Legislature(2013 - 2014)BUTROVICH 205
02/27/2013 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB21 | |
| SJR3 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 21 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SJR 3 | TELECONFERENCED | |
SB 21-OIL AND GAS PRODUCTION TAX
3:32:03 PM
CHAIR GIESSEL announced that CSSB 21(RES), labeled 28-GS1647\N,
was before the committee. She said a legislative letter of
intent and a Senate Resources memorandum to the Finance
Committee would be transmitted with the bill. The memorandum had
five specific subjects that were raised in this committee, but
were within the Finance Committee's jurisdiction and merited
further consideration. She said that Legislative Legal Services
and the Department of Law (DOL) had also suggested a few
refinements.
3:33:20 PM
SENATOR DYSON moved Amendment 5.
28-GS1647\N.7
Bullock
AMENDMENT 5
OFFERED IN THE SENATE
TO: CSSB 21(RES), Draft Version "N"
Page 2, line 21, following "section.":
Insert "A taxpayer receiving the transfer of a
certificate under this subsection may not apply more
than $10,000,000 in tax credits authorized by this
section in a single tax year and may not use a tax
credit authorized by this section to reduce a tax
liability under this chapter below zero."
Page 3, line 12:
Delete the first occurrence of "and"
Insert "or"
Page 3, line 13:
Delete ", regardless of whether the oil and gas
is located in the state"
Page 3, line 16:
Delete the first occurrence of "and"
Insert "or"
Page 3, lines 16 - 17:
Delete ", regardless of whether the oil and gas
is located in the state"
Page 3, line 21:
Delete "and"
Insert "or"
Page 3, line 22:
Delete "regardless of whether the oil and gas is
located in the state,"
Page 8, line 22:
Delete "20"
Insert "30"
Page 15, line 12:
Delete "in"
Insert "for"
Page 15, line 23:
Delete "43.55.024(c)"
Insert "43.55.024"
Page 17, line 2:
Delete "again"
Insert "against"
Page 18, line 15:
Delete "taxable oil"
Insert "oil taxable under AS 43.55.011(e)"
Page 22, line 24:
Delete the first occurrence of "an"
Insert "any"
Page 27, line 4:
Delete "an area"
Insert "acreage"
Page 27, line 7:
Delete "an area"
Insert "acreage"
Page 27, line 8:
Delete "production tax value"
Insert "gross value at the point of production"
Page 30, line 8:
Delete "Sections 9, 10, 12, 15, and 24"
Insert "Sections 9, 10, 12, 15, 20, 21, and 24"
Page 30, line 29:
Delete "Sections 1, 3, 6, 7, 9, 10, 12, 15, 17,
18, 24, and 26 - 28"
Insert "Sections 1, 3, 6, 7, 9, 10, 12, 15, 17,
18, 20, 21, 24, and 26 - 28"
SENATOR FRENCH objected.
3:34:37 PM
MARGARET DOWLING, staff to Senator Giessel, Alaska State
Legislature, Juneau, Alaska, explained that this amendment
cleans up minor word changes and is nothing substantive.
She explained language inserted on page 2, line 21, clarified
that if the Alaska manufacturing credit is transferred, the
transferee takes the credit subject to the same limitation that
would be imposed on the person who earned the credit. So, only
$10 million in any one year can be applied against a tax
liability.
3:36:33 PM
Next on page 3, line 12, "and" was deleted and "or" was inserted
to clarify that the costs associated with those manufacturing of
goods that qualify for credits can be used for goods either in
the exploration, development "or" production of oil; "and"
generally means in addition to.
In section 2, on page 3, line 13, language that was not needed
was removed, because it is assumed that it doesn't matter where
the products are used at the end point. Language on page 3, line
16, deleted "and" and inserted "or" for the same reason above on
line 12.
3:38:06 PM
Language on page 3, lines 16-17, deleted "regardless of whether
the oil and gas is located in the state". That is basically the
same change as on line 13.
