVR/GRE.                                                                                                                        
                                                                                                                                
MR.  PAWLOWSKI  interjected that  another  concern  is Version  K                                                               
steps away from the well-by-well  analysis and the five-year time                                                               
limit  is based  on the  unit itself.   [Page  24, lines  15-16,]                                                               
state "(1)  the oil or gas  is produced from a  lease or property                                                               
that does not contain a lease that  was within a unit ...", so it                                                               
is linking  back to the actual  property itself.  The  concern is                                                               
the duration of  time it takes to actually develop  that lease or                                                               
property, how  long it can  take to drill all  of the wells  in a                                                               
fashion  to actually  develop them.   Additionally,  removing the                                                               
gross revenue exclusion during a  period in the well's productive                                                               
life is essentially a tax  increase on that well, specifically as                                                               
it is  becoming less  productive.  It  would change  the economic                                                               
equation precisely when  that well is becoming  more expensive to                                                               
operate and  may encourage the  shutting in of  production before                                                               
it would naturally be necessary.                                                                                                
                                                                                                                                
9:08:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER said a  foundational premise underlying the                                                               
entire development of  this legislation is the  need to rebalance                                                               
Alaska's tax system  from giving too much upfront  and taking too                                                               
much  at the  end.   Alaska  is  not looking  at  its fields  and                                                               
development as  lifecycle economics  the way that  industry does.                                                               
Alaska  is providing  benefits and  taxing  in a  manner that  is                                                               
incongruent  with the  natural economics  of development.   There                                                               
has  been some  hollering about  taking away  all those  frontend                                                               
credits,  but the  decision being  made  here is  to lower  those                                                               
frontend  benefits  and  spread   them  out  over  the  lifecycle                                                               
economics of the entire development.   Passing Amendment 21 would                                                               
again  impose  an  element   of  additional  frontend  short-term                                                               
benefits that do not aid the  state in its long-term objective of                                                               
creating  better lifecycle  economics and  attracting the  needed                                                               
investment for increased sustained production.                                                                                  
                                                                                                                                
9:10:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON disagreed  about the  lifecycle economics.                                                               
Credits  are not  being given  upfront, he  said, it  is changing                                                               
those economics and then going to  the base case, the reduced tax                                                               
rates  in this  bill.   The  GVR/GRE is  an  additional help  for                                                               
starting  out  because of  capitalization  costs.   Amendment  21                                                               
would apply to all  three kinds of new oil [in  the GVR/GRE].  It                                                               
would  limit the  state's liability  to the  base case  plus five                                                               
years  of gross  revenue exclusion  on  new oil.   The  lifecycle                                                               
economics are totally calculable by  the oil industry under this.                                                               
It sounds as if people are saying  that the base case is no good,                                                               
as if there  is massive progressivity back in the  bill, which is                                                               
not the case at all.  The  reversion after five years would be to                                                               
the base case  that has been brought forward for  the oil fields.                                                               
Over time  the state will be  transitioning to more and  more new                                                               
oil because it  is always going to be new  oil, even though after                                                               
30 years it  should be old oil  at the base case.   The committee                                                               
has never  received an analysis for  what it will look  like when                                                               
there is  50 percent  new oil,  despite it  being asked  for long                                                               
ago.  The state needs to  protect itself and ensure the system is                                                               
durable over time.                                                                                                              
                                                                                                                                
9:12:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR asked  how to resolve the  issue being raised                                                               
by Representative  Seaton - that at  some point all oil  is going                                                               
to be new oil and the GVR/GRE will apply to everything.                                                                         
                                                                                                                                
MR.  BALASH responded  the discovered  and  in-place reserves  in                                                               
North  Slope legacy  fields, and  the smaller  fields surrounding                                                               
them, are estimated  at 3.3 billion barrels.  If  they are proven                                                               
reserves they probably  should be in the  participating areas and                                                               
part  of the  reserve reports.   Additionally,  the estimate  for                                                               
undiscovered  resource  is about  3  billion  barrels.   Existing                                                               
production, existing reserves, are expected  to continue to be an                                                               
enormous  portion  of  the  production   going  forward  for  the                                                               
foreseeable  future.    As  additional  resource  is  proven  up,                                                               
brought  into  production,  eligible  for the  GVR/GRE,  it  will                                                               
become a bigger and bigger fraction  over time, but it will still                                                               
be a fraction over that time.                                                                                                   
                                                                                                                                
9:14:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  offered her  appreciation for the  intent of                                                               
Amendment  21.    She  asked  whether  the  time  period  in  the                                                               
amendment should  be changed or  does the  administration believe                                                               
the fraction will not be a large enough problem to address.                                                                     
                                                                                                                                
MR.  BALASH  recounted that  similar  angst  came up  about  this                                                               
mechanism  in a  previous  stage  of the  process  - a  different                                                               
committee was  heading toward  some kind  of time  limitation for                                                               
the reasons expressed by Representative  Seaton.  An illustration                                                               
was  presented  by  the  administration  to  those  members  that                                                               
suggested making the GVR/GRE smaller  rather than to truncate its                                                               
application.   After  the administration  laid  out the  economic                                                               
case and  showed the potential unintended  consequences of having                                                               
a cutoff,  the decision was  made to  reduce the GVR/GRE  from 30                                                               
percent to 20 percent, rather than having a time limitation.                                                                    
                                                                                                                                
MR. PAWLOWSKI called attention to  the Revenue Sources Book, page                                                               
43, which talks about currently producing  and new oil.  Based on                                                               
the  fiscal note  and the  revisions  made to  the gross  revenue                                                               
exclusion by  this committee, very  little of  that risk-adjusted                                                               
new oil counts  for the gross revenue  exclusion looking forward.                                                               
Even by 2022, if  all of it counted, which in  the fiscal note it                                                               
does not,  75 percent of the  oil production would still  be from                                                               
the  legacy  fields.   Under  the  proposed committee  substitute                                                               
before the committee, very little of  the new oil within the next                                                               
decade, or  very little  of the oil  within the  revenue forecast                                                               
over  the next  decade, will  be eligible  for the  gross revenue                                                               
exclusion.  He added the  administration will work on getting the                                                               
requested information to members.                                                                                               
                                                                                                                                
9:17:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TUCK  stated he is  concerned about all  oil being                                                               
considered new  oil.   The bill is  a significant  investment for                                                               
Alaska and therefore the state  should expect some rate of return                                                               
on its investment.  He  supported Amendment 21, saying it ensures                                                               
the state some sort  of rate return.  By spelling  it out now, it                                                               
further ensures changes will not be made down the road.                                                                         
                                                                                                                                
CO-CHAIR FEIGE,  voicing his opinion  on the amendment,  said the                                                               
gross value reduction is  an attempt to grow the pie.   It is oil                                                               
the state does not have in  production currently and oil that the                                                               
state  is not  really counting  towards the  bill's fiscal  note.                                                               
So, if  it is discovered, it  is a sizeable return  to the state.                                                               
This is  an outstanding rate  of return  for the State  of Alaska                                                               
because the  state is  not investing in  anything, yet  the state                                                               
will reap the benefits of  taxable revenue on that new production                                                               
for a long time  into the future.  He said  he views the proposed                                                               
five-year limitation on the GVR/GRE  as a disincentive for trying                                                               
to find new oil and looking for new production.                                                                                 
                                                                                                                                
REPRESENTATIVE SEATON,  regarding the statement on  distortion of                                                               
behavior about  drilling new wells  into a  reservoir, maintained                                                               
that that has been taken care  of because it must be expansion of                                                               
participating areas.  New wells could  not just be drilled into a                                                               
reservoir and others closed in.                                                                                                 
                                                                                                                                
9:20:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 21.                                                                 
                                                                                                                                
A roll  call vote was  taken.  Representatives Seaton,  Tarr, and                                                               
Tuck voted in favor of  Amendment 21.  Representatives P. Wilson,                                                               
Hawker,  Johnson, Olson,  Saddler,  and Feige  voted against  it.                                                               
Therefore, Amendment 21 failed by a vote of 3-6.                                                                                
                                                                                                                                
9:22:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  moved to  adopt Amendment 22,  labeled 28-                                                               
GS1647\K.32, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 11, line 10, following "AS 43.55.160(f)":                                                                         
          Insert "or (g)"                                                                                                   
                                                                                                                                
     Page 24, following line 27:                                                                                                
          Insert a new subsection to read:                                                                                      
          "(g)  In the calculation of an annual production                                                                      
     tax value of  a producer under (a)(1)  of this section,                                                                    
     the gross  value at the  point of production of  oil or                                                                    
     gas produced  from a  shale formation  from a  lease or                                                                    
     property in the state is  reduced by 20 percent for the                                                                    
     first   three    years   immediately    following   the                                                                    
     commencement  of   production  subject  to   tax  under                                                                    
     AS 43.55.011(e). A reduction  under this subsection may                                                                    
     not reduce the  gross value at the  point of production                                                                    
     below zero."                                                                                                               
                                                                                                                                
     Reletter the following subsection accordingly.                                                                             
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE SEATON  provided a  handout depicting  the decline                                                               
curves  of  shale oil  that  were  included  in the  response  he                                                               
received to a  question he put forth to PFC  Energy.  Noting that                                                               
50 percent  of the oil in  shale is recovered in  the first three                                                               
years, he explained that Amendment  22 would provide a three-year                                                               
sunset  on the  GVR/GRE.   He  withdrew the  amendment given  the                                                               
previous amendment, but said he  wanted the committee to have the                                                               
information that went along with this amendment.                                                                                
                                                                                                                                
9:23:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON moved to adopt Amendment 23, labeled 28-                                                                  
GS1647\K.33, Nauman/Bullock, 4/3/13, which read:                                                                                
                                                                                                                                
     Page 11, line 10, following "AS 43.55.160(f)":                                                                         
          Insert "or (g)"                                                                                                   
                                                                                                                                
     Page 24, following line 27:                                                                                                
          Insert a new subsection to read:                                                                                      
          "(g)  In the calculation of an annual production                                                                      
     tax value of  a producer under (a)(1)  of this section,                                                                    
     the gross  value at the  point of production of  oil or                                                                    
     gas produced  from a  shale formation  from a  lease or                                                                    
     property  in the  state  is reduced  by  10 percent.  A                                                                    
     reduction  under this  subsection  may  not reduce  the                                                                    
     gross value at the point of production below zero."                                                                        
                                                                                                                                
     Reletter the following subsection accordingly.                                                                             
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE SEATON explained Amendment  23 also deals with the                                                               
shale situation  but in a  different light  on the GVR/GRE.   The                                                               
amendment is  an idea  for providing  protection by  reducing the                                                               
GVR/GRE  for shale  to 10  percent  because those  wells will  be                                                               
different as  has been seen in  the Bakken and Eagle  Ford plays.                                                               
Saying the  committee has  not had  enough analysis  on different                                                               
rates of GVR/GRE, he withdrew the amendment.                                                                                    
                                                                                                                                
9:25:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON moved to adopt Amendment 24, labeled 28-                                                                  
GS1647\K.28, Nauman/Bullock, 4/2/13, which read:                                                                                
                                                                                                                                
     Page 1, line 5, following "state;":                                                                                      
          Insert "relating to the taxation of certain                                                                         
     natural gas that is reinjected;"                                                                                         
                                                                                                                                
     Page 12, following line 31:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec. 16. AS 43.55.020(f) is amended to read:                                                                     
          (f)  If oil or gas is produced but not sold, gas                                                                      
     is produced  but is stored  in a gas  storage facility,                                                                    
     or oil or gas is  produced and sold under circumstances                                                                    
     where the sale price  does not represent the prevailing                                                                    
     value  for  oil or  gas  of  like kind,  character,  or                                                                    
     quality in the field or  area from which the product is                                                                    
     produced,  the department  may require  the  tax to  be                                                                    
     paid upon the  basis of the value of oil  or gas of the                                                                    
     same kind,  quality, and character prevailing  for that                                                                    
     field or  area during the calendar  month of production                                                                    
     or sale. If  an economic sale is available  for gas and                                                                
     the producer determines  it is in the  best interest of                                                                
     the producer to reinject rather  than sell the gas, the                                                                
     producer  shall  pay  the  tax on  the  volume  of  gas                                                                
     reinjected."                                                                                                           
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, line 6:                                                                                                           
          Delete "sec. 31"                                                                                                      
          Insert "sec. 32"                                                                                                      
                                                                                                                                
     Page 29, line 7:                                                                                                           
          Delete "18 and 20 - 23"                                                                                               
          Insert "19 and 21 - 24"                                                                                               
          Delete "sec. 18"                                                                                                      
          Insert "sec. 19"                                                                                                      
                                                                                                                                
     Page 29, line 9:                                                                                                           
          Delete "Section 19"                                                                                                   
          Insert "Section 20"                                                                                                   
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 37"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "20 - 23, 28, 37"                                                                                              
          Insert "21 - 24, 29, 38"                                                                                              
                                                                                                                                
     Page 29, line 25:                                                                                                          
          Delete "sec. 18"                                                                                                      
          Insert "sec. 19"                                                                                                      
          Delete "sec. 31"                                                                                                      
          Insert "sec. 32"                                                                                                      
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
9:25:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  explained  Amendment 24  deals  with  gas                                                               
sales  agreements.   In the  time since  the Alaska  Stranded Gas                                                               
Development  Act, many  producers  have  consistently said  there                                                               
must be  fiscal certainty  for a gas  sales agreement  to happen.                                                               
By definition, this  means that a gas sales  agreement would have                                                               
to  have  a long-term  contract  guarantee  that the  state  will                                                               
reimburse   the  gas   producers  for   any  future   legislature                                                               
increasing either  gas or  oil tax, something  he does  not think                                                               
should be done.   Even if the  state itself builds a  gas line to                                                               
the  North Slope  and the  gas  could be  sold economically,  the                                                               
condition could  well be put on  that the producer will  not sell                                                               
the gas  until the state  agrees to  fiscal certainty -  and that                                                               
would be fixing  oil and gas tax rates for  35 years because that                                                               
is what  it was  during the  stranded gas act.   There  has never                                                               
been any indication  that the producers would  take anything less                                                               
than 35 years.   Amendment 24 provides that if  a gas pipeline is                                                               
built, and  if there is  an economic  sale, and if  the producers                                                               
will not  sell the  gas without entering  an agreement  of fiscal                                                               
certainty, then the  gas will be declared produced  at that time,                                                               
just like a  lease says that a producer must  produce and sell if                                                               
it  is economic.   Amendment  24 would  ensure the  state is  not                                                               
"over  the barrel"  by requiring  that if  the producer  will not                                                               
sell natural gas in an economic  sale, then it will be assumed to                                                               
have  been  produced  gas  if   it  is  reinjected  for  storage.                                                               
However, this will  not apply to gas reinjected  for the recovery                                                               
of oil.                                                                                                                         
                                                                                                                                
9:28:39 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER  requested Representative Seaton to  restate his                                                               
point about long-term fiscal certainty.                                                                                         
                                                                                                                                
REPRESENTATIVE  SEATON replied  fiscal certainty  was defined  by                                                               
the producers as a long-term  contract guarantee that if a future                                                               
legislature changes  oil or  gas taxes  the state  will guarantee                                                               
through the  gas sales contract  that it  will take money  out of                                                               
the treasury and reimburse producers  for any difference from the                                                               
tax rate  at the time of  the gas contract.   Responding further,                                                               
he  agreed  it  would  be   a  make-good-by-contract  basis.    A                                                               
legislature cannot constitutionally  prevent a future legislature                                                               
from changing a  tax rate.  Fiscal certainty says  the state will                                                               
reimburse the  producer if a  future legislature changes  the tax                                                               
rate.   The link between this  and Amendment 24 is  the amendment                                                               
prevents producers from deciding that  they will not sell the gas                                                               
unless the state gives them 35 years of fiscal certainty.                                                                       
                                                                                                                                
9:30:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   HAWKER  opposed   Amendment   24  as   currently                                                               
constructed,  cautioning  that  producers have  people  who  will                                                               
interpret  the  words   as  they  see  them  on   paper  and  not                                                               
necessarily how legislators had intended.   These words would not                                                               
accomplish the  same thing  as the sponsor  says.   The amendment                                                               
would be  in the section  that states if  oil or gas  is produced                                                               
but not  sold, is produced but  stored in a storage  facility, or                                                               
produced and sold  in circumstances where the price  did not meet                                                               
prevailing value,  then the  department may  require that  tax be                                                               
paid based on the value of oil  or gas of the same kind, quality,                                                               
and character in the prevailing area.   Thus, the state can force                                                               
the taxes to  be paid.  The language that  Amendment 24 would add                                                               
to this  section does not  say anything  about a pipeline  or gas                                                               
that  was stored.    It  simply says,  "If  an  economic sale  is                                                               
available for  gas", but the  definition of economic  is unknown.                                                               
The amendment  goes on  to state that  the only  qualification is                                                               
"the  producer determines  it  is  in the  best  interest of  the                                                               
producer  to  reinject  rather  than   sell  the  gas",  but  the                                                               
amendment does not state for  what purpose it is being reinjected                                                               
instead of sold.  So, if  the gas is reinjected rather than sold,                                                               
then the producer must pay the tax  on the volume of gas.  In his                                                               
opinion, that says if there was  the ability to sell that gas but                                                               
the producer made a business-based  decision to reinject that gas                                                               
for  the purposes  of  further oil  recovery,  then the  producer                                                               
would be  taxed on  that gas.   While he  heard what  the sponsor                                                               
intends, he said  he does not believe  the amendment accomplishes                                                               
that.   Continuing, Representative  Hawker said  there may  be an                                                               
issue  with entering  in the  third part  of regulation.   If  an                                                               
economic sale  is available  and a producer  determines it  is in                                                               
its  best   interest  to  reinject,   the  Alaska  Oil   and  Gas                                                               
Conservation  Commission (AOGCC)  could say  the producer  cannot                                                               
offtake and he would  argue that it is in the  best interest of a                                                               
producer to comply with rulings of the AOGCC.                                                                                   
                                                                                                                                
9:34:22 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE inquired what scenario  the maker of the amendment                                                               
envisions  where a  producer would  determine that  it is  in its                                                               
best interest to  reinject the gas and not sell  it, and why take                                                               
it out of the ground in the first place.                                                                                        
                                                                                                                                
