Legislature(1997 - 1998)

05/08/1997 08:10 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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       CS FOR HOUSE BILL NO. 63(2d RLS)                                        
                                                                               
       "An Act amending  the definition of `motor  fuel' under                 
                                                                               
                                                                               
  the  state's motor fuel  tax to add,  as a  part of the  tax                 
  exemption      set out  in that  definition, exemption  from                 
  the tax for fuel    sold for use  in jet propulsion aircraft                 
  operating in flights     that    continue    from    foreign                 
  countries, subject to termination  of the exemption for that                 
  fuel if a refiner operating a      refinery  at   which  the                 
  fuel was produced fails to comply with  terms of a voluntary                 
  agreement entered into by the refiner to     use      Alaska                 
  residents, contractors, and suppliers to provide  goods  and                 
  services when the refinery's capacity is expanded,     t   o                 
  add exemption  from the tax  for certain number  6 `residual                 
       fuel oil,' also known as bunker fuel, and to delete the                 
       exemption from the  tax for  fuel that is  at least  10                 
  percent   alcohol by volume; and repealing ch. 42, SLA 1994,                 
  the Act   providing for  the imposition  of a different  tax                 
  levy on   residual   fuel  oil  used   in  and   on  certain                 
  watercraft until June    30,  1998;  and  providing  for  an                 
  effective date."                                                             
                                                                               
  Paul   Bowers,   Director,   Statewide  Aviation,   Leasing,                 
  Department  of  Transportation  and  Public  Facilities  was                 
  invited  to   join  the   committee.     He  explained   the                 
  department's standing on  the bill.  Senator  Adams referred                 
  to SB 256 of last year and said concerning  the aviation tax                 
  he was worried about  how this might affect  rural aviation.                 
  Mr.  Bowers responded  and  noted that  PFC's  would not  be                 
  affected.  All taxes collected at  the airport would be used                 
  for capital projects at the specific airport.                                
                                                                               
  Senator Donley asked  if the Governor supported  the alcohol                 
  exemption on page  4, line 29.   Mr. Bowers said he  did not                 
  know this status.  He did feel, however, everyone should pay                 
  the  same amount  of tax.   Senator  Donley said  it was  an                 
  inequity  removing  the tax  on aviation  fuel.   Mr. Bowers                 
  indicated  that last  year  they dealt  with the  problem of                 
  inequity,  but  there was  no  way  to stop  fuel  coming in                 
  through the foreign trade zone.                                              
                                                                               
  Bob  Bartholomew, Deputy  Director,  Division of  Income and                 
  Excise Audit, Department of Revenue, was invited to join the                 
  committee.   He explained the  legal opinion and  said under                 
  this  opinion the State would lose the challenge on tax.  It                 
  was "preempted by Federal law".   Senator Torgerson asked if                 
  incoming fuel to the foreign trade zone could  be restricted                 
  and Mr. Bartholomew said it had not been asked.  Mr. Bowers,                 
  however, informed that the Department of Transportation  had                 
  asked if restrictions could be   placed on the incoming fuel                 
  but they go nowhere on that issue.  Co-chair Sharp said that                 
  the ethanol exemption had resulted in  a loss the last three                 
  years of over $17 million.   Senator Pearce asked if we were                 
  being  sold fuel even  if we did  not need it  and  Co-chair                 
  Sharp indicated "yes".   Senator Pearce said we  should only                 
  purchase ethanol gas as needed.                                              
                                                                               
                                                                               
  Jeff Cook, MAPCO,  was invited  to join the  committee.   He                 
  explained MAPCO's understanding of the  bill.  He said there                 
  was an eight cent  state credit.   The cost for ethanol  was                 
  $1.35.   They could  inject MTB  at the truck.   The  credit                 
  would  equal  the cost  of the  project  to blend.   Senator                 
  Donley inquired  the mandatory period  and Mr. Cook  said it                 
  was November through March.                                                  
                                                                               
  Mark Necessary, TESORO,  was invited to join  the committee.                 
  He said their  standing was different  than MAPCO.  They  do                 
  have  the  flexibility  to manufacture  octane  and  they do                 
  export some gasoline.   Ultimately, the market  will dictate                 
  what will happen.   Senator Donley requested  TESORO provide                 
  certain information.   He  noted the  price would  go up  in                 
  Anchorage.                                                                   
                                                                               
  Mr. Cook  said that ethanol  also had  a fluctuating  price.                 
  The  Anchorage   market,  specifically,  had   a  tremendous                 
  fluctuation and the prices may vary from station to station.                 
  Senator Phillips said he noted higher MAPCO prices in poorer                 
  sections.                                                                    
                                                                               
  Senator  Pearce  moved  CSHB  63(2d  RLS)   with  individual                 
  recommendations  and  accompanying  fiscal notes.    Senator                 
  Donley objected.                                                             
                                                                               
  AMEND #1 moved by  Senator Donley failed by a vote of 3 - 3                  
                (Torgerson, Pearce, Sharp).                                    
  AMEND #2 moved by Senator Donley failed by a vote of 3 - 3                   
           (Torgerson, Pearce, Sharp).                                         
  AMEND #3 moved by Senator Donley failed by a vote of 2 - 4                   
           (Torgerson, Parnell, Pearce, Sharp).                                
                                                                               
  There  followed  miscellaneous discussion  by  the committee                 
  members.  Senator Phillips  said he was not interested  in a                 
  bill providing  a special tax break.  He  said it was one of                 
  the worst pieces of legislation he had seen especially since                 
  everyone was opposed to it.  Senator Donley said deletion of                 
  the tax exemption was unfair to Anchorage.  He felt it was a                 
  very ill advised bill.  It would be extremely devastating to                 
  trucking  and  transportation  in Anchorage.    The  City of                 
  Anchorage provided its' own services and  it was not fair to                 
  say they live  with this 20%  increase.  The bill  contained                 
  many inequities.                                                             
                                                                               
  Co-chair Sharp asked the roll be called and by a vote of 5 -                 
   2 (Donley,  Phillips) HB 63(2d  RLS) was reported  out with                 
  individual recommendations and accompanying fiscal notes.                    
                                                                               
  Senator  Pearce  introduced  SCR  16  and read  the  sponsor                 
  statement.  There were four  new bargaining agreements.  She                 
  explained her amendment #1  and noted the change on  page 2,                 
  line 1.   Senator  Pearce moved  amendment #1  and   without                 
  objection  it  was  adopted.   Senator  Parnell  moved CSSCR
  16(FIN)  and  by a  vote of  5  - 2  (Donley, Adams)  it was                 
  reported   out   with    individual   recommendations    and                 
  accompanying  zero  fiscal  note  from  the  Senate  Finance                 
  Committee.                                                                   
                                                                               
  Co-chair Sharp called SB 159.                                                
                                                                               

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