Legislature(2011 - 2012)HOUSE FINANCE 519

03/30/2012 01:30 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 289 NATURAL GAS STORAGE TAX CREDIT/REGULATION TELECONFERENCED
Moved CSHB 289(FIN) Out of Committee
+= HB 296 CRIME OF ESCAPE/DEF. OF CORRECT. FACILITY TELECONFERENCED
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 30, 2012                                                                                            
                         1:38 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:38:49 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the House Finance Committee meeting                                                                     
to order at 1:38 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Bill Thomas Jr., Co-Chair                                                                                        
Representative Anna Fairclough, Vice-Chair                                                                                      
Representative Mia Costello                                                                                                     
Representative Mike Doogan                                                                                                      
Representative Les Gara                                                                                                         
Representative David Guttenberg                                                                                                 
Representative Mark Neuman                                                                                                      
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Bryce Edgmon                                                                                                     
Representative Reggie Joule                                                                                                     
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Steve   Thompson,  Sponsor;   Jane  Pierson,                                                                    
Staff,  Representative  Steve Thompson;  Representative  Max                                                                    
Gruenberg,  Sponsor;  Anne   Carpeneti,  Assistant  Attorney                                                                    
General, Legal  Services Section-Juneau,  Criminal Division,                                                                    
Department of Law; Senator Kevin Meyer                                                                                          
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Sam    Edwards,   Deputy    Commissioner,   Department    of                                                                    
Corrections, Mat-Su;                                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 289    NATURAL GAS STORAGE TAX CREDIT/REGULATION                                                                             
                                                                                                                                
          CSHB 289(FIN)  was REPORTED out of  committee with                                                                    
          a  "do  pass"  recommendation  and  with  one  new                                                                    
          fiscal impact note and  one new indeterminate note                                                                    
          from  Department  of  Natural Resources,  one  new                                                                    
          indeterminate note Department  of Revenue, one new                                                                    
          zero    impact    note    from    Department    of                                                                    
          Administration, and one new  zero impact note from                                                                    
          Department  of  Commerce, Community  and  Economic                                                                    
          Development.                                                                                                          
                                                                                                                                
HB 296    CRIME OF ESCAPE/DEF. OF CORRECT. FACILITY                                                                             
                                                                                                                                
          HB  296  was  HEARD  and  HELD  in  committee  for                                                                    
          further consideration.                                                                                                
                                                                                                                                
HOUSE BILL NO. 289                                                                                                            
                                                                                                                                
     "An Act  relating to a  gas storage  facility; relating                                                                    
     to the tax credit for  a gas storage facility; relating                                                                    
     to  the powers  and duties  of the  Alaska Oil  and Gas                                                                    
     Conservation Commission; relating  to the regulation of                                                                    
     natural  gas  storage as  a  utility;  relating to  the                                                                    
     powers and  duties of the  director of the  division of                                                                    
     lands and to  lease fees for a gas  storage facility on                                                                    
     state land; and providing for an effective date."                                                                          
                                                                                                                                
1:39:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  STEVE THOMPSON,  SPONSOR,  relayed that  the                                                                    
legislation  would incentivize  private  sector delivery  of                                                                    
lower-cost  natural gas  in the  state by  extending credits                                                                    
for above-ground  liquefied natural gas  storage facilities.                                                                    
He  elaborated  that  the  bill created  a  new  credit  for                                                                    
construction of  above-ground liquefied natural  gas storage                                                                    
tanks  with a  volume of  25  thousand gallons  or more.  He                                                                    
furthered  that  the  amount  of the  credit  was  would  be                                                                    
limited to  50 percent of  the construction costs, or  up to                                                                    
$15 million, whichever was less.  He said that the bill also                                                                    
allowed  for  an  eligible  above-ground  liquefied  storage                                                                    
facility cited on  state lands to request  an exemption from                                                                    
rental payments; the  exemption would extend up  to 10 years                                                                    
following commencement of  commercial operations. He pointed                                                                    
to   letters  of   support   from   multiple  agencies   and                                                                    
organizations (copy on file.)                                                                                                   
                                                                                                                                
1:41:46 PM                                                                                                                    
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON,                                                                             
highlighted the changes in version X of the legislation:                                                                        
                                                                                                                                
     Section 1. AS 38.05 is  amended by adding a new section                                                                
     to read:                                                                                                                 
                                                                                                                            