REPRESENTATIVE SEATON  related that during stranded  gas hearings                                                               
the legislature's attorney on lease  terms, Spencer Hosie, talked                                                               
about the  duty to produce  under the  Division of Lands  1 Lease                                                               
Form (DL1).  Discussion was about  the state being a partner in a                                                               
pipeline  and the  big  conundrum  was the  duty  to produce  and                                                               
whether the  state could be  held "over the barrel"  and required                                                               
to give 35 years of  fiscal certainty before producers would sell                                                               
the gas.   If AOGCC were  to direct it be  reinjected to maintain                                                               
well pressure,  then that is  not gas for  sale, that is  part of                                                               
the lease  terms.  The  problem the state  has run up  against in                                                               
the  past  and  could  run  up  against  in  the  future  is  the                                                               
resistance to have  a gas sale unless there  is fiscal certainty.                                                               
Amendment  24 says  that  gas  from an  economic  sale cannot  be                                                               
withheld  and  reinjected until  the  state  gives in  and  signs                                                               
fiscal  certainty  for  oil  and   gas,  thereby  binding  future                                                               
legislatures in a way that  is marginally within the constitution                                                               
because  the  legislature can  offer  contracts  but cannot  bind                                                               
future  legislatures.   Legislative Legal  and Research  Services                                                               
was requested to draft this  amendment around the exact provision                                                               
of an  economic sale  that is  included in the  DL1.   In further                                                               
response, he explained  DL1 leases were designed  for North Slope                                                               
oil and gas and their terms  include an assumed duty to produce -                                                               
the state's resources cannot be warehoused.                                                                                     
                                                                                                                                
9:37:48 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE pointed  out that currently tax must be  paid if a                                                               
product crosses a unit boundary.                                                                                                
                                                                                                                                
REPRESENTATIVE SEATON responded the  gas can be reinjected; there                                                               
is not  a sale  for it.   Also,  it cannot  be sold  unless AOGCC                                                               
determines that  it can  be taken  off without  leaving petroleum                                                               
product behind.                                                                                                                 
                                                                                                                                
CO-CHAIR FEIGE  outlined a  potential scenario:   Pt.  Thomson is                                                               
developed and approved  for blow down.  Part  of the considerable                                                               
quantity of  gas goes into a  pipeline, but the operators  of Pt.                                                               
Thomson and Prudhoe  Bay conspire to inject the  surplus gas into                                                               
the Prudhoe Bay  reservoir.  He asked whether  Amendment 24 would                                                               
hinder doing that.                                                                                                              
                                                                                                                                
REPRESENTATIVE SEATON answered he does  not believe it would be a                                                               
hindrance because  it is different  operators at the  two places.                                                               
The gas going  to Prudhoe Bay for reinjection would  be sold, not                                                               
given away.                                                                                                                     
                                                                                                                                
9:39:51 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE requested DNR's position on Amendment 24.                                                                        
                                                                                                                                
MR. BALASH replied [DNR] is opposed  to Amendment 24.  He offered                                                               
his  belief that  a variety  of things  are not  being completely                                                               
understood  in  the types  of  events  that  occur when  a  lease                                                               
boundary is  crossed.  For  royalty purposes, there is  a royalty                                                               
event when  a boundary is crossed.   That is not  necessarily the                                                               
case in a  tax setting; they are  basically different mechanisms.                                                               
With regard  to clarity,  the proposed  language would  appear to                                                               
pay  a tax  on  the  entire volume,  not  just  the volume  being                                                               
requested for sale.   An enormous volume of gas,  8 billion cubic                                                               
feet, is  injected every day at  Prudhoe Bay.  Would  an offer to                                                               
buy 10  million cubic  feet of  gas a  day trigger  a tax  on the                                                               
entire  8  billion  cubic  feet?   He  said  Amendment  24  would                                                               
function much like the reserves  tax that was soundly defeated at                                                               
the polls not so long ago.                                                                                                      
                                                                                                                                
9:42:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON disagreed that Amendment  24 is the same as                                                               
a  reserves tax  that  does not  involve a  sale.   The  language                                                               
"reinject rather  than sell the gas"  does not mean all  the gas,                                                               
it means the gas that was economic  to sell and was for sale.  He                                                               
offered his  belief that the language  "shall pay the tax  on the                                                               
volume of  gas reinjected" is the  gas that is being  offered for                                                               
sale  as allowed  by AOGCC.   He  argued the  committee needs  to                                                               
address in  this tax  bill the circumstances  the state  may find                                                               
itself in in  the future because it is the  only way available to                                                               
protect the legislature.                                                                                                        
                                                                                                                                
REPRESENTATIVE JOHNSON  ventured the  state can very  quickly get                                                               
out from  being "over the barrel"  given it took 30  days to pass                                                               
ACES from start to finish.                                                                                                      
                                                                                                                                
REPRESENTATIVE TUCK  said his  concern is  that rights  to leases                                                               
are being  bought on  the North  Slope and  those rights  are not                                                               
being exercised;  it is a  commodity that  can be owned  and that                                                               
can increase  in value.  It  is the state's best  interest to see                                                               
production, even gas production.   Gas has dual purposes, selling                                                               
or reinjecting, and  he wants to ensure that gas  is not going to                                                               
be stored under the name  of reinjecting.  He supported Amendment                                                               
24, saying  he shares the  same concern for ensuring  the ability                                                               
to enforce the  duty to produce.   Resource developers oftentimes                                                               
do not  want to develop  some resources because it  would compete                                                               
against  the developers'  interests  elsewhere, and  he does  not                                                               
want that to be the case here.                                                                                                  
                                                                                                                                
9:44:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE OLSON  said his  recollection of  fiscal certainty                                                               
is it  was more of  a request  from the producers  for protection                                                               
from the tax regime changing every  year or two or being adjusted                                                               
if gas  came on,  rather than  as described by  the maker  of the                                                               
amendment.  He inquired whether his recollection is correct.                                                                    
                                                                                                                                
MR.  BALASH responded  the form  with  which any  sort of  fiscal                                                               
arrangement might come is probably  not predictable at this point                                                               
in time.  Things that were  attempted in years past would attempt                                                               
to  do something  Representative  Olson described,  but a  fiscal                                                               
arrangement for gas  could be as simple as  landing a methodology                                                               
for valuing  the state's royalty  before the sales  contracts are                                                               
entered into.   It  could be  as simple  as limiting  the state's                                                               
rights to switch from in-kind to  in-value or vice versa.  Fiscal                                                               
terms, fiscal  certainty, fiscal stability  get balled up  into a                                                               
bogey man,  but in peeling apart  the pieces they are  not as bad                                                               
as they maybe could be, but  they are all elements that fold into                                                               
the  concerns expressed  by various  parties along  the way.   He                                                               
proffered the state  is looking for some fiscal  certainty in any                                                               
sort of gas deal; otherwise, why do it?                                                                                         
                                                                                                                                
REPRESENTATIVE  OLSON further  recalled the  term was  dropped in                                                               
less than a  year and was changed to fiscal  stability, which was                                                               
a little more  encompassing of the direction  that producers were                                                               
looking for.   He said there may  have been a third  term that he                                                               
cannot remember at the moment.                                                                                                  
                                                                                                                                
9:47:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 24.                                                                 
                                                                                                                                
A roll  call vote was  taken.  Representatives Tuck,  Seaton, and                                                               
Tarr voted  in favor  of Amendment  24.   Representatives Hawker,                                                               
Johnson, Olson, P.  Wilson, Saddler, and Feige  voted against it.                                                               
Therefore, Amendment 24 failed by a vote of 3-6.                                                                                
                                                                                                                                
9:48:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  moved to  adopt Amendment 25,  labeled 28-                                                               
GS1647\K.1, Nauman/Bullock, 4/3/13, [text  provided at the end of                                                               
this document].                                                                                                                 
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE SEATON  noted that  "(g)" on page  1, line  16, of                                                               
the amendment  should be corrected  to read  "(q)".  He  said the                                                               
entire amendment  is really on  page 16, the rest  is revisionary                                                               
language for how things go.   He drew attention to page 16, lines                                                               
18-19,  of  the   amendment  which  state  "the   volume  of  oil                                                               
production for the calendar year  2018 does not exceed the volume                                                               
of oil  produced for the  2013 calendar  year."  This  provides a                                                               
five-year  sunset  clause  if  this   amount  of  investment  and                                                               
production does not, at the least,  have the state stay stable at                                                               
the 2013 level.  If it does  not happen, there will be a one-year                                                               
timeframe  for  a  sunset to  the  state's  previous  provisions.                                                               
Testimony  has indicated  there will  be investment  in three  to                                                               
four years and then production.                                                                                                 
                                                                                                                                
9:50:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  called attention to an  affidavit prepared                                                               
by  William  Van  Dyke,   PE,  Petrotechnical  Resources  Alaska,                                                               
entitled "Report on the Estimated  Life of the Alaska North Slope                                                               
Proven Oil Reserves"  dated March 7, 2011.  He  read from page 17                                                               
of  the affidavit:    "It  is important  to  again emphasize  the                                                               
earlier  comments   on  'the  timing  of   production'  and  'the                                                               
estimated life  of TAPS.'   Future North Slope oil  production is                                                               
not a question  of 'if' but of  'when.'"  He then  read from page                                                               
18  of the  affidavit:   "This  metered pace  of development,  at                                                               
times, frustrates  Alaska state officials  and other oil  and gas                                                               
lessors, but  it is a  deliberate and very  well-managed process.                                                               
For  better  or  worse,  it  is  how  many  multi-billion  dollar                                                               
companies  run their  businesses.   Projects and  project phasing                                                               
are optimized for maximum profit and efficiency."                                                                               
                                                                                                                                
9:54:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  then referred to  a chart appended  to the                                                               
affidavit prepared by AOGCC and  entitled, "Development & Service                                                               
Wells  and Wellbores  Drilled (1998-2012*),  North Slope  Oil and                                                               
Gas Only**,  by ConocoPhillips  Alaska, Inc."   He  explained the                                                               
chart represents  the strategic build  out of this  system across                                                               
the North Slope as  talked about by Mr. Van Dyke.   The number of                                                               
wells is  basically the same  going across the entire  time span.                                                               
It did  not matter what  the price or tax  rate was.   He offered                                                               
his  concern  about  whether  the  state  will  get  what  it  is                                                               
expecting  out  of this  [proposed]  tax  regime.   According  to                                                               
testimony, in  three to four  years the state  will get a  lot of                                                               
investment based on  its new regime.  The state  has had ACES for                                                               
five years and it is being said  it did not work.  There are more                                                               
employees and wells being drilled  by non-legacy producers.  Some                                                               
new fields are coming on.   But the question is whether the state                                                               
is going to get  the expected bump.  He said  he is worried about                                                               
the  gas contract  and this  is another  way of  doing that.   If                                                               
there is  production that at  least maintains the level  of 2013,                                                               
then this  provision would go  away and  the state will  have had                                                               
success with  its program.   The amendment's intent is  to ensure                                                               
the state has  success; things will be revisited if  there is not                                                               
success in  five years.   Representative Seaton  provided another                                                               
handout  entitled,  "Alaska  oil production  changes  over  time:                                                               
(1995 to 1998) and (2009 to  2012)."  Reading from the handout he                                                               
noted  that from  1995-1998, oil  production declined  by 309,000                                                               
barrels,  a   28  percent  decrease,  and   from  2009-2012,  oil                                                               
production  declined   by  119,000   barrels,  an   18.4  percent                                                               
decrease.  Amendment 25 is not  punitive, he said, its purpose is                                                               
to ensure accomplishment of the bill's goal.                                                                                    
                                                                                                                                
9:58:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE asked  what happens if in 2018  production is just                                                               
one barrel below 2013.                                                                                                          
                                                                                                                                
REPRESENTATIVE SEATON  answered if the  state is below  the level                                                               
of 2013  it means  production has  not increased  sufficiently to                                                               
reach the  state's goal.   In fact, the  state is counting  on an                                                               
increase of 40,000 barrels per day.   The goal of this bill is to                                                               
arrest decline and  to increase production.  If it  is found that                                                               
by  2018 production  did not  increase, even  by one  barrel over                                                               
2013, then  it would  go to  the sunset  provision.   This sunset                                                               
provision  provides a  good incentive  to ensure  that production                                                               
does move forward across the North Slope.                                                                                       
                                                                                                                                
CO-CHAIR FEIGE  recalled that the  figure of 44,000  barrels more                                                               
per day was  the amount needed to make up  the revenue that would                                                               
be foregone by lowering the tax  rate.  However, that is relative                                                               
production -  it is  44,000 [barrels]  a day  more than  what has                                                               
been  forecast.   What is  still forecast  is a  decline, pending                                                               
development in  the new fields and  pending additional technology                                                               
in existing fields.  While he  is not saying it is impossible, it                                                               
could be  interpreted by industry  as a sunset on  the provisions                                                               
of the tax code and, he presumed, a rollback to ACES.                                                                           
                                                                                                                                
REPRESENTATIVE  SEATON replied  correct,  adding that  that is  a                                                               
pretty good incentive.                                                                                                          
                                                                                                                                
10:00:52 PM                                                                                                                   
                                                                                                                                
CO-CHAIR FEIGE  posited a  future legislature  could at  the time                                                               
make the determination as to whether the tax system is working.                                                                 
                                                                                                                                
REPRESENTATIVE SEATON  responded Amendment 25 is  also the backup                                                               
for the problem  of gas sales contract.  If  a gas sales contract                                                               
is undertaken that locks in fiscal  terms, this is a fiscal term.                                                               
It says that if there is  a gas sales contract but oil production                                                               
is not  increased at least to  the level had in  2013, then these                                                               
are going to be the terms.  It  is a way to protect the state for                                                               
the future.   All of the  industry's news releases state  it will                                                               
require  fiscal certainty;  they  do not  say fiscal  durability.                                                               
This is  a way to  ensure that if  fiscal certainty is  locked in                                                               
there  will at  least be  oil production  to the  level of  2013,                                                               
which would accomplish the bill's goal.   He has heard no one say                                                               
the goal is to let production  continue to decline and it is just                                                               
a change in the tax rates.                                                                                                      
                                                                                                                                
CO-CHAIR   FEIGE  inquired   whether  Representative   Seaton  is                                                               
assuming a gas pipeline sending gas to Valdez by 2018.                                                                          
                                                                                                                                
REPRESENTATIVE SEATON  responded he is  assuming there will  be a                                                               
gas  contract  before a  gas  pipeline  is  started to  be  built                                                               
because he  does not  think a  gas pipeline  will be  built until                                                               
there are agreements  for a gas sales agreement.   That is one of                                                               
the precedent agreements that will  have to occur before building                                                               
of pipeline is started.                                                                                                         
                                                                                                                                
10:03:07 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  HAWKER  opposed  Amendment  25, saying  it  is  a                                                               
slight  variation  on  Amendment  15,  which  was  defeated,  and                                                               
anything entered into that debate  is applicable to Amendment 25.                                                               
This amendment  is the  "punish the  new producers  amendment for                                                               
the  sins of  the  old  producers," he  argued,  in  that if  the                                                               
current large volume  producers do not increase  production or do                                                               
not mitigate  their declines sufficiently,  the benefits  of this                                                               
tax provision are taken away  from everyone.  Amendment 25 treats                                                               
production on the North Slope as  if it is one entity rather than                                                               
multiple entities each  making their own decisions  and the state                                                               
encouraging  each   company  individually  without   holding  any                                                               
investor responsible for the action of other investors.                                                                         
                                                                                                                                
CO-CHAIR SADDLER noted  current production on the  North Slope is                                                               
not guaranteed  either.  If there  was some way to  guarantee oil                                                               
production by  government action, then  he would think  every law                                                               
book in  the world  would have  it.  He  offered his  belief that                                                               
there is no language in the  current law of ACES stipulating that                                                               
if ACES does not succeed then the tax law reverts to PPT.                                                                       
                                                                                                                                
10:05:40 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TARR supported Amendment  25, saying it gives some                                                               
expectations  of a  timeline in  which  activity would  increase.                                                               
When  this would  kick in,  the fiscal  impact will  have already                                                               
been in the range of $4 billion  and at that time it could be too                                                               
late if the legislature is unable  to act quickly, given it takes                                                               
a long time to make substantial changes.                                                                                        
                                                                                                                                
CO-CHAIR FEIGE interjected that ACES took 42 days.                                                                              
                                                                                                                                
REPRESENTATIVE TARR  pointed out that  that was just  the special                                                               
session.  She  added that Amendment 25  would encourage producers                                                               
to  move quickly  to maintain  the change  in the  tax structure.                                                               
The  windfall profits  in the  state's savings  account could  be                                                               
used up,  making it even harder  in the future when  the state is                                                               
forced to act.                                                                                                                  
                                                                                                                                
10:07:39 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK  supported Amendment 25, concurring  with the                                                               
aforementioned reasons.   The amendment would make  it easier for                                                               
producers to  meet some goals  and not  just a flat  line decline                                                               
curve  from  2013.     The  tax  changes  that   are  being  made                                                               
acknowledge  what was  heard from  the industry  and others  that                                                               
ACES needs to be refined or  changed.  Amendment 25 provides that                                                               
these changes be tried for a bit  and if they do not work the tax                                                               
regime then returns to the  starting base to begin refining ACES.                                                               
He referred to  a chart that shows how production  is carried out                                                               
for the maximized  benefits and profits of the  oil industry, not                                                               
necessarily maximizing  the benefits of  Alaskans.  If  the state                                                               
is going to be  more of a partner with the  industry, he said, it                                                               
must have  some sort of  rate of  return, some sort  of guarantee                                                               
when moving  forward.  The only  guarantee the state has  is that                                                               
industry  is going  to spend  its  money elsewhere  when it  gets                                                               
windfall  profits.   He  said  he  does  not  want to  see  those                                                               
windfall profits go away in  trying something new without setting                                                               
some benchmarks.                                                                                                                
                                                                                                                                
10:09:29 PM                                                                                                                   
                                                                                                                                
CO-CHAIR FEIGE opposed Amendment 25,  stating the outcome in 2018                                                               
will  be  dependent  on  many  variables,  including  oil  taxes,                                                               
geologic and political risk, and  things beyond anyone's control,                                                               
such as  an earthquake on the  North Slope.  Putting  such a hard                                                               
line  on   comparing  2018  production  to   2013  production  is                                                               
arbitrary.   Many different rabbit  trails have been run  down in                                                               
looking for  different ways to  incentivize the  desired behavior                                                               
of more production  on the North Slope.  It  is very difficult to                                                               
create  an   incentive  that  does  not   create  a  disincentive                                                               
somewhere else.   The tax rate is an incentive  that affects each                                                               
of these  producers relatively equally.   A disincentive  of this                                                               
amendment  is that  no one  producer has  the ability  to totally                                                               
affect that  2018 number and  make sure  it is higher  than 2013,                                                               
which  means all  the  producers  have to  depend  on each  other                                                               
somehow and  he does not  expect that  to occur.   Companies will                                                               
act on their  own behalf for in their own  interests.  While they                                                               
will be  able to work together  if it is in  their best interest,                                                               
he will  not depend  on them to  work together as  part of  a tax                                                               
policy.    The  Oil  and Gas  Competitiveness  Review  Board,  as                                                               
provided in  the bill,  will meet and  report to  the legislature                                                               
regarding how  well the  tax rates,  gross value  reductions, and                                                               
other incentives are working.   Future legislators will take that                                                               
information and do with it as they see fit.                                                                                     
                                                                                                                                