Language on page 3, line 21, deleted "and" and inserted "or"
after "development" - the same change as on lines 12 and 16.
Language on page 3, line 22, deleted ", regardless of whether
the oil and gas is located in the state" for the same reason she
explained on lines 13 and 17.
3:38:58 PM
Section 6 on page 8, line 22, replaced the number "20" with
"30", a conforming change for AS 43.55.020, payment of tax, to
account for increasing the GRE to 30 percent.
3:39:33 PM
Section 15, on page 15, line 12, deletes "in" and inserts "for"
to clarify that the tax credit that is increased 15 percent a
year stops increasing on December 31 of the calendar year
immediately preceding the calendar year "for" which the credit
is applied against the tax liability.
On page 15, line 23, "43.55.024(c)" was replaced with
"43.55.024". The reference to subsection (c) was not necessary.
All the credits under .024 - not just (c) - must be considered
first when they determine the total tax liability to see if it
reaches zero or less before the loss carry forward credit can be
applied.
On page 17, line 2 "again" was replaced with "against", a simple
word correction.
On page 18, line 15 "taxable oil" was replaced with "oil taxable
under AS 43.55.011(e)". The Department of Law wanted to make
sure there was no confusion that the $5/bbl credit is applied
against taxable oil and not royalty oil.
3:41:48 PM
In section 24, on page 22, line 24, "an" was replaced with
"any". This clarified that there may or may not be an increase
in the amount of credit under .023(r), which is the provision
that allows the 15 percent increase in value of an unused loss
carry forward credit. It just says if there is any increase,
it's not assuming there is an increase, and it has to be
identified in the statement a producer would have to file with
the department to get the credit.
The Department of Law suggested in section 28 on page 27, line
4, to delete "in area" and insert "acreage" to clarify that
"area" is presently defined in the DOR regulations as meaning a
geographic region or geologic province including the Cook Inlet
or the North Slope of the state. So, this change doesn't affect
the intent of section 24, but it removes any ambiguity as to
whether "area" for this provision means the same thing as "area"
as defined in regulations. Language on page 27, line 7, makes
the same change as the previous one.
Language on page 27, line 8, deleted "production tax value" and
inserted "gross value at the point of production" to also
enhance clarity that the GRE is taken off the gross production
tax value to achieve the production tax value, which cannot be
reduced below zero.
Section 33 on page 30, line 8, deleted "sections 9, 10,11, 12
and 24" and inserted "sections 9, 10, 12, 15, 20, 21 and 24"
and this is a conforming change that accounts for these
amendments. Page 30, line 29, does the same replacing of section
numbers to account for the changes made with the amendments.
3:45:24 PM
At ease 3:45:24 to 3:45:49.
3:45:49 PM
SENATOR FRENCH removed his objection to Amendment 5.
CHAIR GIESSEL, finding no further objection, announced that
Amendment 5 was adopted.
SENATOR DYSON moved Amendment 6.
28-GS1647\N.9
Nauman/Bullock
AMENDMENT 6
OFFERED IN THE SENATE
TO: CSSB 21(RES), Draft Version "N"
Page 11, lines 20 - 22:
Delete "Except as provided in (p) - (u) of this
section for a tax credit based on 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 [A]"
Insert "A"
Page 11, line 23:
Delete "35 [25]"
Insert "25"
Page 11, line 24, following "loss":
Insert "based on lease expenditures incurred to
explore for, develop, or produce oil or gas deposits
located south of 68 degrees North latitude. A
producer or explorer subject to the requirements in
(p) - (u) of this section may elect to take a tax
credit in the amount of 35 percent of a carried-
forward annual loss based on lease expenditures
incurred after December 31, 2013, to explore for,
develop, or produce oil or gas deposits located north
of 68 degrees North latitude"
3:46:39 PM
SENATOR FRENCH objected.