     Sec. 38.05.096. Exemption from  rental payments on land                                                                
     leased  for  certain   liquefied  natural  gas  storage                                                              
     facilities.  (a)   A person  leasing state  land for  a                                                                
     liquefied  natural gas  storage facility  other than  a                                                                  
     gas  storage facility  subject to  AS 38.05.180(u)  may                                                                  
     request an  exemption from  lease payments  as provided                                                                  
     in this  section. The exemption  is applicable  for the                                                                  
     periods described in (b) of this section.                                                                                
      (b)   The exemption is available for the calendar year                                                                  
     in  which the  liquefied natural  gas storage  facility                                                                  
     commences  commercial operation  and  for  each of  the                                                                  
     nine  calendar years  immediately  following the  first                                                                  
     year of commercial operation.  However, an exemption is                                                                  
     not  applicable   for  the  calendar  year   after  the                                                                  
     facility  ceases   commercial  operation  or   for  any                                                                  
     subsequent calendar year.  (c)     The   lessee   shall                                                                  
     provide the director with  any information the director                                                                  
     requests to determine whether  the lessee qualifies for                                                                  
     the exemption.                                                                                                           
      (d)   Information related  to state land leased  for a                                                                  
     liquefied natural  gas storage facility  qualifying for                                                                  
     the  exemption in  this section  is public  information                                                                  
     and may  be furnished  to the Regulatory  Commission of                                                                  
     Alaska.  On request,  the  director  shall provide  the                                                                  
     name  of each  person  using state  land  leased for  a                                                                  
     liquefied natural  gas storage facility, the  years for                                                                  
     which an exemption  was granted, and the  amount of the                                                                  
     exemption.                                                                                                               
      (e)   A  person receiving an  exemption for  a payment                                                                  
     under this  section that  contracts to  store liquefied                                                                  
     natural  gas for  a utility  regulated  under AS  42.05                                                                  
     shall reduce the storage price  to reflect the value of                                                                  
     the exemption.                                                                                                           
      (f)  In this section,                                                                                                   
             (1)  "ceases commercial operation" and                                                                           
     "commences  commercial  operation"  have  the  meanings                                                                  
     given in AS 31.05.032;                                                                                                   
             (2)  "liquefied natural gas storage facility"                                                                    
     has the meaning given in AS 42.05.990.                                                                                   
                                                                                                                              
     Sec. 2. AS 42.05.381(k) is amended to read:                                                                              
      (k)   The cost to the utility of storing  gas in a gas                                                                  
     storage facility or storing liquefied  natural gas in a                                                              
     liquefied natural gas storage  facility that is allowed                                                                
     in  determining  a  just   and  reasonable  rate  shall                                                                  
     reflect  the  reduction  in cost  attributable  to  any                                                                  
     exemption  from a  payment due  under  AS 38.05.096  or                                                                
     38.05.180(u), as applicable,  [AS 38.05.180(u)] and the                                                                
     value  of  a tax  credit  that  the  owner of  the  gas                                                                  
     storage  facility   received  under  AS   43.20.046  or                                                                
     43.20.047,  as applicable.  The commission  may request                                                                
     the  (1) commissioner  of natural  resources to  report                                                                  
     the value of the exemption  from a payment due under AS                                                                
     38.05.096   or   38.05.180(u),   as   applicable,   [AS                                                              
     38.05.180(u)] that  the gas storage  facility received;                                                                  
     and (2)  commissioner of revenue to  report information                                                                  
     on  the   amount  of  tax  credits   claimed  under  AS                                                                  
     43.20.046  and 43.20.047,  as applicable,  for the  gas                                                                
     storage  facility  or  liquefied  natural  gas  storage                                                              
     facility. In this subsection,                                                                                          
      (1)   "gas storage facility" has the  meaning given in                                                                
     AS 31.05.032;                                                                                                         
      (2)   "liquefied natural gas storage facility" has the                                                                
     meaning given                                                                                                         
     in AS 42.05.990                                                                                                       
                                                                                                                              