10:12:41 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection to Amendment 25.                                                                 
                                                                                                                                
A roll  call vote was  taken.  Representatives Seaton,  Tarr, and                                                               
Tuck voted  in favor  of Amendment  25.   Representatives Hawker,                                                               
Johnson, Olson, P.  Wilson, Saddler, and Feige  voted against it.                                                               
Therefore, Amendment 25 failed by a vote of 3-6.                                                                                
                                                                                                                                
10:13:34 PM                                                                                                                   
                                                                                                                                
The committee took an at-ease from 10:13 p.m. to 10:24 p.m.                                                                     
                                                                                                                                
10:25:04 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  moved to  adopt Amendment 26,  labeled 28-                                                               
GS1647\K.35, Nauman, 4/3/13, which read:                                                                                        
                                                                                                                                
     Page 17, line 28, through page 18, line 28:                                                                                
          Delete all material and insert:                                                                                       
          "(j)  For each month of the calendar year for                                                                         
     which a  producer's average monthly gross  value at the                                                                    
     point of production of a  barrel of taxable oil and gas                                                                    
     is less  than $150,  a producer  may apply  against the                                                                    
     producer's tax  liability for  the calendar  year under                                                                    
     AS 43.55.011(e) a  tax credit  in the  amount specified                                                                    
     in  this  subsection for  each  barrel  of taxable  oil                                                                    
     under  AS 43.55.011(e) that  does not  meet any  of the                                                                    
     criteria  in  AS 43.55.160(f)   and  that  is  produced                                                                    
     during a  calendar year after December 31,  2013. A tax                                                                    
     credit under  this section may not  reduce a producer's                                                                    
     tax    liability   for    a    calendar   year    under                                                                    
     AS 43.55.011(e)  below  zero.  The amount  of  the  tax                                                                    
     credit  for a  barrel of  taxable oil  subject to  this                                                                    
     subsection is                                                                                                              
               (1)  if the producer's average monthly gross                                                                     
     value  at  the  point  of production  of  a  barrel  of                                                                    
     taxable oil and gas is less than or equal to $100, $5                                                                      
     for each barrel of taxable oil; or                                                                                         
               (2)  if the producer's average monthly gross                                                                     
     value  at  the  point  of production  of  a  barrel  of                                                                    
     taxable oil  and gas  is more than  $100 and  less than                                                                    
     $150, $5  for each  barrel of  taxable oil,  reduced by                                                                    
     one-tenth  of  the   difference  between  that  average                                                                    
     monthly gross  value at  the point  of production  of a                                                                    
     barrel of oil and $100."                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER objected for the purpose of discussion.                                                                   
                                                                                                                                
10:25:23 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  SEATON  directed  attention  to  the  PFC  Energy                                                               
PowerPoint   presentation   entitled,   "Alaska   Fiscal   System                                                               
Discussion Slides," dated April 2, 2013.   He pointed out on page                                                               
5, the  graph entitled,  "Credit level  under Step  versus Linear                                                               
Function"  showed "a  smooth  line  going up"  and  a stair  step                                                               
function resulting from  an increase of $1 per  barrel credit for                                                               
every  $10 increase  in  ANS  West Coast  price.   The  amendment                                                               
accomplishes  the  smooth  line  by  taking  $0.1  of  $1,  which                                                               
prevents  stair step  increases and  the high  marginal rates  as                                                               
shown on  the graph  entitled, "Marginal  Rate under  Step versus                                                               
Linear  Function,"  also found  on  page  5.   Additionally,  the                                                               
amendment directs that  after per barrel credits  increase to $5,                                                               
the level is maintained at $5 instead  of going up to $6, $7, and                                                               
$8 at the lower prices.  He said  $6, $7, and $8 levels result in                                                               
a great deal of liability to the  state when prices are low.  The                                                               
two purposes  of the amendment are  to maintain the level  at $5,                                                               
and smoothly decrease, instead of by stair steps, down to $150.                                                                 
                                                                                                                                
REPRESENTATIVE HAWKER agreed that  attempting to smooth the curve                                                               
gets around the stair step  issue, but creates another complexity                                                               
and  another  detail  in  the   calculation.    He  said  he  was                                                               
comfortable with the  stair step approach as  has been presented,                                                               
and which has been evaluated by the committee.                                                                                  
                                                                                                                                
REPRESENTATIVE TUCK recalled testimony  that was heard during the                                                               
committee meeting  of 4/2/13, regarding  smoothing out  the stair                                                               
steps.   He advised the  amendment would smooth out  the marginal                                                               
rates that  could jump  from $35  to $135 as  prices change.   He                                                               
expressed his support for the amendment.                                                                                        
                                                                                                                                
10:28:58 PM                                                                                                                   
                                                                                                                                
CO-CHAIR  FEIGE ascertained  from the  identified slide  that for                                                               
prices below $100, the per-barrel credit stays the same at $5.                                                                  
                                                                                                                                
REPRESENTATIVE SEATON  said yes.   Directing attention to  page 2                                                               
of  the  same presentation,  he  noted  "you'll  see that  $5  is                                                               
graphed on there and gives you the tax rate."                                                                                   
                                                                                                                                
CO-CHAIR FEIGE observed that currently  in Version K of the bill,                                                               
the per barrel  exclusion rises up to $8 in  a stair step fashion                                                               
on  the  downside,  which  greatly  improves  the  economics  for                                                               
projects in  the $70-$90  per barrel  range.   Previous testimony                                                               
has revealed that the $70-$90 per  barrel range is the range upon                                                               
which companies  base their investment  decisions.   He concluded                                                               
that the  change would  make the state  less competitive  in that                                                               
price range.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON stated  that the  question is  whether the                                                               
state intends  to be  at zero  production tax  when the  ANS West                                                               
Coast price  is $60, or  at 10 percent  as shown  on page 2.   He                                                               
acknowledged this  is a policy call  and given that the  state is                                                               
losing  progressivity, he  urged for  a bill  that provides  some                                                               
protection on the  low side, as was provided in  the Senate bill.                                                               
He opined the fiscal  impact of $8 at an ANS  West Coast price of                                                               
$90 or below  is a big liability for the  state.  This liability,                                                               
and  to prevent  stair steps  and  high marginal  rates, are  the                                                               
reasons for the amendment.                                                                                                      
                                                                                                                                
10:31:26 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection.                                                                                 
                                                                                                                                
A roll call  vote was taken.  Representatives  Seaton, P. Wilson,                                                               
Tarr, and Tuck  voted in favor of Amendment  26.  Representatives                                                               
Hawker,  Johnson, Olson,  Saddler,  and Feige  voted against  it.                                                               
Therefore, Amendment 26 failed by a vote of 4-5.                                                                                
                                                                                                                                
10:32:20 PM                                                                                                                   
                                                                                                                                
CO-CHAIR  FEIGE   moved  to  adopt  Amendment   27,  labeled  28-                                                               
GS1647\K.36, Nauman/Bullock,  4/3/13, [text  provided at  the end                                                               
of this document].                                                                                                              
                                                                                                                                
REPRESENTATIVE HAWKER objected for the purpose of discussion.                                                                   
                                                                                                                                
CO-CHAIR  FEIGE  told  the committee  Amendment  27  affects  the                                                               
portion of  the bill  pertaining to the  reports prepared  by the                                                               
Oil  and Gas  Competitiveness Review  Board (review  board).   On                                                               
page  1,  line  5,  of   the  amendment,  January  31,  2015,  is                                                               
established as the  due date for a report from  the review board,                                                               
followed by the details the report  is to contain and the subject                                                               
of  the  report.   On  page  1,  line  18,  January 31,  2021  is                                                               
established as the due date for  a second report, followed by the                                                               
details of its tasks.  The  second date was chosen because at the                                                               
end of 2022,  there are many elements in the  state's current tax                                                               
and incentive system  that are expiring; thus,  those issues must                                                               
be dealt with by the legislature  at that time.  Finally, page 2,                                                               
line 9 sunsets the review board  one month after the final report                                                               
is due to the legislature.                                                                                                      
                                                                                                                                
10:34:26 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  HAWKER expressed  his  concern  about the  review                                                               
board  as established  by  the  bill.   He  said  a review  board                                                               
institutionalizes  a  "culture  of   uncertainty"  into  the  tax                                                               
regime.  However, he said he would support the amendment.                                                                       
                                                                                                                                
REPRESENTATIVE P.  WILSON asked what changes  the amendment makes                                                               
in the review board's tasks.                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  advised the amendment  details the  subjects that                                                               
will  be included  in the  review  board's reports.   In  further                                                               
response to Representative P. Wilson,  he said each report covers                                                               
separate items.   The  first report  is a  review of  the state's                                                               
regulatory environment, permitting  structure, changes that would                                                               
be conducive to increased investment,  the state's resident labor                                                               
pool,  related infrastructure,  and  the  competitiveness of  the                                                               
state's fiscal tax regime compared  with those of other entities.                                                               
The  report due  in 2021  will cover  the state's  fiscal regime,                                                               
alternative means  to attract and  maintain investment,  a review                                                               
of  the current  and future  effectiveness of  related provisions                                                               
that may  be expiring at  that time, and  a review of  renewed or                                                               
newly enacted oil and gas tax legislation.                                                                                      
                                                                                                                                
10:39:31 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TARR asked why a sunset clause in 2021 was added.                                                                
                                                                                                                                
CO-CHAIR  FEIGE  responded that  the  sunset  clause in  2021  is                                                               
logical because  there will be a  general review of oil  tax laws                                                               
at that  time; however,  the review  board can  be retained  by a                                                               
future legislature if desired.                                                                                                  
                                                                                                                                
REPRESENTATIVE TARR suggested the  sunset date may interfere with                                                               
the completion of the review board's work.                                                                                      
                                                                                                                                
CO-CHAIR FEIGE  pointed out  the sunset date  is one  month after                                                               
the final report is due.                                                                                                        
                                                                                                                                
REPRESENTATIVE  TUCK said  he will  not oppose  Amendment 27  but                                                               
questions  the  need  for  the   review  board  since  there  are                                                               
consultants  and  state  agencies  that can  be  relied  upon  to                                                               
provide accurate information.                                                                                                   
                                                                                                                                
10:41:34 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  HAWKER removed  his  objection  to Amendment  27.                                                               
There being no further objection, Amendment 27 was adopted.                                                                     
                                                                                                                                
10:41:56 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  P. WILSON  moved to  adopt Amendment  28, labeled                                                               
28-GS1647\K.2, Nauman/Bullock, 4/2/13, [text  provided at the end                                                               
of the document].                                                                                                               
                                                                                                                                
REPRESENTATIVE HAWKER objected for the purpose of discussion.                                                                   
                                                                                                                                
REPRESENTATIVE   P.  WILSON   referred  to   previous  testimony,                                                               
explaining that  the public  may view the  members of  the review                                                               
board as "slanted over to the  oil side."  Amendment 28 would add                                                               
an ex-officio, nonvoting legislator from  each body to the review                                                               
board.   The review  board at-large  members include  a petroleum                                                               
engineer, a  geologist, and a  financial analyst, but  the review                                                               
board is directed  to give financial advice  and technical advice                                                               
can  be  gleaned from  testimony  before  the legislature.    She                                                               
cautioned  against   the  perception  of  bias   because  of  the                                                               
membership of the review board.                                                                                                 
                                                                                                                                
10:44:27 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER said the intent  was to separate the review                                                               
board from the legislature and  its political process.  He stated                                                               
his  concern  about  removing public  members  with  professional                                                               
qualifications;  in fact,  public members  that are  appointed by                                                               
the governor do  not slant the board, but  create a knowledgeable                                                               
board.    He   described  the  members  of  the   board:    trade                                                               
association members  representing the  oil and gas  industry; the                                                               
chair  of the  Alaska Oil  and Gas  Conservation Commission;  the                                                               
commissioner  of the  Department  of Environmental  Conservation;                                                               
the commissioner of the Department  of Natural Resources; and the                                                               
commissioner of  the Department of  Revenue.  These  members will                                                               
be appointed  by the governor  and confirmed by  the legislature,                                                               
and will  bring a  level of  state governance to  the board.   He                                                               
pointed   out  that   the  three   commissioners  represent   the                                                               
administration and reiterated  that knowledgeable public members,                                                               
such  as  a petroleum  engineer,  a  geologist, and  a  financial                                                               
analyst, will provide a high level of technical expertise.                                                                      
                                                                                                                                
10:47:45 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  TARR  appreciated  the  amendment  and  supported                                                               
adding members from  the legislature.  She agreed  the public may                                                               
perceive that the work product from the review board is biased.                                                                 
                                                                                                                                
REPRESENTATIVE P. WILSON pointed out  the review board can invite                                                               
expert testimony  from the oil and  gas industry if needed.   She                                                               
remarked:                                                                                                                       
                                                                                                                                
     One of  the problems that Alaska's  faced in developing                                                                    
     its oil  and gas policies  over the last  several years                                                                    
     is  the lack  of forum  for developing  a broad  public                                                                    
     understanding and consensus on  the nature and depth of                                                                    
     the  problems  that  Alaska   faces  in  competing  for                                                                    
     investments.                                                                                                               
                                                                                                                                
CO-CHAIR  FEIGE   observed  that   nonvoting  members   from  the                                                               
legislature  would  give  the   public  "some  comfort  perhaps."                                                               
Although the board may ask  for information, review board members                                                               
must be  knowledgeable.   In addition,  the three  public members                                                               
were designated in a way that  will prevent a rogue governor from                                                               
appointing  his  "political cronies."    And  those members  with                                                               
specialties  will guarantee  the review  board can  interpret the                                                               
testimony it hears.                                                                                                             
                                                                                                                                
10:52:10 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER pointed  out an error, noting  that page 1,                                                               
line 18, of the Amendment 28  reads "Page 2," but should probably                                                               
read "Page 27,".                                                                                                                
                                                                                                                                
REPRESENTATIVE P. WILSON concurred it is an error.                                                                              
                                                                                                                                
CO-CHAIR  FEIGE  said  he  will   direct  Legislative  Legal  and                                                               
Research Services to make this technical change.                                                                                
                                                                                                                                
10:53:13 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON proposed a  friendly amendment to Amendment                                                               
28 to delete page 1, lines 10-12, which read:                                                                                   
                                                                                                                                
     Page 26, lines 26 - 28:                                                                                                    
       Delete ", including one member who is a petroleum                                                                        
        engineer, one member who is a geologist, and one                                                                        
     member who is a financial analyst"                                                                                         
                                                                                                                                
REPRESENTATIVE  SEATON explained  this would  make the  number of                                                               
people  on the  review board  eleven,  with one  person from  the                                                               
House and one  from the Senate, while retaining  the expertise of                                                               
the petroleum engineer, geologist, and financial analyst.                                                                       
                                                                                                                                
REPRESENTATIVE P. WILSON said that  change defeats the purpose of                                                               
the amendment.   She stressed the importance of  having a variety                                                               
of financial experts on the board.                                                                                              
                                                                                                                                
REPRESENTATIVE SEATON noted the review  board has other duties as                                                               
well as  analyzing the competitiveness  of fiscal terms,  such as                                                               
understanding  relative  geology  and  the  types  of  oil  under                                                               
production.                                                                                                                     
                                                                                                                                
CO-CHAIR SADDLER agreed with Representative Seaton.                                                                             
                                                                                                                                
REPRESENTATIVE TUCK suggested an  economist should take the place                                                               
of the financial analyst.                                                                                                       
                                                                                                                                
REPRESENTATIVE  P.  WILSON recalled  the  bill  calls for  expert                                                               
testimony before the  review board.  She said she  would agree to                                                               
the proposed amendment to Amendment 28.                                                                                         
                                                                                                                                
10:56:48 PM                                                                                                                   
                                                                                                                                
CO-CHAIR  FEIGE   moved  to  adopt  Conceptual   Amendment  1  to                                                               
Amendment 28  to delete [page  1,] lines  10-12.  There  being no                                                               
objection, it was so ordered.                                                                                                   
                                                                                                                                
REPRESENTATIVE TARR  expressed her  concern about a  review board                                                               
member  who  has  a  clear or  perceived  financial  conflict  of                                                               
interest which may discredit the work of the review board.                                                                      
                                                                                                                                
CO-CHAIR FEIGE opined the remedy  for that concern rests with the                                                               
governor.                                                                                                                       
                                                                                                                                
10:58:59 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER  removed his objection to  Amendment 28, as                                                               
amended.   There  being no  further objection,  Amendment 28,  as                                                               
amended, was adopted.                                                                                                           
                                                                                                                                
10:59:41 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER  moved to  adopt Amendment 29,  labeled 28-                                                               
GS1647\K.6, Nauman/Bullock, 4/2/13, which read:                                                                                 
                                                                                                                                
     Page 1, lines 11 - 12:                                                                                                     
          Delete    "establishing    the   Oil    and    Gas                                                                  
     Competitiveness Review Board;"                                                                                           
                                                                                                                                
     Page 25, following line 20:                                                                                                
     Insert a new bill section to read:                                                                                         
        "* Sec. 33. AS 43.55.180(b) is amended to read:                                                                     
          (b)  The department shall prepare a report on or                                                                      
     before  the  first  day  of  the  2016  [2011]  regular                                                                
     session of the legislature on  the results of the study                                                                    
     made   under    (a)   of   this    section,   including                                                                    
     recommendations  as to  whether any  changes should  be                                                                    
     made to  this chapter. The department  shall notify the                                                                    
     legislature  that   the  report  prepared   under  this                                                                    
     subsection is available."                                                                                                  
                                                                                                                                
     Page 26, line 16, through page 28, line 29:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, lines 16 - 21:                                                                                                    
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill section accordingly.                                                                           
                                                                                                                                
REPRESENTATIVE TARR objected for the purpose of discussion.                                                                     
                                                                                                                                