MS. DOWLING explained that the first change was in section 9 on
page 11, lines 20-22, and was a reworking of language to be
better understood by taxpayers that the carry forward loss
credit remains 25 percent for all areas except the North Slope
(the intent of section 9). For North Slope producers, the carry
forward loss credits are still subjected to the subsections of
(p) through (u) and it's in the amount of 35 percent, but only
for expenses that are incurred after December 31, 2013. This is
going to match the 35 percent base tax rate for the North Slope
that will go into place after December 31, 2013.
SENATOR FRENCH asked if this is meant to ensure that it's a 25
percent net operating loss carry forward credit for south of the
Brooks Range and 35 percent north of the Brooks Range on the
North Slope.
MS. DOWLING said she thought it was that simple, but wanted Mr.
Pawlowski's opinion.
MICHAEL PAWLOWSKI, Advisor, Petroleum and Fiscal Systems,
Department of Revenue (DOR), Anchorage, Alaska, said it is that
simple. The confusion is a little bit around the dates. The
expenditures during 2013 will be at 25 percent, because the base
rate during 2013 is 25 percent. On the effective date of the
act, January 1, 2014, the tax rate on the North Slope is 35
percent and after December 31, 2013 the North Slope loss carry
forward credit will go to 35 percent as well.
SENATOR FRENCH removed his objection.
CHAIR GIESSEL, hearing no further objection, announced that
Amendment 6 was adopted.
3:50:23 PM
SENATOR DYSON moved Amendment 7.
28-GS1647\N.10
Nauman/Bullock
AMENDMENT 7
OFFERED IN THE SENATE
TO: CSSB 21(RES), Draft Version "N"
Page 11, following line 18:
Insert a new bill section to read:
"* Sec. 9. AS 43.55.023(a), as amended by sec. 8
of this Act, is amended to read:
(a) Except as provided in AS 43.55.025(q), 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;
(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 11, line 20, following "in":
Insert "AS 43.55.025(q) and"
Page 12, line 30:
Delete "sec. 11"
Insert "sec. 12"
Page 20, following line 28:
Insert a new bill section to read:
"* Sec. 22. AS 43.55.025 is amended by adding a new
subsection to read:
(q) An exploration expenditure incurred after
December 31, 2013, to explore for oil or gas located
north of 68 degrees North latitude that is the basis
for a credit under (a)(1), (2), or (3) of this section
may not also be the basis for a credit claimed under
AS 43.55.023 or this section."
Renumber the following bill sections accordingly.
Page 30, line 2:
Delete "26 - 28"
Insert "28 - 30"
Page 30, line 4:
Delete "25"
Insert "27"
Page 30, line 6:
Delete "11, 13, and 14"
Insert "12, 14, and 15"
Page 30, line 8:
SENATOR FRENCH objected.
MS. DOWLING explained that Amendment 7 was the "anti-stacking
provision." She said that the new section 9 was designed to put
producers on notice that they should take a look at subsection
(q) by inserting "except as provided in AS 43.55.025(q)". The
restriction in (q) specifies that a North Slope producer cannot
use the same expenditures for both a loss carry forward credit
and for an exploration credit. They can be used for one or the
other but not both. This is consistent with Alaska policy that
disfavors allowing multiple credits or deductions using the same
expense. Their experts have said that not putting in such a
section would risk having credits taken under .023(a) in the
amount of 30 percent and then the loss carry forward in the
amount of 35 percent for a total of 65 percent. The amendment
had further conforming changes to account for the desired
effective date of these new provisions and an instruction to
renumber the remaining sections of the bill.
3:52:48 PM
SENATOR FRENCH asked for a walk through of how the credits could
be stacked in the absence of this amendment and in its presence.
3:53:17 PM
MR. PAWLOWSKI explained that there are separate credits. The
.023(b) credit is the loss carry forward and the .025 credit is
the exploration credit. A company makes an expenditure and it
qualifies for the credit based on that expenditure. So, you
could make an expenditure for an exploration well under .025 and
use that same expenditure to claim a credit under .023(b). So,
functionally you would end up with a 65 percent credit.