     Sec. 3. AS 42.05.990(5) is amended to read:                                                                            
      (5)    "public utility"  or  "utility" includes  every                                                                  
     corporation whether public,  cooperative, or otherwise,                                                                  
     company,  individual,  or association  of  individuals,                                                                  
     their lessees,  trustees, or  receivers appointed  by a                                                                  
     court, that  owns, operates,  manages, or  controls any                                                                  
     plant, pipeline, or system for                                                                                           
             (A)  furnishing, by generation, transmission,                                                                    
     or distribution,  electrical service to the  public for                                                                  
     compensation;                                                                                                            
             (B)  furnishing telecommunications service to                                                                    
     the public for compensation;                                                                                             
             (C)  furnishing water, steam, or sewer service                                                                   
     to the public for compensation;                                                                                          
             (D)  furnishing by transmission or distribution                                                                  
     of  natural  or  manufactured  gas to  the  public  for                                                                  
     compensation;                                                                                                            
             (E)  furnishing for distribution or by                                                                           
     distribution  petroleum or  petroleum  products to  the                                                                  
     public for compensation when the consumer has no                                                                         
     alternative in  the choice of supplier  of a comparable                                                                  
     product and service at an equal or lesser price;                                                                           
             (F)  furnishing collection and disposal service                                                                  
     of garbage,  refuse, trash, or other  waste material to                                                                  
     the public for compensation;                                                                                             
             (G)  furnishing the service of natural gas                                                                       
     storage to the public for compensation;                                                                                  
             (H)  furnishing the service of liquefied                                                                       
    natural gas storage to the public for compensation;                                                                  
                                                                                                                              
     Sec.  4.   AS  42.05.990  is  amended   by  adding  new                                                                
     paragraphs to read:                                                                                                      
      (11)   "liquefied natural gas  storage facility" means                                                                  
     a  facility  that receives  natural  gas  volumes in  a                                                                  
     liquid or  gaseous state from customers,  holds the gas                                                                  
     volumes in a liquid state  in a reservoir, and delivers                                                                  
     the gas  volumes in  a liquid or  gaseous state  to the                                                                  
     customer; in this paragraph, "facility" includes                                                                         
             (A)  all parts of the facility from the point                                                                    
     at which  the natural gas  volumes are received  by the                                                                  
     facility from  the customer to  the point at  which the                                                                  
     natural gas  volumes are delivered  by the  facility to                                                                  
     the customer;                                                                                                            
             (B)  a facility consisting of a reservoir,                                                                       
     either underground  or aboveground, and one  or more of                                                                  
     the following components of the facility:                                                                                
                   (i)  pipe;                                                                                                 
                   (ii)  compressor stations;                                                                                 
                   (iii)  station equipment;                                                                                  
           (iv)  liquefaction plant or facility;                                                                              
           (v)  gasification plant or facility;                                                                               
                   (vi)  on-site or remote monitoring,                                                                        
     supervision, and control  facilities;                                                                                    
                   (vii)  gas processing plants and gas                                                                       
     treatment  plants, but  not  including a  manufacturing                                                                  
     plant or facility;                                                                                                       
                   (viii)  other equipment necessary to                                                                       
     receive,  place  into  the reservoir,  monitor,  remove                                                                  
     from the reservoir, process, and deliver natural gas;                                                                    
      (12)    "reservoir"  means  a receptacle  or  chamber,                                                                  
     either natural  or man-made, holding  a gas  or liquid,                                                                  
     and includes  a tank or  a depleted or  nearly depleted                                                                  
     pool;   (13)    "service   of  liquefied   natural  gas                                                                  
     storage"  means the  operation of  a liquefied  natural                                                                  
     gas  storage facility;  "service  of liquefied  natural                                                                  
     gas storage" does not include  the storage of liquefied                                                                  
     natural gas                                                                                                                
             (A)  owned by or contractually obligated to the                                                                  
     owner, operator,  or manager  of the  liquefied natural                                                                  
     gas storage facility;                                                                                                    
             (B)  that is incidental to the production or                                                                     
     sale  of  natural  gas  to   one  or  more  third-party                                                                  
     customers; or                                                                                                            
             (C)  for which the price of storage is not                                                                       
     separately itemized.                                                                                                     
                                                                                                                            