REPRESENTATIVE  HAWKER continued  discussion on  the Oil  and Gas                                                               
Competitiveness  Review   Board,  stating   he  is   troubled  by                                                               
establishing a  board that  is complex  and difficult  to define.                                                               
Because a  review is  valuable, Amendment  29 deletes  the review                                                               
board and reverts the bill's  language to the original production                                                               
profits tax  (PPT) language requiring  that DOR prepare  a report                                                               
on the  results of a  study of  the tax regime,  and recommending                                                               
changes.     Unlike  the   review  board,   DOR  has   access  to                                                               
confidential taxpayer information and is  in the best position to                                                               
prepare a  report to the  legislature in  2016 on the  results of                                                               
implementing  the proposed  tax  changes.   After  the report  is                                                               
issued,  the  legislature can  assess  its  content, which  is  a                                                               
better approach toward a stable and durable tax structure.                                                                      
                                                                                                                                
11:03:40 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE P.  WILSON asked whether the  original report that                                                               
was due in 2011 was issued.                                                                                                     
                                                                                                                                
REPRESENTATIVE HAWKER indicated yes,  adding that the legislature                                                               
reviewed  the  report, disagreed  with  its  findings, and  began                                                               
revising ACES.  He concluded that this mechanism worked.                                                                        
                                                                                                                                
REPRESENTATIVE SEATON  asked whether  the report required  by the                                                               
amendment would be out of DOR.                                                                                                  
                                                                                                                                
REPRESENTATIVE HAWKER said yes.                                                                                                 
                                                                                                                                
REPRESENTATIVE   SEATON  endorsed   DOR's  experience   providing                                                               
information  to  the  legislature,   and  said  he  supports  the                                                               
amendment.                                                                                                                      
                                                                                                                                
REPRESENTATIVE TARR  asked whether  all of  the provisions  of AS                                                               
43.55.180 are being repealed in other parts of the bill.                                                                        
                                                                                                                                
REPRESENTATIVE HAWKER said he did not believe so.                                                                               
                                                                                                                                
11:07:16 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  TARR questioned  the accuracy  of the  amendment.                                                               
She  read from  AS 43.55.180(a)(1)  and (2),  stating that  other                                                               
sections of  the statute  are ACES provisions.   Reading  from AS                                                               
43.55.180  (b),  she  suggested   additional  amendments  may  be                                                               
required to include the statutory  references that are necessary,                                                               
and  asked  whether  some  of  the  above  provisions  have  been                                                               
repealed.                                                                                                                       
                                                                                                                                
CO-CHAIR FEIGE said  no, stating that AS  43.55.011 is production                                                               
tax, AS  43.55.023-025 pertain to  credits, and  AS 43.55.160-170                                                               
pertain to calculations.                                                                                                        
                                                                                                                                
REPRESENTATIVE  HAWKER  agreed  there   have  been  changes,  but                                                               
assured  the  committee the  bill  revisor  will make  conforming                                                               
amendments  to  correct  any  inaccuracies.   The  point  is  the                                                               
effective date of the bill is  the coming year, and there will be                                                               
elements of  current provisions deleted  in statute, but  not the                                                               
entire section.   The  report encompasses  the entire  state, not                                                               
just the  North Slope, and the  intent is to be  as comprehensive                                                               
as possible  and transcend  all timelines in  the history  of the                                                               
state's development of production taxes.                                                                                        
                                                                                                                                
REPRESENTATIVE TARR gave the example  of the previously discussed                                                               
new credit  related to  in-state work  that is  a new  section of                                                               
statute.  This new section is  a provision that the report should                                                               
encompass.                                                                                                                      
                                                                                                                                
11:10:38 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER,  regarding the required report,  read from                                                               
AS 43.55.180, which is written as follows:                                                                                      
                                                                                                                                
     (a) The department shall study                                                                                             
       (1) the effects of the provisions of this chapter                                                                        
          on oil and gas exploration, development, and                                                                          
     production in the state ...                                                                                                
                                                                                                                                
REPRESENTATIVE  HAWKER emphasized  the statute  specifically left                                                               
those references  from the previous  report as linkage  to assure                                                               
time transcendence.                                                                                                             
                                                                                                                                
REPRESENTATIVE TARR  restated her concern that  the amendment, as                                                               
written, does  not specify  all of the  sections desired  for the                                                               
study.  She  further inquired as to the shortcomings  of the 2011                                                               
study.                                                                                                                          
                                                                                                                                
REPRESENTATIVE HAWKER  clarified that he disagreed  with the 2011                                                               
report.                                                                                                                         
                                                                                                                                
11:12:16 PM                                                                                                                   
                                                                                                                                
CO-CHAIR  FEIGE  supported  some  aspects of  the  review  board.                                                               
First, the board is comprised  of nine members, five from outside                                                               
government and  four inside, giving  the public a bias.   Second,                                                               
the  review  board's  tasks  are  to address  a  wider  range  of                                                               
subjects  than the  report sought  by Amendment  29.   Third, the                                                               
review  board is  also tasked  in  its final  report to  evaluate                                                               
provisions of law that will possibly expire in 2022.                                                                            
                                                                                                                                
REPRESENTATIVE TARR maintained  her objection, further suggesting                                                               
the information from the report  should be modified to that which                                                               
was required from the review board.                                                                                             
                                                                                                                                
11:15:43 PM                                                                                                                   
                                                                                                                                
A  roll  call vote  was  taken.   Representatives  Tuck,  Hawker,                                                               
Johnson,  Olson,  and Seaton  voted  in  favor of  Amendment  29.                                                               
Representatives  P.  Wilson,  Tarr,   Saddler,  and  Feige  voted                                                               
against it.  Therefore, Amendment 29  was adopted by a vote of 5-                                                               
4.                                                                                                                              
                                                                                                                                
11:15:46 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER moved to adopt Amendment 30, labeled 28-                                                                  
GS1647\K.3, Nauman/Bullock, 4/2/13, which read:                                                                                 
                                                                                                                                
     Page 6, line 8:                                                                                                            
          Delete "35"                                                                                                       
          Insert "30"                                                                                                       
                                                                                                                                
     Page 10, line 17:                                                                                                          
          Delete "35"                                                                                                       
          Insert "30"                                                                                                       
                                                                                                                                
     Page 11, line 1:                                                                                                           
          Delete "35"                                                                                                       
          Insert "30"                                                                                                       
                                                                                                                                
     Page 11, line 14:                                                                                                          
          Delete "35"                                                                                                       
          Insert "30"                                                                                                       
                                                                                                                                
     Page 11, line 23:                                                                                                          
          Delete "35"                                                                                                       
          Insert "30"                                                                                                       
                                                                                                                                
     Page 15, line 10:                                                                                                          
          Delete "35"                                                                                                       
          Insert "30"                                                                                                       
                                                                                                                                
REPRESENTATIVE TARR objected.                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER  urged the  committee to  consider reducing                                                               
the base rate in  the bill from 35 percent to  30 percent.  After                                                               
hearing consultant and industry  testimony, he is concerned about                                                               
what  the legislature  has done  in recent  years to  the state's                                                               
global competitiveness.  It is  most important to make meaningful                                                               
change in the tax structure,  and while the bill is well-crafted,                                                               
the  legislature has  "not moved  the  needle far  enough."   The                                                               
state is  approaching a  middle range  of competitiveness  in the                                                               
world, but testimony  indicates that robust fiscal  terms must be                                                               
offered, and he opined Alaska  is still marginally higher than it                                                               
ought to  be.   He said a  change to 30  percent would  move from                                                               
average fiscal terms  to robust fiscal terms in  order to attract                                                               
investment.    Production decline  in  the  state is  its  single                                                               
greatest challenge to  "getting our fair share."  As  this is the                                                               
committee of first referral, the  committee has an opportunity to                                                               
make  a statement  for  a robust  tax regime,  and  then let  the                                                               
public and legislative processes  further review and evaluate the                                                               
impact of the change.                                                                                                           
                                                                                                                                
11:22:47 PM                                                                                                                   
                                                                                                                                
BARRY  PULLIAM,  Managing  Director,  Econ  One  Research,  Inc.,                                                               
speaking as  a consultant to  the administration,  understood the                                                               
amendment  would  reduce the  tax  rate  from  35 percent  to  30                                                               
percent, and  would not alter the  credits that are in  Version K                                                               
of the bill.   He  provided a slide entitled, "Average Government                                                               
Take For  All Existing Producers (FY2015-FY2019),"  but noted the                                                               
effects  of  the  specific  structure of  Amendment  30  are  not                                                               
modeled  in this  slide.   To  obtain an  estimate, he  suggested                                                               
looking  at the  following data:   column  (5), which  models the                                                               
system  in Version  K, which  is a  35 percent  base rate  with a                                                               
sliding scale  [credit] starting  at $8  and phasing  out; column                                                               
(7), which  models a  35 percent  base rate  with $5  credit; and                                                               
column (11), which models a 30  percent base rate with $5 credit.                                                               
The differences  between columns  (7) and (11)  reduce government                                                               
take by about 2.5 percent at  each price point; thus, to estimate                                                               
under  the sliding  scale mechanism,  subtract  2.5 percent  from                                                               
column (5) for a rough estimate  of government take at 30 percent                                                               
with  a sliding  scale.   For example,  at $100  per barrel  West                                                               
Coast ANS price, the government take  is about 62 percent, and at                                                               
$150  per barrel  West Coast  ANS price,  the government  take is                                                               
about 64.5 percent.                                                                                                             
                                                                                                                                
REPRESENTATIVE  HAWKER surmised  a  5 percent  reduction makes  a                                                               
significant  difference   to  the  investment  dynamics   of  the                                                               
affected industry.                                                                                                              
                                                                                                                                
11:26:20 PM                                                                                                                   
                                                                                                                                
DAN  STICKLE, Assistant  Chief Economist,  Anchorage Office,  Tax                                                               
Division,  Department   of  Revenue   (DOR),  provided   a  slide                                                               
entitled,  "Provisions in  HCS  CSSB21(RES)  and their  Estimated                                                               
Fiscal  Impact as  compared to  Fall 2012  Forecast ($millions)."                                                               
He drew attention  to line 2, which gives  the estimated increase                                                               
in revenue resulting  after moving from 25 percent  to 35 percent                                                               
base rate.   An increase of  5 percent would be  one-half of what                                                               
is shown on  line 2; for example, in 2015,  the increase would be                                                               
a little less  than $550 million.  Furthermore, there  would be a                                                               
$20  million increase  in appropriations  for the  conforming net                                                               
operating  loss credits  after a  change  from 25  percent to  30                                                               
percent base rate.                                                                                                              
                                                                                                                                
MR. PAWLOWSKI  added that  to "work down  through the  table" one                                                               
would take  one-half of  the projection on  line 2,  and subtract                                                               
that from the numbers in yellow [Total Fiscal Impact].                                                                          
                                                                                                                                
CO-CHAIR FEIGE inferred  that for FY 2015, the state  would see a                                                               
change from negative $1 billion to negative $1.15 billion.                                                                      
                                                                                                                                
MR. PAWLOSKI said yes.                                                                                                          
                                                                                                                                
REPRESENTATIVE HAWKER  responded to the  aforementioned estimates                                                               
of the  future by noting  that every producer testified  that the                                                               
base rate  is still an  issue, and that  a lower base  rate would                                                               
create greater  impetus for  them to  make investments.   Greater                                                               
investment equals  greater production,  and "there is  no correct                                                               
answer here."  However, a lower  base rate is an objective number                                                               
to maximize  future production.   He informed the  committee that                                                               
major tax  regimes around the  world are reducing their  taxes to                                                               
attract   industry  because   industry  cannot   be  taxed   into                                                               
productivity.  A  certain business risk is inherent,  but - based                                                               
on testimony  from the industry -  the state has not  reached the                                                               
right base rate.                                                                                                                
                                                                                                                                
11:30:57 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TARR cautioned  that reducing the base  rate to 30                                                               
percent  and adjusting  the  net operating  loss  (NOL) seems  to                                                               
disadvantage small  producers, because  their only credit  is NOL                                                               
credit,   while  benefitting   large   producers   that  are   in                                                               
production.    The  previous  proposals  struck  a  balance,  but                                                               
adjusting   the  NOL   credit  downward   severely  disadvantages                                                               
explorers.                                                                                                                      
                                                                                                                                
MR.  PAWLOWSKI reminded  the  committee  that the  aforementioned                                                               
fiscal impact  is a rough  estimate without the  consideration of                                                               
production   scenarios;  any   illustration  without   additional                                                               
production should be taken with  a grain of salt.  Representative                                                               
Tarr brings up  an important issue:  Studying  the full lifecycle                                                               
economics around the proposal is  the method analysts use to find                                                               
a balance between the credits and  the overall take.  Gross value                                                               
reduction,  per   barrel  credit,  and  upfront   credit,  viewed                                                               
together, create an opportunity  for investment that can outweigh                                                               
losses upfront,  particularly with the addition  of the authority                                                               
of AIDEA, the impact of which is unknown at this time.                                                                          
                                                                                                                                
11:32:55 PM                                                                                                                   
                                                                                                                                
CO-CHAIR SADDLER said he has  supported lowering the tax rate and                                                               
government take for  the oil industry, but has  concerns with the                                                               
significance  of  the  change  proposed  by  Amendment  30.    He                                                               
suggested changing to a 33 percent base rate.                                                                                   
                                                                                                                                
REPRESENTATIVE  P. WILSON  agreed  that a  33  percent base  rate                                                               
would make a difference and  she would feel comfortable if Alaska                                                               
were  "in  the middle  of  the  pack"  worldwide.   She  inquired                                                               
whether Representative  Hawker would accept a  friendly amendment                                                               
to the amendment.                                                                                                               
                                                                                                                                
REPRESENTATIVE HAWKER indicated no.                                                                                             
                                                                                                                                
REPRESENTATIVE JOHNSON  recalled testimony that 62  percent total                                                               
government take [when  oil is priced at $100 per  barrel] "is the                                                               
winner."   He reviewed the  difficulties the industry  faces when                                                               
conducting business  in Alaska, and said  he is not happy  in the                                                               
middle of  the pack; in  fact, to  ensure the future  for Alaska,                                                               
Alaska needs to lead.  He  supported Amendment 30, saying that it                                                               
would put Alaska near the front of the pack.                                                                                    
                                                                                                                                
11:37:26 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK opposed Amendment  30.  He recalled testimony                                                               
last year and said it is  difficult to compare one oil field with                                                               
the next  due to different construction  environments, especially                                                               
regarding the  time needed for  new investments  to pay off.   In                                                               
addition, the  difference between the production  of conventional                                                               
oil and  nonconventional oil  is significant.   In  North Dakota,                                                               
the production costs  of oil developed by  "fracking" are between                                                               
$40  and  $60 per  barrel;  however,  because production  is  not                                                               
seasonal, the rate  of return is about 18 months,  rather than 10                                                               
years as in Alaska.  As  stated in testimony, Alaska is resource-                                                               
rich, which is  attractive to investors.  In  addition, Pedro van                                                               
Meurs' comparisons  between Alaska's tax  rate and that  of other                                                               
shallow-water  oil   areas  are  comparable,  and   his  analysis                                                               
indicated  that  HB  110 [offered  during  the  27th  Legislative                                                               
Session] reduced government  take from 72 percent  to 65 percent.                                                               
The current proposal  reduces government take to  62 percent when                                                               
oil prices are $110 per  barrel.  Representative Tuck referred to                                                               
favorable reports  in the  past two years  from the  governor and                                                               
DOR, even  in the  case of  a failed  well.   For example,  on an                                                               
unsuccessful development  project, the state share  is 76 percent                                                               
and an  existing producer's  share is  15 percent.   Furthermore,                                                               
Alaska's tax credit system is  the most competitive in the world.                                                               
He mentioned ongoing projects on  the North Slope, and urged that                                                               
legislators  fulfill  their  roles  and negotiate  with  the  oil                                                               
industry instead of against each other.                                                                                         
                                                                                                                                
11:42:26 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  JOHNSON   emphasized  that   not  a   single  new                                                               
production project on the North  Slope would have been sanctioned                                                               
under ACES  tax policy.   He said  that is a  fallacious argument                                                               
and  the record  should be  set straight:   ACES  would not  have                                                               
generated  the  competition  that  is there  now  -  it  happened                                                               
because of a previous regime.                                                                                                   
                                                                                                                                
REPRESENTATIVE TUCK stressed the  Department of Labor & Workforce                                                               
Development reported employment on the  North Slope climbed to an                                                               
all-time high  in 2012;  if these  statistics are  debatable, the                                                               
amendment is premature.                                                                                                         
                                                                                                                                
CO-CHAIR SADDLER inquired as to DOR's position on Amendment 30.                                                                 
                                                                                                                                
11:45:01 PM                                                                                                                   
                                                                                                                                
MR. PAWLOWSKI responded that making  Alaska competitive is one of                                                               
the  goals  of   the  governor  and  the   administration.    The                                                               
governor's  legislation  is  focused   on  creating  a  long-term                                                               
environment  with four  principles:   fair to  Alaskans; durable;                                                               
balanced;  and simple.   As  Version K  is in  flux, he  reserved                                                               
comment other than to assist the committee in its efforts.                                                                      
                                                                                                                                
REPRESENTATIVE TARR maintained her objection.                                                                                   
                                                                                                                                
REPRESENTATIVE  HAWKER disputed  the  statistics  that the  labor                                                               
boom on  the North Slope is  from new oil production,  arguing it                                                               
is  due  to increased  maintenance  on  existing facilities;  oil                                                               
revenue  is  metered  and  every  barrel  of  oil  production  is                                                               
counted.  If ACES was working  as was represented when it passed,                                                               
production would not be in decline.   He gave examples of new oil                                                               
production  in  other areas  of  the  world,  and urged  for  the                                                               
adoption  of Amendment  30, saying  it  would signify  meaningful                                                               
change towards Alaska's fair share.                                                                                             
                                                                                                                                
11:49:03 PM                                                                                                                   
                                                                                                                                
A roll  call vote  was taken.   Representatives  Hawker, Johnson,                                                               
and Olson voted in favor  of Amendment 30.  Representatives Tarr,                                                               
Tuck, Seaton,  P. Wilson,  Saddler, and  Feige voted  against it.                                                               
Therefore, Amendment 30 failed by a vote of 3-6.                                                                                
                                                                                                                                
11:50:09 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER  moved to  adopt Amendment 31,  labeled GS-                                                               
1647\K.4, Nauman/Bullock,  4/2/13, [text  provided at the  end of                                                               
the document].                                                                                                                  
                                                                                                                                