SENATOR FRENCH asked if the exploration credit would also be
accumulating at 15 percent as if it were a net operating loss.
MR. PAWLOWSKI answered no. The intent of this amendment is to
make sure you cannot claim expenditures twice. The EIC that was
expanded in the CS is one that remains monetizable by the state
for exploration expenditures only. The .025 credit has
limitations related to having to come into the Department of
Natural Resources and prequalify the expenditures as an
exploration target and then share the information from that
exploration with it. The difference between that exploration
credit and the blanket .023 (b) credit is that there is no
similar qualification other than the expenditure was made. This
puts the taxpayer in a position of deciding on one or the other.
SENATOR FRENCH asked the relative value of each.
MR. PAWLOWSKI answered the exploration incentive credit (EIC) is
30 percent if within 25 miles of a unit boundary and 40 percent
if farther than 25 miles from a unit boundary. Brooks Range
Petroleum testified that most of the area within the central
North Slope is within that 30 percent range. So, it's 30 or 40
percent depending on distance from infrastructure; then the loss
carry forward credit in the CS is 35 percent of the loss,
assuming the taxpayer had no revenues.
3:56:45 PM
SENATOR FRENCH asked if he had any idea which credit the
producers prefer.
MR. PAWLOWSKI said no; he thought it would depend on each
individual company. The committee heard from Brooks Range in
particular that the revision to the EIC was material to their
company.
3:57:35 PM
SUSAN POLLARD, Assistant Attorney General, Department of Law
(DOL), Juneau, Alaska, added that the previous explanation for
this amendment was correct except for the reference to section 9
where (p) through (u) refers to the section .023 statute, which
provides the new rules for the carry forward loss credit. The
amendment they are looking at now adds an exception to section
.025, which is the exploration incentive credit that Mr.
Pawlowski was just referring to.
SENATOR FRENCH removed his objection.
CHAIR GIESSEL, finding no further objection, announced that
Amendment 7 was adopted.
3:58:34 PM
SENATOR DYSON moved to report CSSB 21(RES), version \N as
amended, from committee [with individual recommendations] and
attached fiscal notes.
SENATOR FRENCH objected saying he thought the process was rushed
and the amendments they just adopted made some significant
changes; and the CS put in front of them last Friday basically
revamps the governor's bill. The fiscal notes, which they had
received this afternoon had not been discussed either. He didn't
feel confident of the work.
SENATOR DYSON said he wanted to amend his previous motion to
include individual recommendations and the letter of intent.
SENATOR MICCICHE said he appreciated the process the bill had
gone through; the committee had spent many hours and some
members had spent hundreds of hours processing this bill in two
different committees. It will also go to the Finance Committee
that would have another opportunity to review it.
4:01:00 PM
SENATOR MCGUIRE asked Mr. Pawlowski about the fiscal note on the
Competitiveness Review Board. She agreed with the personnel
services and the travel and the fact that they would have at
least two meetings, but she didn't necessarily agree with the
estimated $835,000 per year for costs that are based on previous
DOR consulting contracts for oil and gas and related issues. The
board is not meant to supplant what the DOR is doing, and she
didn't know that is was meant to do up to a million dollars'
worth of personnel services.
MR. PAWLOWSKI said the department appreciated the dialogue on
this issue, and said the Competitiveness Review Board language
could be interpreted such that they will engage in services with
types of groups like PFC and Gaffney Cline & Associates. The
fiscal note was modeled after those kinds of contracts. The
personnel services component is already in the 2014 budget. No
new positions are being added for this board and it would need
professional level engagement.
SENATOR FRENCH maintained his objection.
CHAIR GIESSEL asked for a roll call on moving SB 21 from
committee.
A roll call vote was taken: Senators McGuire, Micciche, Bishop,
Dyson, Fairclough and Giessel voted yea; Senator French voted
nay. Therefore, CSSB 21(RES), version N as amended, moved from
committee with attached fiscal notes, letter of intent and with
individual recommendations.