     Sec. 5. AS 43.20 is amended  by adding a new section to                                                                
     article 1 to read:                                                                                                       
     Sec. 43.20.047. Liquefied  natural gas storage facility                                                                
     tax  credit.  (a)  A  person  that is  an  owner  of  a                                                                
     liquefied  natural gas  storage  facility described  in                                                                  
     (b)   of  this   section   that  commences   commercial                                                                  
     operation  before   January  1,   2020,  may   apply  a                                                                  
     refundable credit  against a tax liability  that may be                                                                  
     imposed  on the  person under  this chapter  or receive                                                                  
     the amount of  the credit in the form of  a payment for                                                                  
     the  taxable year  in which  the liquefied  natural gas                                                                  
     storage  facility commences  commercial operation.  The                                                                  
     tax  credit  or  payment  under this  section  may  not                                                                  
     exceed the lesser  of $15,000,000 or 50  percent of the                                                                  
     costs  incurred to  establish or  expand the  liquefied                                                                  
     natural gas  storage facility. The  tax credit  in this                                                                  
     section is in  addition to any other  credit under this                                                                  
     chapter for which the person is eligible.                                                                                
      (b)   To  qualify for  the credit  in this  section, a                                                                  
     liquefied natural gas storage facility                                                                                   
             (1) must have a liquefied natural gas storage                                                                    
     volume  of not  less than  25,000 gallons  of liquefied                                                                  
     natural  gas,  or, if  the  credit  is claimed  for  an                                                                  
     expansion,  the  expansion   must  have  increased  the                                                                  
     capacity of  an existing liquefied natural  gas storage                                                                  
     facility by more than 25,000 gallons;                                                                                    
             (2)  may not have been in operation as a                                                                         
     liquefied natural  gas storage facility  before January                                                                  
     1,  2011, unless  the  tax credit  in  this section  is                                                                  
     based  on the  expansion of  the liquefied  natural gas                                                                  
     storage facility after December 31, 2011;                                                                                
             (3)  must be regulated under AS 42.05 as a                                                                       
     utility  and be  available  to furnish  the service  of                                                                  
     liquefied natural gas  storage to customers, utilities,                                                                  
     or industrial  facilities; in this  paragraph, "service                                                                  
     of  liquefied  natural  gas storage"  has  the  meaning                                                                  
     given in AS 42.05.990;                                                                                                     
             (4)  if located on state land and leased or                                                                      
     subject  to  a  lease  under   AS  38.05,  must  be  in                                                                  
     compliance with the terms of the lease; and                                                                              
             (5)  must have commenced commercial operation                                                                    
     on or before  the date the person takes  a credit under                                                                  
     (a) of this section or  applies for a payment under (a)                                                                  
     of this section.                                                                                                         
      (c)    To claim  the credit  or request  a payment,  a                                                                  
     person shall  submit to the department  a certification                                                                  
     of the  capacity of the  liquefied natural  gas storage                                                                  
     facility  measured in  gallons  or the  capacity of  an                                                                  
     expansion to an existing  liquefied natural gas storage                                                                  
     facility  measured  in  gallons,   the  date  that  the                                                                  
     liquefied  natural   gas  storage   facility  commenced                                                                  
     commercial operation,  the date  that any  expansion to                                                                  
     the  liquefied natural  gas storage  facility commenced                                                                  
     commercial  operation, and  other information  required                                                                  
     by the department.                                                                                                       
      (d)   A person applying the credit  under this section                                                                  
     against a liability under this  chapter shall claim the                                                                  
     credit on the  person's return. A person  entitled to a                                                                  
     tax credit under this section  that is greater than the                                                                  
     person's tax  liability under this chapter  may request                                                                  
     a  refund  or  payment  in the  amount  of  the  unused                                                                  
     portion of the tax credit.                                                                                               
      (e)   The  department may use  money available  in the                                                                  
     oil  and   gas  tax  credit  fund   established  in  AS                                                                  
     43.55.028  to make  a refund  or payment  under (d)  of                                                                  
     this  section in  whole or  in part  if the  department                                                                  
     finds  that   (1)  the  claimant   does  not   have  an                                                                  
     outstanding   liability  to   the   state  for   unpaid                                                                  
     delinquent  taxes  under  this  title;  and  (2)  after                                                                  
     application   of  all   available   tax  credits,   the                                                                  
     claimant's total  tax liability under this  chapter for                                                                  
     the calendar year  in which the claim is  made is zero.                                                                  
     In this  subsection, "unpaid  delinquent tax"  means an                                                                  
     amount of  tax for which  the department has  issued an                                                                  
     assessment that  has not been  paid and,  if contested,                                                                  
     has not been finally resolved in the taxpayer's favor.                                                                   
      (f)   For the purpose of determining the amount of the                                                                  
     credit  under  this  section,  the  costs  incurred  to                                                                  
     establish a  liquefied natural gas storage  facility or                                                                  
     to  expand a  liquefied  natural  gas storage  facility                                                                  
     shall be submitted to  the department with verification                                                                  
     by   an   independent  certified   public   accountant,                                                                  
     licensed in the state.  The volume of working liquefied                                                                  
     natural gas  storage or volume  of the expansion  to an                                                                    