REPRESENTATIVE TARR objected.                                                                                                   
                                                                                                                                
REPRESENTATIVE  HAWKER   said  Amendment  31   addresses  another                                                               
problem  for   taxpayers  caused   by  the  enactment   of  ACES.                                                               
Amendment  31 will  provide legislative  guidance and  clarity to                                                               
state  taxing agencies  regarding the  determination of  wellhead                                                               
value  as  the basis  for  production  tax.   He  explained  that                                                               
wellhead value is the value one  sells the oil for, less the cost                                                               
of  transportation, and  the  problem is  with  how DOR  auditors                                                               
determine the cost of transportation.   Prior to ACES, a taxpayer                                                               
deducted its actual costs of  transportation unless the following                                                               
three circumstances existed:  the  shipper is affiliated with the                                                               
transportation carrier;  the transportation  contract was  not at                                                               
arm's length;  and the  methods or  terms of  transportation were                                                               
not   reasonable   in   light  of   alternative   transportation.                                                               
Furthermore,  DOR  had  discretion to  apply  a  "reasonableness"                                                               
standard if  those same circumstances existed.   He characterized                                                               
this  provision  as successful  for  many  years until  the  ACES                                                               
legislation made a number of  statutory changes.  Following those                                                               
statutory  changes,  DOR  developed  new  regulations  that  have                                                               
garnered complaints.   The complaints charge  that DOR calculates                                                               
what it  considers reasonable by regulation,  and also calculates                                                               
actual costs that  really are not actual.   Representative Hawker                                                               
said  this  issue  arose   "through  that  rather  indecipherable                                                               
regulation making arguments that  actual transportation costs are                                                               
not  really what  we  want to  consider actual  and  fair."   The                                                               
current  regulations defer  to  DOR's  discretion in  calculating                                                               
both  actual and  reasonable  transportation  costs, and  require                                                               
that the lesser amount is used.                                                                                                 
                                                                                                                                
11:53:46 PM                                                                                                                   
                                                                                                                                
REPRESENTATIVE HAWKER remarked:                                                                                                 
                                                                                                                                
     What the  amendment before us does,  is simply restores                                                                    
     the  language in  Section 43.55.150  which  is ...  the                                                                    
     section of  statute on determining  the gross  value at                                                                    
     the  point  of   production,  basically  the  allowable                                                                    
     transportation costs.   This amendment  simply restores                                                                    
     the language  that existed before ACES  passed, when it                                                                    
     was fairly  clear, the regulations  worked, and  we did                                                                    
     not  have   this  circumstance  which  I   believe  has                                                                    
     resulted   in  the   department  taking   a  regulatory                                                                    
     position  that  is  inconsistent with  what  I  believe                                                                    
     would be  good legislative intent:   That what  you pay                                                                    
     for transportation is what you  pay, unless those three                                                                    
     qualifications are  met, and  then there's  a different                                                                    
     standard applied.                                                                                                          
                                                                                                                                
REPRESENTATIVE HAWKER  further explained  Amendment 31 is  one of                                                               
two  amendments  he  is  offering  to  address  unintended  -  or                                                               
intended but inappropriate - consequences  of changes made in the                                                               
ACES legislation.                                                                                                               
                                                                                                                                
REPRESENTATIVE  SEATON  was  unsure  whether  the  aforementioned                                                               
changes  were the  result of  ACES or  the result  of the  tariff                                                               
settlement and  lawsuit related to actual  transportation [costs]                                                               
for  intrastate transportation.    He  estimated the  calculation                                                               
difference  for that  settlement was  about $6  billion over  the                                                               
lifetime, and  questioned whether returning to  calculations that                                                               
were inaccurate,  or that  were a basis  for a  legal settlement,                                                               
would be good for  the state.  At this point there  is no time to                                                               
review   the   amendment  or   for   research   to  confirm   his                                                               
recollection.                                                                                                                   
                                                                                                                                
11:56:23 PM                                                                                                                   
                                                                                                                                
CO-CHAIR FEIGE directed  attention to the 2013  edition of Alaska                                                             
Oil and  Gas Laws and  Regulations Annotated, page 186,  and said                                                             
Representative  Hawker   was  correct   on  the  effect   of  the                                                               
amendment.                                                                                                                      
                                                                                                                                
REPRESENTATIVE SEATON  pointed out  the footnotes  that reference                                                               
the lawsuit  and settlement made  by the  Knowles Administration;                                                               
although he  did not remember the  exact terms, he said  that was                                                               
the reason for the language.  He asked for a response from DOR.                                                                 
                                                                                                                                
REPRESENTATIVE TARR agreed with  Representative Seaton that there                                                               
was   litigation   to  protect   the   state.     She   requested                                                               
clarification  from  DOL  as to  her  understanding  that  "these                                                               
provisions are the result of some of this activity in the past."                                                                
                                                                                                                                
MS. POLLARD  said she is  unable to  give detailed advice  on the                                                               
methodology  related  to  the TAPS  tariff  settlement  in  1985.                                                               
However, in 2007,  there was testimony on  the reasons supporting                                                               
restoring the statute  that existed in 2006, which  is the intent                                                               
of  Amendment 31.   She  recalled  the testimony  was before  the                                                               
Senate  Judiciary  Standing  Committee  in October  of  2007  and                                                               
discussed an alternative deduction for  tax reasons.  Ms. Pollard                                                               
was unable to say which tariff issues were directly discussed.                                                                  
                                                                                                                                
MR. PAWLOWSKI said  DOR's understanding of the  amendment is that                                                               
its  language  restores   what  was,  at  the   time,  a  certain                                                               
legislative  direction.   He solicited  additional comments  from                                                               
the Tax Division.                                                                                                               
                                                                                                                                
[See April  4, 2013, minutes  and audio for the  continuation and                                                               
conclusion of this meeting.]                                                                                                    
                                                                                                                                
Following is the text for Amendments 2,  3, 4, 5, 15, 16, 18, 25,                                                               
27, 28, and 31.                                                                                                                 
                                                                                                                                
  Amendment 2, labeled 28-GS1647\K.20, Nauman/Bullock, 4/2/13:                                                              
                                                                                                                                
     Page 1, lines 2 - 11:                                                                                                      
          Delete "providing a tax credit against the                                                                          
     corporation  income  tax  for  qualified  oil  and  gas                                                                  
     service industry expenditures; relating  to the oil and                                                                  
     gas production  tax rate; relating  to gas used  in the                                                                  
     state; relating to monthly  installment payments of the                                                                  
     oil and  gas production  tax; relating  to oil  and gas                                                                  
     production   tax  credits   for   certain  losses   and                                                                  
     expenditures; relating  to oil  and gas  production tax                                                                  
     credit  certificates; relating  to nontransferable  tax                                                                  
     credits based  on production; relating  to the  oil and                                                                  
     gas tax  credit fund; relating to  annual statements by                                                                  
     producers and explorers;  relating to the determination                                                                  
     of annual  oil and  gas production tax  value including                                                                  
     adjustments  based on  a percentage  of gross  value at                                                                  
     the  point   of  production  from  certain   leases  or                                                                  
     properties;"                                                                                                             
                                                                                                                                
     Page 5, line 27, through page 12, line 31:                                                                                 
          Delete all material and insert:                                                                                       
        "* Sec. 11. AS 43.55.011(g) is amended to read:                                                                     
          (g)  For each month of the calendar year for                                                                          
     which  the producer's  average  monthly production  tax                                                                    
     value   under  AS 43.55.160(a)(2)   of   a  [PER]   BTU                                                                
     equivalent barrel  of the taxable  oil and gas  is more                                                                    
     than $30, the  amount of tax for purposes  of (e)(2) of                                                                    
     this section  is determined by multiplying  the monthly                                                                    
     production  tax  value  of  the  taxable  oil  and  gas                                                                    
     produced during  the month by  the tax  rate calculated                                                                    
     as follows:                                                                                                                
               (1)  if the producer's average monthly                                                                           
     production tax  value of a [PER]  BTU equivalent barrel                                                                
     of the  taxable oil and gas  for the month is  not more                                                                    
     than $92.50, the tax rate  is 0.4 percent multiplied by                                                                    
     the number that represents  the difference between that                                                                    
     average  monthly production  tax value  of a  [PER] BTU                                                                
     equivalent barrel and $30; or                                                                                              
               (2)  if the producer's average monthly                                                                           
     production tax  value of a [PER]  BTU equivalent barrel                                                                
     of the taxable  oil and gas for the month  is more than                                                                    
     $92.50, the tax  rate is the sum of 25  percent and the                                                                    
     product of  0.1 percent  multiplied by the  number that                                                                    
     represents the  difference between the  average monthly                                                                    
     production tax  value of a [PER]  BTU equivalent barrel                                                                
     and $92.50,  except that the sum  determined under this                                                                    
     paragraph may not exceed 30 [50] percent."                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 14, line 13, through page 16, line 9:                                                                                 
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 16, lines 11 - 12:                                                                                                    
          Delete "of this section"                                                                                          
                                                                                                                                
     Page 16, line 12:                                                                                                          
          Delete "former"                                                                                                   
                                                                                                                                
     Page 16, line 26, through page 25, line 20:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 28, line 30, through page 29, line 15:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 16"                                                                                                      
                                                                                                                                
     Page 29, lines 22 - 26:                                                                                                    
          Delete all material.                                                                                                  
                                                                                                                                
                                                                                                                                
  Amendment 3, labeled 28-GS1647\K.21, Nauman/Bullock, 4/3/13:                                                              
                                                                                                                                
     Page 6, line 6:                                                                                                            
          Delete "(g)"                                                                                                          
          Insert "(g)(1) [(g)]"                                                                                             
                                                                                                                                
     Page 6, line 7, following "2014,":                                                                                     
          Insert "                                                                                                              
               (A)"                                                                                                         
                                                                                                                                
     Page 6, line 9, following "percent":                                                                                   
          Insert "; and                                                                                                     
               (B)  the sum, over all the months of the                                                                     
     calendar year, of the tax  amounts determined under (g)                                                                
     of this section"                                                                                                       
                                                                                                                                
     Page 6, following line 9:                                                                                                  
          Insert a new bill section to read:                                                                                    
        "* Sec. 12. AS 43.55.011(g) is amended to read:                                                                     
          (g)  For purposes of (e) of this section, the tax                                                                 
     amount  is   determined  by  multiplying   the  monthly                                                                
     production  tax  value  of  the  taxable  oil  and  gas                                                                
     produced during  the month by  the tax  rate calculated                                                                
     as follows:                                                                                                            
               (1)  before January 1, 2014, for [FOR] each                                                                  
     month  of the  calendar year  for which  the producer's                                                                    
     average    monthly   production    tax   value    under                                                                    
     AS 43.55.160(a)(2) of a [PER]  BTU equivalent barrel of                                                                
     the taxable oil  and gas is more than  $30, [THE AMOUNT                                                                    
     OF  TAX  FOR PURPOSES  OF  (e)(2)  OF THIS  SECTION  IS                                                                    
     DETERMINED  BY MULTIPLYING  THE MONTHLY  PRODUCTION TAX                                                                    
     VALUE OF  THE TAXABLE OIL  AND GAS PRODUCED  DURING THE                                                                    
     MONTH BY] the tax rate calculated as follows:                                                                              
               (A) [(1)]  if the producer's average monthly                                                                 
     production tax  value of a [PER]  BTU equivalent barrel                                                                
     of the  taxable oil and gas  for the month is  not more                                                                    
     than $92.50, the tax rate  is 0.4 percent multiplied by                                                                    
     the number that represents  the difference between that                                                                    
     average  monthly production  tax value  of a  [PER] BTU                                                                
     equivalent barrel and $30; or                                                                                              
               (B) [(2)]  if the producer's average monthly                                                                 
     production tax  value of a [PER]  BTU equivalent barrel                                                                
     of the taxable  oil and gas for the month  is more than                                                                    
     $92.50, the tax  rate is the sum of 25  percent and the                                                                    
     product of  0.1 percent  multiplied by the  number that                                                                    
     represents the  difference between the  average monthly                                                                    
     production tax  value of a [PER]  BTU equivalent barrel                                                                
     and $92.50,  except that the sum  determined under this                                                                    
     paragraph may not exceed 50 percent;                                                                                   
               (2)  on or after January 1, 2014, for each                                                                   
     month  of the  calendar year  for which  the producer's                                                                
     average    monthly   production    tax   value    under                                                                
     AS 43.55.160(a)(2) of  a BTU  equivalent barrel  of the                                                                
     taxable  oil and  gas is  more than  $55, the  tax rate                                                                
     calculated  by  multiplying  by  0.2  the  number  that                                                                
     represents the difference  between that average monthly                                                                
     production  tax value  of a  BTU equivalent  barrel and                                                                
     $55,  except that  the tax  rate determined  under this                                                                
     paragraph may not exceed 15 percent."                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 10, line 17:                                                                                                          
          Delete "35 percent"                                                                                               
          Insert "the sum of 35 percent and the tax rate                                                                    
     calculated for the month under AS 43.55.011(g)"                                                                        
                                                                                                                                
     Page 11, line 1:                                                                                                           
          Delete "35 percent"                                                                                               
          Insert "the sum of 35 percent and the tax rate                                                                    
     calculated for the month under AS 43.55.011(g)"                                                                        
                                                                                                                                
     Page 11, line 14:                                                                                                          
          Delete "35 percent"                                                                                               
          Insert "the sum of 35 percent and the tax rate                                                                    
     calculated for the month under AS 43.55.011(g)"                                                                        
                                                                                                                                
     Page 11, line 23:                                                                                                          
          Delete "35 percent"                                                                                               
          Insert "the sum of 35 percent and the tax rate                                                                    
     calculated for the month under AS 43.55.011(g)"                                                                        
                                                                                                                                
     Page 12, lines 13 - 31:                                                                                                    
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 13, line 25, through page 14, line 12:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 28, line 31:                                                                                                          
          Delete "43.55.011(g)"                                                                                                 
          Insert "43.55.011(g)(1)"                                                                                              
                                                                                                                                
     Page 29, line 1:                                                                                                           
          Delete       "AS 43.55.020(d),       43.55.023(i),                                                                    
     43.55.023(p), 43.55.160(a)(2), and 43.55.160(c)"                                                                           
          Insert "43.55.023(i), and 43.55.023(p)"                                                                               
                                                                                                                                
     Page 29, line 5:                                                                                                           
          Delete "Section 13"                                                                                                   
          Insert "Section 14"                                                                                                   
                                                                                                                                
     Page 29, line 6:                                                                                                           
          Delete "sec. 31"                                                                                                      
          Insert "sec. 30"                                                                                                      
                                                                                                                                
     Page 29, line 7:                                                                                                           
          Delete "Sections 18 and 20 - 23"                                                                                      
          Insert "Sections 17 and 19 - 22"                                                                                      
          Delete "sec. 18"                                                                                                      
          Insert "sec. 17"                                                                                                      
                                                                                                                                
     Page 29, line 9:                                                                                                           
          Delete "Section 19"                                                                                                   
          Insert "Section 18"                                                                                                   
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 35"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "Sections 13, 20 - 23, 28, and 37"                                                                             
          Insert "Sections 14, 19 - 22, 27, and 36"                                                                             
                                                                                                                                
     Page 29, line 25:                                                                                                          
          Delete "sec. 18"                                                                                                      
          Insert "sec. 17"                                                                                                      
          Delete "sec. 31"                                                                                                      
          Insert "sec. 30"                                                                                                      
                                                                                                                                
                                                                                                                                
  Amendment 4, labeled 28-GS1647\K.25, Nauman/Bullock, 4/3/13:                                                              
                                                                                                                                
     Page 1, line 4:                                                                                                            
          Delete "rate"                                                                                                       
          Insert "rates"                                                                                                      
                                                                                                                                
     Page 6, line 8:                                                                                                            
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 6, following line 9:                                                                                                  
     Insert a new bill section to read:                                                                                         
        "* Sec. 12. AS 43.55.011(f) is amended to read:                                                                     
          (f) Before January 1, 2014, the [THE] levy of tax                                                                 
     under this  section for oil  and gas produced  north of                                                                    
     68  degrees  North latitude,  other  than  oil and  gas                                                                    
     production  subject  to (i)  of  this  section and  gas                                                                    
     subject to (o) of this section, may not be less than                                                                       
               (1)  four percent of the gross value at the                                                                      
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax is due is more than $25;                                                                                     
               (2)  three percent of the gross value at the                                                                     
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax is due is over $20 but not over $25;                                                                         
               (3)  two percent of the gross value at the                                                                       
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax is due is over $17.50 but not over $20;                                                                      
               (4)  one percent of the gross value at the                                                                       
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax  is due is over $15 but  not over $17.50;                                                                    
     or                                                                                                                         
               (5)  zero percent of the gross value at the                                                                      
     point of  production when the average  price per barrel                                                                    
     for  Alaska  North Slope  crude  oil  for sale  on  the                                                                    
     United States  West Coast during the  calendar year for                                                                    
     which the tax is due is $15 or less."                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 7, following line 1:                                                                                                  
          Insert new bill sections to read:                                                                                     
        "* Sec. 15. AS 43.55.011 is  amended by adding a new                                                                
     subsection to read:                                                                                                        
          (g)  On and after January 1, 2014, except for oil                                                                     
     and gas subject to (i)  of this section and gas subject                                                                    
     to  (o)  of  this   section,  the  provisions  of  this                                                                    
     subsection  apply to  oil and  gas  produced from  each                                                                    
     lease  or   property  within  a  unit   or  nonunitized                                                                    
     reservoir that has  cumulatively produced 1,000,000,000                                                                    
     BTU equivalent  barrels of oil  or gas by the  close of                                                                    
     the  most  recent  calendar year  and  from  which  the                                                                    
     average daily oil  and gas production from  the unit or                                                                    
     nonunitized reservoir  during the most  recent calendar                                                                    
     year   exceeded   100,000   BTU   equivalent   barrels.                                                                    
     Notwithstanding  any  contrary   provision  of  law,  a                                                                    
     producer may not apply tax  credits to reduce its total                                                                    
     tax liability  under (e)  of this  section for  oil and                                                                    
     gas produced  from all leases or  properties within the                                                                    
     unit or  nonunitized reservoir below 10  percent of the                                                                    
     total gross  value at the  point of production  of that                                                                    
     oil  and  gas.  If  the amount  of  tax  calculated  by                                                                    
     multiplying the  tax rates  in (e)  of this  section by                                                                    
     the  total production  tax  value of  the  oil and  gas                                                                    
     taxable under (e) of this  section produced from all of                                                                    
     the producer's leases or properties  within the unit or                                                                    
     nonunitized reservoir  is less  than 10 percent  of the                                                                    
     total gross  value at the  point of production  of that                                                                    
     oil and gas, the tax levied  by (e) of this section for                                                                    
     that oil  and gas is equal  to 10 percent of  the total                                                                    
     gross value at the point  of production of that oil and                                                                    
     gas."                                                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 10, line 15:                                                                                                          
          Delete "AS 43.55.011(f)"                                                                                          
          Insert "AS 43.55.011(q)"                                                                                          
                                                                                                                                
     Page 10, line 17:                                                                                                          
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 10, line 25:                                                                                                          
          Delete "AS 43.55.011(f)"                                                                                          
          Insert "AS 43.55.011(q)"                                                                                          
                                                                                                                                
     Page 10, lines 27 - 31:                                                                                                    
          Delete all material and insert:                                                                                       
          "(ii)  10 percent of the gross value at the point                                                                 
     of  production of  the oil  and gas  produced from  the                                                                
     leases  or properties  during the  month for  which the                                                                
     installment payment is calculated; or "                                                                              
                                                                                                                                
     Page 11, line 1:                                                                                                           
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 11, line 14:                                                                                                          
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 11, line 23:                                                                                                          
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 15, line 10:                                                                                                          
          Delete "35"                                                                                                       
          Insert "50"                                                                                                       
                                                                                                                                
     Page 17, line 21:                                                                                                          
          Delete "new subsections"                                                                                              
          Insert "a new subsection"                                                                                             
                                                                                                                                
     Page 17, line 23:                                                                                                          
          Delete "$5"                                                                                                           
          Insert "$12"                                                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "that meets one or more of the criteria in                                                                     
     AS 43.55.160(f) and"                                                                                                       
                                                                                                                                
     Page 17, line 28, through page 18, line 28:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
     Page 29, line 5:                                                                                                           
          Delete "Section 13"                                                                                                   
          Insert "Section 14"                                                                                                   
                                                                                                                                
     Page 29, line 6:                                                                                                           
          Delete "sec. 31"                                                                                                      
          Insert "sec. 33"                                                                                                      
                                                                                                                                
     Page 29, line 7:                                                                                                           
          Delete "Sections 18 and 20 - 23"                                                                                      
          Insert "Sections 20 and 22 - 25"                                                                                      
          Delete "sec. 18"                                                                                                      
          Insert "sec. 20"                                                                                                      
                                                                                                                                
     Page 29, line 9:                                                                                                           
          Delete "Section 19"                                                                                                   
          Insert "Section 21"                                                                                                   
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 38"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "Sections 13, 20 - 23, 28, and 37"                                                                             
          Insert "Sections 14, 22 - 25, 30, and 39"                                                                             
                                                                                                                                
     Page 29, line 25:                                                                                                          
          Delete "sec. 18"                                                                                                      
          Insert "sec. 20"                                                                                                      
          Delete "sec. 31"                                                                                                      
          Insert "sec. 33"                                                                                                      
                                                                                                                                
                                                                                                                                
 Amendment 5, labeled, 28-GS1647\K.24, Nauman/Bullock, 4/3/13:                                                              
                                                                                                                                
     Page 1, line 4:                                                                                                            
          Delete "rate"                                                                                                       
          Insert "rates"                                                                                                      
                                                                                                                                
     Page 6, line 8:                                                                                                            
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 6, following line 9:                                                                                                  
          Insert a new bill section to read:                                                                                    
        "*   Sec.  12.   AS 43.55.011(f)  is   repealed  and                                                                
     reenacted to read:                                                                                                         
          (f)  Except for oil and gas subject to (i) of                                                                         
     this section  and gas subject  to (o) of  this section,                                                                    
     the provisions of this subsection  apply to oil and gas                                                                    
     produced from each  lease or property within  a unit or                                                                    
     nonunitized  reservoir that  has cumulatively  produced                                                                    
     1,000,000,000 BTU  equivalent barrels of oil  or gas by                                                                    
     the close  of the  most recent  calendar year  and from                                                                    
     which  the average  daily oil  and gas  production from                                                                    
     the  unit  or  nonunitized reservoir  during  the  most                                                                    
     recent  calendar year  exceeded 100,000  BTU equivalent                                                                    
     barrels.  Notwithstanding  any  contrary  provision  of                                                                    
     law, a  producer may  not apply  tax credits  to reduce                                                                    
     its total tax  liability under (e) of  this section for                                                                    
     oil  and gas  produced  from all  leases or  properties                                                                    
     within  the  unit  or nonunitized  reservoir  below  10                                                                    
     percent  of  the total  gross  value  at the  point  of                                                                    
     production of  that oil and  gas. If the amount  of tax                                                                    
     calculated by multiplying the tax  rates in (e) of this                                                                    
     section by  the total production  tax value of  the oil                                                                    
     and  gas taxable  under (e)  of  this section  produced                                                                    
     from all of the  producer's leases or properties within                                                                    
     the  unit  or nonunitized  reservoir  is  less than  10                                                                    
     percent  of  the total  gross  value  at the  point  of                                                                    
     production of that  oil and gas, the tax  levied by (e)                                                                    
     of this  section for that  oil and  gas is equal  to 10                                                                    
     percent  of  the total  gross  value  at the  point  of                                                                    
     production of that oil and gas."                                                                                           
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 10, line 17:                                                                                                          
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 10, lines 27 - 31:                                                                                                    
          Delete all material and insert:                                                                                       
               "(ii)  10 percent of the gross value at the                                                                  
     point of  production of the  oil and gas  produced from                                                                
     the  leases or  properties during  the month  for which                                                                
     the installment payment is calculated; or"                                                                             
                                                                                                                                
     Page 11, line 1:                                                                                                           
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 11, line 14:                                                                                                          
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 11, line 23:                                                                                                          
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 15, line 10:                                                                                                          
          Delete "35"                                                                                                       
          Insert "45"                                                                                                       
                                                                                                                                
     Page 17, line 21:                                                                                                          
          Delete "new subsections"                                                                                              
          Insert "a new subsection"                                                                                             
                                                                                                                                
     Page 17, line 23:                                                                                                          
          Delete "$5"                                                                                                           
          Insert "$10"                                                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "that meets one or more of the criteria in                                                                     
     AS 43.55.160(f) and"                                                                                                       
                                                                                                                                
     Page 17, line 28, through page 18, line 28:                                                                                
          Delete all material.                                                                                                  
                                                                                                                                
     Page 29, line 5:                                                                                                           
          Delete "Section 13"                                                                                                   
          Insert "Section 14"                                                                                                   
                                                                                                                                
     Page 29, line 6:                                                                                                           
          Delete "sec. 31"                                                                                                      
          Insert "sec. 32"                                                                                                      
                                                                                                                                
     Page 29, line 7:                                                                                                           
          Delete "Sections 18 and 20 - 23"                                                                                      
          Insert "Sections 19 and 21 - 24"                                                                                      
          Delete "sec. 18"                                                                                                      
          Insert "sec. 19"                                                                                                      
                                                                                                                                
     Page 29, line 9:                                                                                                           
          Delete "Section 19"                                                                                                   
          Insert "Section 20"                                                                                                   
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 37"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "Sections 13, 20 - 23, 28, and 37"                                                                             
          Insert "Sections 14, 21 - 24, 29, and 38"                                                                             
                                                                                                                                
     Page 29, line 25:                                                                                                          
          Delete "sec. 18"                                                                                                      
          Insert "sec. 19"                                                                                                      
                                                                                                                                
                                                                                                                                
     Amendment 15, labeled 28-GS1647\K.15, Bullock, 4/3/13:                                                                 
                                                                                                                                
     Page 1, line 4:                                                                                                            
          Delete "rate"                                                                                                       
          Insert "rates"                                                                                                      
                                                                                                                                
     Page 1, line 12:                                                                                                           
          Delete the second occurrence of "and"                                                                               
                                                                                                                                
     Page 1, line 12, following "amendments":                                                                                 
         Insert "; and providing for an effective date"                                                                       
                                                                                                                                
     Page 2, following line 13:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Sec.  3.  AS 29.60.850(b),  as amended by  sec. 2                                                                
     of this Act, is amended to read:                                                                                         
          (b)  Each fiscal year, the legislature may                                                                            
     appropriate to  the community  revenue sharing  fund an                                                                
     amount equal  to 20  percent of  the money  received by                                                                
     the  state  during  the previous  calendar  year  under                                                                    
     AS 43.55.011(g) [AS 43.20.030(c)].  The amount  may not                                                                
     exceed                                                                                                                     
               (1)  $60,000,000; or                                                                                             
               (2)  the amount that, when added to the fund                                                                     
     balance on June 30 of the  previous fiscal year, equals                                                                    
     $180,000,000."                                                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 6, following line 9:                                                                                                  
          Insert a new bill section to read:                                                                                    
        "* Sec.  13. AS 43.55.011(e), as amended  by sec. 12                                                                
     of this Act, is repealed and reenacted to read:                                                                            
          (e)  There is levied on the producer of oil or                                                                        
     gas a  tax for all  oil and gas produced  each calendar                                                                    
     year from  each lease  or property  in the  state, less                                                                    
     any  oil and  gas the  ownership or  right to  which is                                                                    
     exempt  from  taxation  or  constitutes  a  landowner's                                                                    
     royalty  interest. Except  as otherwise  provided under                                                                    
     (f), (j),  (k), (o), and  (p) of this section,  the tax                                                                    
     is equal to the sum of                                                                                                     
               (1)  the annual production tax value of the                                                                      
     taxable    oil   and    gas    as   calculated    under                                                                    
     AS 43.55.160(a)(1) multiplied by 25 percent; and                                                                           
               (2)  the sum, over all months of the                                                                             
     calendar year, of the tax  amounts determined under (q)                                                                    
     of this section."                                                                                                          
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 7, following line 1:                                                                                                  
     Insert new bill sections to read:                                                                                          
        "* Sec.  16. AS 43.55.011(o), as amended  by sec. 15                                                                  
     of this Act, is amended to read:                                                                                           
          (o)  Notwithstanding other provisions of this                                                                         
     section,  for  a calendar  year  before  2022, the  tax                                                                    
     levied under (e)  of this section for  each 1,000 cubic                                                                    
     feet of gas  for gas produced from a  lease or property                                                                    
     outside the  Cook Inlet sedimentary  basin and  used in                                                                    
     the  state [,  OTHER THAN  GAS SUBJECT  TO (p)  OF THIS                                                                    
     SECTION,] may  not exceed  the amount  of tax  for each                                                                    
     1,000  cubic  feet  of gas  that  is  determined  under                                                                    
     (j)(2) of this section.                                                                                                    
        * Sec. 17.  AS 43.55.011 is amended by  adding a new                                                                  
     subsection to read:                                                                                                        
          (q)  For each month of the calendar year for                                                                          
     which  the producer's  average  monthly production  tax                                                                    
     value  under  AS 43.55.160(a)(2)  of a  BTU  equivalent                                                                    
     barrel of  the taxable  oil and gas  is more  than $30,                                                                    
     the  amount  of tax  for  purposes  of (e)(2)  of  this                                                                    
     section  is  determined   by  multiplying  the  monthly                                                                    
     production  tax  value  of  the  taxable  oil  and  gas                                                                    
     produced during  the month by  the tax  rate calculated                                                                    
     as follows:                                                                                                                
               (1)  if the producer's average monthly                                                                           
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable  oil and  gas for  the month  is not  more than                                                                    
     $92.50, the tax  rate is 0.4 percent  multiplied by the                                                                    
     number  that  represents  the difference  between  that                                                                    
     average  monthly   production  tax   value  of   a  BTU                                                                    
     equivalent barrel and $30; or                                                                                              
               (2)  if the producer's average monthly                                                                           
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable oil and gas for  the month is more than $92.50,                                                                    
     the tax rate  is the sum of 25 percent  and the product                                                                    
     of   0.1  percent   multiplied  by   the  number   that                                                                    
     represents the  difference between the  average monthly                                                                    
     production  tax value  of a  BTU equivalent  barrel and                                                                    
     $92.50,  except  that  the sum  determined  under  this                                                                    
     paragraph may not exceed 50 percent."                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 12, following line 12:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec.  19. AS 43.55.020(a), as amended  by sec. 18                                                                
     of this Act, is repealed and reenacted to read:                                                                            
          (a)  For a calendar year, a producer subject to                                                                       
     tax under  AS 43.55.011(e), (f), (h), (i),  (p), or (q)                                                                    
     shall pay the tax as follows:                                                                                              
               (1)  an installment payment of the estimated                                                                     
     tax levied  by AS 43.55.011(e), net of  any tax credits                                                                    
     applied as  allowed by  law, is due  for each  month of                                                                    
     the  calendar year  on the  last day  of the  following                                                                    
     month; except  as otherwise provided under  (2) of this                                                                    
     subsection, the  amount of  the installment  payment is                                                                    
     the sum of the following  amounts, less 1/12 of the tax                                                                    
     credits that are  allowed by law to  be applied against                                                                    
     the  tax levied  by  AS 43.55.011(e)  for the  calendar                                                                    
     year,  but the  amount of  the installment  payment may                                                                    
     not be less than zero:                                                                                                     
               (A)  for oil and gas produced from leases or                                                                     
     properties  in   the  state  outside  the   Cook  Inlet                                                                    
     sedimentary  basin but  not subject  to AS 43.55.011(o)                                                                    
     or  (p), other  than  leases or  properties subject  to                                                                    
     AS 43.55.011(f), the greater of                                                                                            
               (i)  zero; or                                                                                                    
               (ii)  the sum of 25 percent and the tax rate                                                                     
     calculated   for   the  month   under   AS 43.55.011(q)                                                                    
     multiplied  by the  remainder  obtained by  subtracting                                                                    
     1/12 of the producer's  adjusted lease expenditures for                                                                    
     the calendar year of  production under AS 43.55.165 and                                                                    
     43.55.170  that  are  deductible   for  the  leases  or                                                                    
     properties under  AS 43.55.160 from the gross  value at                                                                    
     the point  of production  of the  oil and  gas produced                                                                    
     from  the leases  or properties  during  the month  for                                                                    
     which the installment payment is calculated;                                                                               
               (B)  for oil and gas produced from leases or                                                                     
     properties subject to AS 43.55.011(f), the greatest of                                                                     
               (i)  zero;                                                                                                       
               (ii)  zero percent, one percent, two                                                                             
     percent,   three   percent,   or   four   percent,   as                                                                    
     applicable,  of  the  gross   value  at  the  point  of                                                                    
     production of the oil and  gas produced from all leases                                                                    
     or   properties  during   the  month   for  which   the                                                                    
     installment payment is calculated; or                                                                                      
               (iii)  the sum of 25 percent and the tax                                                                         
     rate  calculated for  the  month under  AS 43.55.011(q)                                                                    
     multiplied  by the  remainder  obtained by  subtracting                                                                    
     1/12 of the producer's  adjusted lease expenditures for                                                                    
     the calendar year of  production under AS 43.55.165 and                                                                    
     43.55.170  that  are  deductible for  those  leases  or                                                                    
     properties under  AS 43.55.160 from the gross  value at                                                                    
     the point  of production  of the  oil and  gas produced                                                                    
     from those  leases or properties  during the  month for                                                                    
     which the installment payment is calculated;                                                                               
               (C)    for oil  and  gas  produced from  each                                                                    
     lease  or  property  subject to  AS 43.55.011(j),  (k),                                                                    
     (o), or (p), the greater of                                                                                                
               (i)  zero; or                                                                                                    
               (ii)  the sum of  25 percent and the tax rate                                                                    
     calculated   for   the  month   under   AS 43.55.011(q)                                                                    
     multiplied  by the  remainder  obtained by  subtracting                                                                    
     1/12 of the producer's  adjusted lease expenditures for                                                                    
     the calendar year of  production under AS 43.55.165 and                                                                    
     43.55.170  that are  deductible under  AS 43.55.160 for                                                                    
     oil or  gas, respectively,  produced from the  lease or                                                                    
     property  from   the  gross  value  at   the  point  of                                                                    
     production of  the oil  or gas,  respectively, produced                                                                    
     from the lease  or property during the  month for which                                                                    
     the installment payment is calculated;                                                                                     
               (2)   an  amount calculated  under (1)(C)  of                                                                    
     this subsection  for oil or  gas produced from  a lease                                                                    
     or property                                                                                                                
               (A)  subject to  AS 43.55.011(j), (k), or (o)                                                                    
     may  not exceed  the product  obtained by  carrying out                                                                    
     the calculation  set out  in AS 43.55.011(j)(1)  or (2)                                                                    
     or 43.55.011(o), as  applicable, for gas or  set out in                                                                    
     AS 43.55.011(k)(1) or (2), as  applicable, for oil, but                                                                    
     substituting  in  AS 43.55.011(j)(1)(A)  or  (2)(A)  or                                                                    
     43.55.011(o), as applicable, the  amount of taxable gas                                                                    
     produced  during the  month for  the amount  of taxable                                                                    
     gas produced during the  calendar year and substituting                                                                    
     in AS 43.55.011(k)(1)(A) or  (2)(A), as applicable, the                                                                    
     amount  of taxable  oil produced  during the  month for                                                                    
     the amount of taxable  oil produced during the calendar                                                                    
     year;                                                                                                                      
               (B)    subject  to  AS 43.55.011(p)  may  not                                                                    
     exceed four percent of the  gross value at the point of                                                                    
     production of the oil or gas;                                                                                              
               (3)  an installment  payment of the estimated                                                                    
     tax  levied  by  AS 43.55.011(i)   for  each  lease  or                                                                    
     property is due for each  month of the calendar year on                                                                    
     the last day of the  following month; the amount of the                                                                    
     installment payment is the sum of                                                                                          
               (A)     the  applicable  tax  rate   for  oil                                                                    
     provided  under  AS 43.55.011(i),   multiplied  by  the                                                                    
     gross  value at  the  point of  production  of the  oil                                                                    
     taxable  under AS 43.55.011(i)  and  produced from  the                                                                    
     lease or property during the month; and                                                                                    
               (B)  the applicable tax rate for gas                                                                             
     provided  under  AS 43.55.011(i),   multiplied  by  the                                                                    
     gross  value at  the  point of  production  of the  gas                                                                    
     taxable  under AS 43.55.011(i)  and  produced from  the                                                                    
     lease or property during the month;                                                                                        
               (4)  any amount of tax levied by                                                                                 
     AS 43.55.011(e) or  (i), net of any  credits applied as                                                                    
     allowed by law,  that exceeds the total  of the amounts                                                                    
     due as installment payments of  estimated tax is due on                                                                    
     March 31  of the  year following  the calendar  year of                                                                    
     production."                                                                                                               
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 12, following line 31:                                                                                                
     Insert a new bill section to read:                                                                                         
        "* Sec.  21. AS 43.55.020(d), as amended  by sec. 20                                                                
     of this Act, is repealed and reenacted to read:                                                                            
          (d)  In making settlement with the royalty owner                                                                      
     for  oil and  gas that  is taxable  under AS 43.55.011,                                                                    
     the producer may  deduct the amount of the  tax paid on                                                                    
     taxable  royalty oil  and gas,  or  may deduct  taxable                                                                    
     royalty oil or gas equivalent  in value at the time the                                                                    
     tax becomes due  to the amount of the tax  paid. If the                                                                    
     total deductions  of installment payments  of estimated                                                                    
     tax for a calendar year  exceed the actual tax for that                                                                    
     calendar year,  the producer  shall, before  April 1 of                                                                    
     the following  year, refund the  excess to  the royalty                                                                    
     owner.  Unless otherwise  agreed  between the  producer                                                                    
     and  the royalty  owner,  the amount  of  the tax  paid                                                                    
     under AS 43.55.011(e), (f), and  (q) on taxable royalty                                                                    
     oil and  gas for  a calendar year,  other than  oil and                                                                    
     gas  the  ownership or  right  to  which constitutes  a                                                                    
     landowner's royalty  interest, is considered to  be the                                                                    
     gross value at  the point of production  of the taxable                                                                    
     royalty oil  and gas produced during  the calendar year                                                                    
     multiplied by a figure that is a quotient, in which                                                                        
               (1)  the numerator is the producer's total                                                                       
     tax liability  under AS 43.55.011(e), (f), and  (q) for                                                                    
     the calendar year of production; and                                                                                       
               (2)  the denominator is the total gross                                                                          
     value at  the point  of production of  the oil  and gas                                                                    
     taxable  under AS 43.55.011(e),  (f), and  (q) produced                                                                    
     by the producer  from all leases and  properties in the                                                                    
     state during the calendar year."                                                                                           
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 15, following line 2:                                                                                                 
          Insert a new bill section to read:                                                                                    
        "* Sec.  25. AS 43.55.023(a), as amended  by sec. 24                                                                
     of this Act, is amended to read:                                                                                           
          (a)  A producer or explorer may take a tax credit                                                                     
     for a qualified capital expenditure as follows:                                                                            
               (1)  notwithstanding that a qualified                                                                            
     capital   expenditure  may   be   a  deductible   lease                                                                    
     expenditure for purposes  of calculating the production                                                                    
     tax value of oil  and gas under AS 43.55.160(a), unless                                                                    
     a   credit  for   that  expenditure   is  taken   under                                                                    
     AS 38.05.180(i),    AS 41.09.010,   AS 43.20.043,    or                                                                    
     AS 43.55.025,  a producer  or  explorer  that incurs  a                                                                    
     qualified capital  expenditure may also elect  to apply                                                                    
     a tax  credit against  a tax levied  by AS 43.55.011(e)                                                                    
     in  the  amount  of  20 percent  of  that  expenditure;                                                                    
     however, not  more than half  of the tax credit  may be                                                                
     applied for a single calendar year;                                                                                    
               (2)  a producer or explorer may take a                                                                           
     credit for a qualified  capital expenditure incurred in                                                                    
     connection with  geological or  geophysical exploration                                                                    
     or in connection  with an exploration well  only if the                                                                    
     producer or explorer                                                                                                       
               (A)  agrees, in writing, to the applicable                                                                       
     provisions of AS 43.55.025(f)(2); and                                                                                      
               (B)  submits to the Department of Natural                                                                        
     Resources  all  data  that  would  be  required  to  be                                                                    
     submitted under AS 43.55.025(f)(2) [;                                                                                      
               (3)  A CREDIT FOR A QUALIFIED CAPITAL                                                                            
     EXPENDITURE  INCURRED  TO   EXPLORE  FOR,  DEVELOP,  OR                                                                    
     PRODUCE  OIL  OR  GAS  DEPOSITS  LOCATED  NORTH  OF  68                                                                    
     DEGREES  NORTH  LATITUDE  MAY  BE  TAKEN  ONLY  IF  THE                                                                    
     EXPENDITURE IS INCURRED BEFORE JANUARY 1, 2014]."                                                                          
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 15, following line 15:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec.  27. AS 43.55.023(b), as amended  by sec. 26                                                                
     of this Act, is amended to read:                                                                                           
          (b)  A [FOR LEASE EXPENDITURES INCURRED TO                                                                        
     EXPLORE FOR,  DEVELOP, OR PRODUCE  OIL OR  GAS DEPOSITS                                                                    
     LOCATED  SOUTH   OF  68  DEGREES  NORTH   LATITUDE,  A]                                                                    
     producer or explorer may elect  to take a tax credit in                                                                    
     the amount  of 25  percent of a  carried-forward annual                                                                    
     loss. [FOR  LEASE EXPENDITURES INCURRED  AFTER DECEMBER                                                                  
     31, 2013,  TO EXPLORE FOR,  DEVELOP, OR PRODUCE  OIL OR                                                                    
     GAS  DEPOSITS   LOCATED  NORTH  OF  68   DEGREES  NORTH                                                                    
     LATITUDE, A  PRODUCER OR EXPLORER  MAY ELECT TO  TAKE A                                                                    
     TAX CREDIT  IN THE AMOUNT  OF 35 PERCENT OF  A CARRIED-                                                                    
     FORWARD ANNUAL  LOSS.] A  credit under  this subsection                                                                    
     may   be    applied   against    a   tax    levied   by                                                                    
     AS 43.55.011(e).  For purposes  of  this subsection,  a                                                                    
     carried-forward  annual   loss  is  the  amount   of  a                                                                    
     producer's  or explorer's  adjusted lease  expenditures                                                                    
     under  AS 43.55.165   and  43.55.170  for   a  previous                                                                    
     calendar year  that was  not deductible  in calculating                                                                    
     production  tax values  for  that  calendar year  under                                                                    
     AS 43.55.160."                                                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 16, following line 9:                                                                                                 
          Insert a new bill section to read:                                                                                    
        "* Sec.  29. AS 43.55.023(d), as amended  by sec. 28                                                                
     of this Act, is repealed and reenacted to read:                                                                            
          (d)  A person that is entitled to take a tax                                                                          
     credit under  this section that wishes  to transfer the                                                                    
     unused  credit  to  another person  or  obtain  a  cash                                                                    
     payment under AS 43.55.028 may  apply to the department                                                                    
     for   transferable   tax    credit   certificates.   An                                                                    
     application  under this  subsection must  be in  a form                                                                    
     prescribed   by  the   department   and  must   include                                                                    
     supporting  information  and   documentation  that  the                                                                    
     department  reasonably requires.  The department  shall                                                                    
     grant or  deny an application, or  grant an application                                                                    
     as to a lesser amount than  that claimed and deny it as                                                                    
     to  the  excess, not  later  than  120 days  after  the                                                                    
     latest  of   the  following:   March 31  of   the  year                                                                    
     following  the calendar  year  in  which the  qualified                                                                    
     capital expenditure or  carried-forward annual loss for                                                                    
     which the credit is claimed  was incurred; the date the                                                                    
     statement  required under  AS 43.55.030(a)  or (e)  was                                                                    
     filed  for the  calendar  year in  which the  qualified                                                                    
     capital expenditure or  carried-forward annual loss for                                                                    
     which the credit  is claimed was incurred;  or the date                                                                    
     the  application was  received by  the department.  If,                                                                    
     based  on the  information  then available  to it,  the                                                                    
     department is  reasonably satisfied that  the applicant                                                                    
     is  entitled to  a credit,  the department  shall issue                                                                    
     the    applicant    two   transferable    tax    credit                                                                    
     certificates,  each  for  half  of the  amount  of  the                                                                    
     credit.   The  credit   shown  on   one   of  the   two                                                                    
     certificates  is  available   for  immediate  use.  The                                                                    
     credit shown on the second  of the two certificates may                                                                    
     not  be  applied against  a  tax  for a  calendar  year                                                                    
     earlier than  the calendar year following  the calendar                                                                    
     year  in  which  the  certificate is  issued,  and  the                                                                    
     certificate  must contain  a  conspicuous statement  to                                                                    
     that   effect.   A   certificate  issued   under   this                                                                    
     subsection does not expire."                                                                                               
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 16, following line 25:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec.  31. AS 43.55.023(g), as amended  by sec. 30                                                                
     of this Act, is amended to read:                                                                                           
          (g)  The issuance of a transferable tax credit                                                                        
     certificate under (d) or (p)  of this section or former                                                                
     (m) of  this section or  the purchase of  a certificate                                                                    
     under  AS 43.55.028  does  not limit  the  department's                                                                    
     ability to later audit a  tax credit claim to which the                                                                    
     certificate  relates  or to  adjust  the  claim if  the                                                                    
     department determines,  as a result of  the audit, that                                                                    
     the applicant  was not  entitled to  the amount  of the                                                                    
     credit for  which the certificate  was issued.  The tax                                                                    
     liability  of the  applicant under  AS 43.55.011(e) and                                                                    
     43.55.017  - 43.55.180  is increased  by the  amount of                                                                    
     the  credit that  exceeds that  to which  the applicant                                                                    
     was  entitled,  or   the  applicant's  available  valid                                                                    
     outstanding credits  applicable against the  tax levied                                                                    
     by AS 43.55.011(e)  are reduced by that  amount. If the                                                                    
     applicant's  tax  liability  is  increased  under  this                                                                    
     subsection,   the   increase   bears   interest   under                                                                    
     [AS 43.05.225(a)  BEFORE  JANUARY  1, 2014,  OR  UNDER]                                                                    
     AS 43.05.225(b)(1)  [ON  AND  AFTER JANUARY  1,  2014,]                                                                    
     from the  date the transferable tax  credit certificate                                                                    
     was  issued.  For  purposes   of  this  subsection,  an                                                                    
     applicant that is an explorer  is considered a producer                                                                    
     subject to the tax levied by AS 43.55.011(e)."                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 17, following line 8:                                                                                                 
          Insert new bill sections to read:                                                                                     
        "* Sec.  33. AS 43.55.023(n), as amended  by sec. 32                                                                
     of this Act, is amended to read:                                                                                           
          (n)  For the purposes of (l) and (p) of this                                                                      
     section,  a  well  lease expenditure  incurred  in  the                                                                    
     state south  of 68  degrees North  latitude is  a lease                                                                    
     expenditure that is                                                                                                        
               (1)  directly related to an exploration                                                                          
     well, a  stratigraphic test well, a  producing well, or                                                                    
     an injection  well other than a  disposal well, located                                                                    
     in the  state south  of 68  degrees North  latitude, if                                                                    
     the expenditure is a  qualified capital expenditure and                                                                    
     an intangible drilling  and development cost authorized                                                                    
     under 26  U.S.C. (Internal  Revenue Code),  as amended,                                                                    
     and  26 C.F.R.  1.612-4,  regardless  of the  elections                                                                    
     made  under 26  U.S.C.  263(c); in  this paragraph,  an                                                                    
     expenditure  directly related  to  a  well includes  an                                                                    
     expenditure  for  well  sidetracking,  well  deepening,                                                                    
     well  completion  or  recompletion, or  well  workover,                                                                    
     regardless  of  whether  the  well is  or  has  been  a                                                                    
     producing well; or                                                                                                         
               (2)  an expense for seismic work conducted                                                                       
     within the  boundaries of  a production  or exploration                                                                    
     unit.                                                                                                                      
        * Sec. 34.  AS 43.55.023 is amended by  adding a new                                                                  
     subsection to read:                                                                                                        
          (p)  For a lease expenditure incurred in the                                                                          
     state  south   of  68  degrees  North   latitude  after                                                                    
     December 31,  2018,  that  qualifies  for  tax  credits                                                                    
     under  (a) and  (b) of  this  section, and  for a  well                                                                    
     lease  expenditure incurred  in the  state south  of 68                                                                    
     degrees North latitude that qualifies  for a tax credit                                                                    
     under (l)  of this section, the  department shall issue                                                                    
     transferable  tax  credit  certificates to  the  person                                                                    
     entitled  to the  credit  for the  full  amount of  the                                                                    
     credit.  The transferable  tax  credit certificates  do                                                                    
     not expire."                                                                                                               
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 21, following line 13:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec.  41. AS 43.55.028(e), as amended  by sec. 40                                                                
     of this Act, is amended to read:                                                                                           
          (e)  The department, on the written application                                                                       
     of  a   person  to  whom  a   transferable  tax  credit                                                                    
     certificate  has been  issued under  AS 43.55.023(d) or                                                                
     (p) or  former AS 43.55.023(m) or to  whom a production                                                                
     tax   credit   certificate   has  been   issued   under                                                                    
     AS 43.55.025(f),  may use  available money  in the  oil                                                                    
     and gas  tax credit  fund to purchase,  in whole  or in                                                                    
     part, the certificate if the department finds that                                                                         
               (1)  the calendar year of the purchase is                                                                        
     not earlier than the first  calendar year for which the                                                                    
     credit  shown on  the  certificate  would otherwise  be                                                                    
     allowed to be applied against a tax;                                                                                       
               (2)  the applicant does not have an                                                                              
     outstanding   liability  to   the   state  for   unpaid                                                                    
     delinquent taxes under this title;                                                                                         
               (3)  the applicant's total tax liability                                                                         
     under   AS 43.55.011(e),  after   application  of   all                                                                    
     available tax  credits, for the calendar  year in which                                                                    
     the application is made is zero;                                                                                           
               (4)      the    applicant's   average   daily                                                                    
     production    of   oil    and    gas   taxable    under                                                                    
     AS 43.55.011(e) during the  calendar year preceding the                                                                    
     calendar year in which the  application is made was not                                                                    
     more than 50,000 BTU equivalent barrels; and                                                                               
               (5)  the purchase is consistent with this                                                                        
     section and regulations adopted under this section."                                                                       
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 21, following line 23:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec.  43. AS 43.55.028(g), as amended  by sec. 42                                                                
     of this Act, is amended to read:                                                                                           
          (g)  The department may adopt regulations to                                                                          
     carry  out  the  purposes of  this  section,  including                                                                    
     standards  and procedures  to allocate  available money                                                                    
     among  applications for  purchases  under this  chapter                                                                    
     and claims for refunds  and payments under AS 43.20.046                                                                    
     or 43.20.047 when the total  amount of the applications                                                                    
     for purchase  and claims for  refund exceed  the amount                                                                    
     of  available  money  in   the  fund.  The  regulations                                                                    
     adopted  by the  department  may  not, when  allocating                                                                    
     available  money  in  the   fund  under  this  section,                                                                    
     distinguish  an  application  for  the  purchase  of  a                                                                    
     credit  certificate  issued  under  AS 43.55.023(p)  or                                                                
     former  AS 43.55.023(m), or  a  claim for  a refund  or                                                                
     payment under AS 43.20.046 or 43.20.047."                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 22, following line 5:                                                                                                 
          Insert a new bill section to read:                                                                                    
        "* Sec.  45. AS 43.55.030(e), as amended  by sec. 44                                                                
     of this Act, is amended to read:                                                                                           
          (e)  An explorer or producer that incurs a lease                                                                      
     expenditure  under AS 43.55.165  or receives  a payment                                                                    
     or  credit under  AS 43.55.170 during  a calendar  year                                                                    
     but  does  not produce  oil  or  gas  from a  lease  or                                                                    
     property in  the state during  the calendar  year shall                                                                    
     file with the department,  on March 31 of the following                                                                    
     year, a statement, under oath,  in a form prescribed by                                                                    
     the   department,   giving,  with   other   information                                                                    
     required, the following:                                                                                                   
               (1)      the   [EXPLORER'S   OR]   producer's                                                                    
     qualified   capital   expenditures,   as   defined   in                                                                    
     AS 43.55.023,    other    lease   expenditures    under                                                                    
     AS 43.55.165,  and  adjustments  or other  payments  or                                                                    
     credits under AS 43.55.170; and                                                                                            
               (2)  if the explorer or producer receives a                                                                      
     payment  or  credit  under  AS 43.55.170,  calculations                                                                    
     showing whether the explorer or  producer is liable for                                                                    
     a  tax under  AS 43.55.160(d) or  43.55.170(b) and,  if                                                                    
     so, the amount."                                                                                                           
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 24, following line 10:                                                                                                
          Insert a new bill section to read:                                                                                    
        "* Sec.  47. AS 43.55.160(a), as amended  by sec. 46                                                                
     of this Act, is repealed and reenacted to read:                                                                            
          (a)  Except as provided in (b) of this section,                                                                       
     for the purposes of                                                                                                        
               (1)  AS 43.55.011(e), the annual production                                                                      
     tax  value of  the taxable  oil,  gas, or  oil and  gas                                                                    
     subject to  this paragraph  produced during  a calendar                                                                    
     year is the  gross value at the point  of production of                                                                    
     the   oil,  gas,   or  oil   and   gas  taxable   under                                                                    
     AS 43.55.011(e),    less     the    producer's    lease                                                                    
     expenditures under  AS 43.55.165 for the  calendar year                                                                    
     applicable  to  the  oil,  gas,  or  oil  and  gas,  as                                                                    
     applicable,  produced by  the producer  from leases  or                                                                    
     properties,  as   adjusted  under   AS 43.55.170;  this                                                                    
     paragraph applies to                                                                                                       
               (A)  oil and gas produced from leases or                                                                         
     properties in the  state that include land  north of 68                                                                    
     degrees North latitude, other  than gas produced before                                                                    
     2022 and used in the state;                                                                                                
               (B)  oil and gas produced from leases or                                                                         
     properties  in   the  state  outside  the   Cook  Inlet                                                                    
     sedimentary  basin, no  part of  which is  north of  68                                                                    
     degrees  North  latitude;  this subparagraph  does  not                                                                    
     apply to                                                                                                                   
               (i)   gas  produced before  2022 and  used in                                                                    
     the state; or                                                                                                              
               (ii)        oil    and   gas    subject    to                                                                    
     AS 43.55.011(p);                                                                                                           
               (C)   oil produced  before 2022 from  a lease                                                                    
     or property in the Cook Inlet sedimentary basin;                                                                           
               (D)   gas produced  before 2022 from  a lease                                                                    
     or property in the Cook Inlet sedimentary basin;                                                                           
               (E)   gas produced  before 2022 from  a lease                                                                    
     or  property  in  the  state  outside  the  Cook  Inlet                                                                    
     sedimentary basin and used in the state;                                                                                   
               (F)   oil and gas subject  to AS 43.55.011(p)                                                                    
     produced from leases or properties in the state;                                                                           
               (G)   oil and  gas produced  from a  lease or                                                                    
     property no part of which  is north of 68 degrees North                                                                    
     latitude, other than oil or  gas described in (B), (C),                                                                    
     (D), (E), or (F) of this paragraph;                                                                                        
               (2)  AS 43.55.011(q),  the monthly production                                                                    
     tax value of the taxable                                                                                                   
               (A)   oil  and gas  produced  during a  month                                                                    
     from  leases or  properties in  the state  that include                                                                    
     land north  of 68 degrees  North latitude is  the gross                                                                    
     value at  the point  of production of  the oil  and gas                                                                    
     taxable  under  AS 43.55.011(e)  and  produced  by  the                                                                    
     producer from those leases or  properties, less 1/12 of                                                                    
     the  producer's lease  expenditures under  AS 43.55.165                                                                    
     for the  calendar year  applicable to  the oil  and gas                                                                    
     produced  by   the  producer   from  those   leases  or                                                                    
     properties,  as   adjusted  under   AS 43.55.170;  this                                                                    
     subparagraph  does   not  apply   to  gas   subject  to                                                                    
     AS 43.55.011(o);                                                                                                           
               (B)   oil  and gas  produced  during a  month                                                                    
     from  leases or  properties  in the  state outside  the                                                                    
     Cook  Inlet  sedimentary basin,  no  part  of which  is                                                                    
     north of 68 degrees North  latitude, is the gross value                                                                    
     at the point  of production of the oil  and gas taxable                                                                    
     under  AS 43.55.011(e)  and  produced by  the  producer                                                                    
     from  those  leases or  properties,  less  1/12 of  the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar  year  applicable  to  the  oil  and  gas                                                                    
     produced  by   the  producer   from  those   leases  or                                                                    
     properties,  as   adjusted  under   AS 43.55.170;  this                                                                    
     subparagraph  does   not  apply   to  gas   subject  to                                                                    
     AS 43.55.011(o);                                                                                                           
               (C)  oil produced during a month from a                                                                          
     lease or  property in the Cook  Inlet sedimentary basin                                                                    
     is the  gross value at  the point of production  of the                                                                    
     oil taxable  under AS 43.55.011(e) and produced  by the                                                                    
     producer from that lease or  property, less 1/12 of the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the oil  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (D)  gas produced during a month from a                                                                          
     lease or  property in the Cook  Inlet sedimentary basin                                                                    
     is the  gross value at  the point of production  of the                                                                    
     gas taxable  under AS 43.55.011(e) and produced  by the                                                                    
     producer from that lease or  property, less 1/12 of the                                                                    
     producer's  lease expenditures  under AS 43.55.165  for                                                                    
     the  calendar year  applicable to  the gas  produced by                                                                    
     the producer  from that lease or  property, as adjusted                                                                    
     under AS 43.55.170;                                                                                                        
               (E)  gas produced during a month from a                                                                          
     lease or  property outside  the Cook  Inlet sedimentary                                                                    
     basin and used  in the state is the gross  value at the                                                                    
     point  of   production  of   that  gas   taxable  under                                                                    
     AS 43.55.011(e) and produced by  the producer from that                                                                    
     lease or  property, less 1/12  of the  producer's lease                                                                    
     expenditures under  AS 43.55.165 for the  calendar year                                                                    
     applicable to  that gas produced  by the  producer from                                                                    
     that   lease    or   property,   as    adjusted   under                                                                    
     AS 43.55.170."                                                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 25, following line 20:                                                                                                
     Insert a new subsection to read:                                                                                           
          "(h) Notwithstanding any contrary provision of                                                                        
     AS 43.55.150,  for purposes  of  calculating a  monthly                                                                    
     production tax value under (a)(2)  of this section, the                                                                    
     gross value at  the point of production of  the oil and                                                                    
     gas  is calculated  under  regulations  adopted by  the                                                                    
     department  that  provide   for  using  an  appropriate                                                                    
     monthly    share   of    the   producer's    costs   of                                                                    
     transportation for the calendar year."                                                                                     
                                                                                                                                
     Page 29, following line 2:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "*    Sec.   55.    AS 43.55.020(l),   43.55.024(i),                                                                
     43.55.024(j),   43.55.160(f),   and  43.55.160(g)   are                                                                    
     repealed."                                                                                                                 
                                                                                                                                
     Page 29, line 5:                                                                                                           
          Delete    "Section   13    of    this   Act    and                                                                    
     AS 43.55.160(a)(1)(E), as amended by sec. 31"                                                                              
          Insert     "Section     15    of     this     Act,                                                                    
     AS 43.55.160(a)(1)(E), as  amended by  sec. 46  of this                                                                    
     Act,  and AS 43.55.160(f)  and (g)  as enacted  by sec.                                                                    
     48"                                                                                                                        
                                                                                                                                
     Page 29, line 7:                                                                                                           
          Delete "Sections 18 and 20 - 23"                                                                                      
          Insert "Sections 24, 28, 30, 32, and 35"                                                                              
          Delete "sec. 18"                                                                                                      
          Insert "sec. 24"                                                                                                      
                                                                                                                                
     Page 29, line 9:                                                                                                           
          Delete "Section 19"                                                                                                   
          Insert "Section 26"                                                                                                   
                                                                                                                                
     Page 29, following line 10:                                                                                                
          Insert a new subsection to read:                                                                                      
          "(d)  AS 43.55.160(h), enacted by sec. 48 of this                                                                     
     Act,  applies  to the  transportation  of  oil and  gas                                                                    
     produced on and after the  effective date of sec. 13 of                                                                    
     this Act."                                                                                                                 
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 52"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "Sections 13, 20 - 23, 28, and 37"                                                                             
          Insert "Sections 15, 28, 30, 32, and 53"                                                                              
                                                                                                                                
     Page 29, following line 26:                                                                                                
     Insert new bill sections to read:                                                                                          
        "*  Sec. 60.  The  uncodified law  of  the State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
          CONDITIONAL EFFECT. Sections 3, 13, 16, 17, 19,                                                                       
     21, 25, 27, 29,  31, 33, 34, 41, 43, 45,  47, and 55 of                                                                    
     this Act,  and AS 43.55.160(h) in  sec. 48 of  this Act                                                                    
     take effect  only if the  volume of oil  production for                                                                    
     the calendar  year 2017 does  not exceed the  volume of                                                                    
     oil produced  for the 2012  calendar year by  more than                                                                    
     10  percent.  The  commissioner  of  natural  resources                                                                    
     shall notify  the lieutenant  governor and  the revisor                                                                    
     of  statutes  before January 1,  2018,  or  as soon  as                                                                    
     practicable   thereafter,   if   the  volume   of   oil                                                                    
     production for  the calendar year 2017  is greater than                                                                    
     the  volume of  oil produced  during the  2012 calendar                                                                    
     year.                                                                                                                      
        * Sec. 61.  If secs. 3, 13, 16, 17,  19, 21, 25, 27,                                                                  
     29, 31,  33, 34, 41,  43, 45, 47,  and 55 of  this Act,                                                                    
     and AS 43.55.160(h) in sec. 48  of this Act take effect                                                                    
     under sec. 59 of this  Act, they take effect January 1,                                                                    
     2018."                                                                                                                     
                                                                                                                                
                                                                                                                                
     Amendment 16, labeled 28-GS1647\K.16, Bullock, 4/3/13:                                                                 
                                                                                                                                
     Page 1, line 4:                                                                                                            
          Delete "rate"                                                                                                       
          Insert "rates"                                                                                                      
                                                                                                                                
     Page 6, following line 9:                                                                                                  
          Insert a new bill section to read:                                                                                    
        "*   Sec.  11.   AS 43.55.011(f)  is   repealed  and                                                                
     reenacted to read:                                                                                                         
          (f)  Except for oil and gas subject to (i) of                                                                         
     this section  and gas subject  to (o) of  this section,                                                                    
     the provisions of this subsection  apply to oil and gas                                                                    
     produced after  December 31, 2013,  from each  lease or                                                                    
     property within  a unit  or nonunitized  reservoir that                                                                    
     has cumulatively produced  1,000,000,000 BTU equivalent                                                                    
     barrels of oil  or gas by the close of  the most recent                                                                    
     calendar year and from which  the average daily oil and                                                                    
     gas production  from the unit or  nonunitized reservoir                                                                    
     during the  most recent calendar year  exceeded 100,000                                                                    
     BTU  equivalent barrels.  Notwithstanding any  contrary                                                                    
     provision of law, a producer  may not apply tax credits                                                                    
     to reduce  its total  tax liability  under (e)  of this                                                                    
     section for  oil and  gas produced  from all  leases or                                                                    
     properties  within the  unit  or nonunitized  reservoir                                                                    
     below 10 percent of the  total gross value at the point                                                                    
     of production  of that  oil and gas.  If the  amount of                                                                    
     tax calculated by  multiplying the tax rates  in (e) of                                                                    
     this section by  the total production tax  value of the                                                                    
     oil and gas taxable under  (e) of this section produced                                                                    
     from all of the  producer's leases or properties within                                                                    
     the  unit  or nonunitized  reservoir  is  less than  10                                                                    
     percent  of  the total  gross  value  at the  point  of                                                                    
     production of that  oil and gas, the tax  levied by (e)                                                                    
     of this  section for that  oil and  gas is equal  to 10                                                                    
        percent of the total gross value at the point of                                                                        
     production of that oil and gas."                                                                                           
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 10, lines 27 - 31:                                                                                                    
          Delete all material and insert:                                                                                       
               "(ii)  10 percent of the gross value at the                                                                  
      point of production of the oil and gas produced from                                                                  
      the leases or properties during the month for which                                                                   
     the installment payment is calculated; or"                                                                           
                                                                                                                                
     Page 11, line 8:                                                                                                           
          Delete "a 20 percent"                                                                                             
          Insert "an"                                                                                                       
                                                                                                                                
     Page 29, line 5:                                                                                                           
          Delete "Section 13"                                                                                                   
          Insert "Section 14"                                                                                                   
                                                                                                                                
     Page 29, line 6:                                                                                                           
          Delete "sec. 31"                                                                                                      
          Insert "sec. 32"                                                                                                      
                                                                                                                                
     Page 29, line 7:                                                                                                           
          Delete "Sections 18 and 20 - 23"                                                                                      
          Insert "Sections 19 and 21 - 24"                                                                                      
          Delete "sec. 18"                                                                                                      
          Insert "sec. 19"                                                                                                      
                                                                                                                                
     Page 29, line 9:                                                                                                           
          Delete "Section 19"                                                                                                   
          Insert "Section 20"                                                                                                   
                                                                                                                                
     Page 29, line 20:                                                                                                          
          Delete "sec. 36"                                                                                                      
          Insert "sec. 37"                                                                                                      
                                                                                                                                
     Page 29, line 24:                                                                                                          
          Delete "Sections 13, 20 - 23, 28, and 37"                                                                             
          Insert "Sections 14, 21 - 24, 29, and 38"                                                                             
                                                                                                                                
     Page 29, line 25:                                                                                                          
          Delete "sec. 18"                                                                                                      
          Insert "sec. 19"                                                                                                      
          Delete "sec. 31"                                                                                                      
          Insert "sec. 32"                                                                                                      
                                                                                                                                
                                                                                                                                
 Amendment 18, labeled 28-GS1647\K.29, Nauman/Bullock, 4/2/13:                                                              
                                                                                                                                
     Page 1, line 11, following "properties;":                                                                                
          Insert    "allowing    the    Alaska    Industrial                                                                  
     Development and Export Authority  to issue bonds for an                                                                  
     oil  processing facility;  creating a  fund to  finance                                                                  
     construction   or  improvement   of  an   oil  or   gas                                                                  
     processing facility"                                                                                                     
                                                                                                                                
     Page 28, following line 29:                                                                                                
     Insert new bill sections to read:                                                                                          
        "* Sec. 37. AS 44.88.140(a) is amended to read:                                                                     
          (a)  Except as provided in AS 29.45.030(a)(1) and                                                                 
     AS 44.88.168,  the real  and personal  property of  the                                                                
     authority  and its  assets,  income,  and receipts  are                                                                    
     declared to be the  property of a political subdivision                                                                    
     of  the  state  and,   together  with  any  project  or                                                                    
     development  project  financed   under  AS 44.88.155  -                                                                    
     44.88.159  or 44.88.172  - 44.88.177,  and a  leasehold                                                                    
     interest created  in a  project or  development project                                                                    
     financed under AS 44.88.155 -  44.88.159 or 44.88.172 -                                                                    
     44.88.177,   devoted  to   an   essential  public   and                                                                    
     governmental  function and  purpose, and  the property,                                                                    
     assets,   income,    receipts,   project,   development                                                                    
     project, and  leasehold interests shall be  exempt from                                                                    
     all taxes  and special  assessments of  the state  or a                                                                    
     political subdivision of  the state, including, without                                                                    
     limitation,   all  boroughs,   cities,  municipalities,                                                                    
     school districts,  public utility districts,  and other                                                                    
     taxing units.  All bonds of the  authority are declared                                                                    
     to be  issued by a  political subdivision of  the state                                                                    
     and for  an essential  public and  governmental purpose                                                                    
     and to be a public  instrumentality, and the bonds, and                                                                    
     the  interest on  them, the  income from  them and  the                                                                    
     transfer  of the  bonds, and  all  assets, income,  and                                                                    
     receipts pledged to  pay or secure the  payments of the                                                                    
     bonds,  or interest  on  them, shall  at  all times  be                                                                    
     exempt from taxation  by or under the  authority of the                                                                    
     state,  except for  inheritance  and  estate taxes  and                                                                    
     taxes  on transfers  by or  in contemplation  of death.                                                                    
     Nothing in this section  affects or limits an exemption                                                                    
     from license  fees, property taxes, or  excise, income,                                                                    
     or any other  taxes, provided under any  other law, nor                                                                    
     does  it create  a tax  exemption with  respect to  the                                                                    
     interest of  any business  enterprise or  other person,                                                                    
     other  than the  authority,  in  any property,  assets,                                                                    
     income,  receipts,  project,  development  project,  or                                                                    
     lease whether  or not financed  under this  chapter. By                                                                    
     January 10 of each year, the  authority shall submit to                                                                    
     the governor a report  describing the nature and extent                                                                    
     of the  tax exemption of the  property, assets, income,                                                                    
     receipts, project,  development project,  and leasehold                                                                    
     interests  of the  authority  under  this section.  The                                                                    
     authority shall notify the  legislature that the report                                                                    
     is available.                                                                                                              
        *  Sec. 38.  AS 44.88  is amended  by  adding a  new                                                                  
     section to read:                                                                                                           
          Sec. 44.88.168. Oil and gas infrastructure fund.                                                                    
     (a) The oil and  gas infrastructure fund is established                                                                    
     in the  authority. The oil and  gas infrastructure fund                                                                    
     consists  of money  appropriated to  the authority  for                                                                    
     deposit in  the fund, and  money deposited in  the fund                                                                    
     by the  authority. The  fund is not  an account  in the                                                                    
     revolving  loan fund  established in  AS 44.88.060, and                                                                    
     the  authority shall  account for  the fund  separately                                                                    
     from the revolving fund. Money  in the fund may be used                                                                    
     to finance  the construction and improvement  of an oil                                                                    
     or gas processing facility on  the North Slope and flow                                                                    
     lines   and  other   surface  infrastructure   for  the                                                                    
     facility.                                                                                                                  
          (b)  Notwithstanding AS 44.88.140, the state or a                                                                     
     political subdivision  of the state  may levy a  tax or                                                                    
     special  assessment   on  an  oil  or   gas  processing                                                                    
     facility, flow lines,  and other surface infrastructure                                                                    
     for  the   facility  financed  by   the  oil   and  gas                                                                    
     infrastructure fund.                                                                                                       
          (c)  In this section, "North Slope" means that                                                                        
     area  of the  state  lying north  of  68 degrees  North                                                                    
     latitude."                                                                                                                 
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 29, following line 21:                                                                                                
     Insert a new bill section to read:                                                                                         
        "*  Sec. 44.  The  uncodified law  of  the State  of                                                                
     Alaska is amended by adding a new section to read:                                                                         
          LEGISLATIVE APPROVAL; NORTH SLOPE OIL OR GAS                                                                          
     PROCESSING   FACILITY.   (a)  The   Alaska   Industrial                                                                    
     Development  and Export  Authority may  issue bonds  to                                                                    
     finance the  construction and improvement of  an oil or                                                                    
     gas processing  facility on the Alaska  North Slope and                                                                    
     flow  lines and  other surface  infrastructure for  the                                                                    
     facility.  The  processing  facility, flow  lines,  and                                                                    
     other surface infrastructure for  the facility shall be                                                                    
     used  to secure  bonds issued  under this  section. The                                                                    
     principal  amount   of  the   bonds  provided   by  the                                                                    
     authority  for  the  facility, flow  lines,  and  other                                                                    
     surface infrastructure may  not exceed $200,000,000 and                                                                    
     may  include the  costs of  funding reserves  and other                                                                    
     costs  of   issuing  the   bonds  that   the  authority                                                                    
     considers  reasonable and  appropriate. Notwithstanding                                                                    
     AS 44.88.140, an  oil or gas processing  facility, flow                                                                    
     lines,  and   other  surface  infrastructure   for  the                                                                    
     facility  constructed or  financed by  the oil  and gas                                                                    
     infrastructure fund  are subject  to taxes  and special                                                                    
     assessments of the state or  a political subdivision of                                                                    
     the state.                                                                                                                 
          (b)  This section constitutes the legislative                                                                         
     approval required by AS 44.88.095(g) and 44.88.690.                                                                        
          (c)  The prohibition on the issuance of bonds in                                                                      
     an  amount  exceeding $400,000,000  under  AS 44.88.095                                                                    
     does not apply to bonds  issued under this section, and                                                                    
     the  principal  amount  of   bonds  issued  under  this                                                                    
     section may  not be  considered in  determining whether                                                                    
     the limit in AS 44.88.095 has been reached."                                                                               
                                                                                                                                
     Renumber the following bill section accordingly.