     existing liquefied  natural gas storage  facility shall                                                                  
     be verified by a  professional engineer licensed in the                                                                  
     state with relevant experience.  (g)   A person may not                                                                  
     receive   a  credit   under   this   section  for   the                                                                  
     acquisition   of  a   liquefied  natural   gas  storage                                                                  
     facility for which  a credit has been  taken under this                                                                  
     section.                                                                                                                 
      (h)   If  the liquefied  natural gas  storage facility                                                                  
     for  which a  credit  was received  under this  section                                                                  
     ceases  commercial operation  during the  nine calendar                                                                  
     years immediately following the  calendar year in which                                                                  
     the  liquefied natural  gas storage  facility commences                                                                  
     commercial  operation,  the  tax liability  under  this                                                                  
     chapter of the  person who claimed the  credit shall be                                                                  
     increased, and  a person not  subject to the  tax under                                                                  
     this chapter that received a  payment under (d) and (e)                                                                  
     of this  section shall  be liable to  the state  in the                                                                  
     amount  determined in  this subsection.  The amount  of                                                                  
     the  increase  in tax  liability  or  liability to  the                                                                  
     state                                                                                                                    
             (1)  for a person subject to the tax under this                                                                  
     chapter,  shall  be  determined and  assessed  for  the                                                                  
     taxable  year  in  which   the  liquefied  natural  gas                                                                  
     storage    facility   ceases    commercial   operation,                                                                  
     regardless  of   whether  the  liquefied   natural  gas                                                                  
     storage   facility   subsequently  resumes   commercial                                                                  
     operation;                                                                                                               
             (2)  for a person not subject to the tax due                                                                     
     under this  chapter, shall  be determined  and assessed                                                                  
     as of  December 31  of the calendar  year in  which the                                                                  
     liquefied   natural   gas   storage   facility   ceases                                                                  
     commercial   operation,  regardless   of  whether   the                                                                  
     liquefied  natural  gas storage  facility  subsequently                                                                  
     resumes commercial operation; and                                                                                        
             (3)  is equal to the total amount of the credit                                                                  
     taken  or  received as  a  payment  under (d)  of  this                                                                  
     section, as  applicable, multiplied by a  fraction, the                                                                  
     numerator  of which  is the  difference between  10 and                                                                  
     the number  of calendar  years for which  the liquefied                                                                  
     natural  gas storage  facility was  eligible for  a tax                                                                  
     credit under this section and  the denominator of which                                                                  
     is 10.                                                                                                                   
      (i)   The issuance of a refund under this section does                                                                  
     not limit  the department's  ability to later  audit or                                                                  
     adjust  the claim  if the  department determines,  as a                                                                  
     result of the  audit, that the person  that claimed the                                                                  
     credit was  not entitled to  the amount of  the credit.                                                                    
     The tax  liability of the  person receiving  the credit                                                                  
     under this  chapter is increased  by the amount  of the                                                                  
     credit  that  exceeds  that to  which  the  person  was                                                                  
     entitled. If the tax liability  is increased under this                                                                  
     subsection,  the increase  bears interest  at the  rate                                                                  
     set  by  AS 43.05.225  from  the  date the  refund  was                                                                  
     issued.                                                                                                                  
      (j)    A  person  claiming  a tax  credit  under  this                                                                  
     section for  a liquefied  natural gas  storage facility                                                                  
     that ceases  commercial operation within  nine calendar                                                                  
     years immediately following the  calendar year in which                                                                  
     the  liquefied natural  gas storage  facility commences                                                                  
     commercial  operation shall  notify  the department  in                                                                  
     writing of  the date the liquefied  natural gas storage                                                                  
     facility ceased  commercial operation. The  notice must                                                                  
     be filed with the return  for the taxable year in which                                                                  
     the  liquefied  natural  gas  storage  facility  ceases                                                                  
     commercial operation.                                                                                                    
      (k)    A  refund  under  this section  does  not  bear                                                                  
     interest.                                                                                                                
      (l)  In this section,                                                                                                   
             (1)  "ceases commercial operation" means that                                                                    
     the  liquefied natural  gas storage  facility fails  to                                                                  
     add  or withdraw  20  percent or  more  of its  working                                                                  
     capacity  of liquefied  natural gas  during a  calendar                                                                  
     year  after the  calendar year  in which  the liquefied                                                                  
     natural  gas  storage   facility  commences  commercial                                                                  
     operation;                                                                                                               
             (2)  "commences commercial operation" means the                                                                  
     first input  of liquefied natural gas  into a liquefied                                                                  
     natural gas  storage facility  for purposes  other than                                                                  
     testing;                                                                                                                 
             (3)  "liquefied natural gas storage facility"                                                                    
     has the meaning given in AS 42.05.990.                                                                                   
                                                                                                                              
     Sec. 6. AS 43.55.028(a) is amended to read:                                                                            
      (a)   The oil and  gas tax credit fund  is established                                                                  
     as a separate fund of the state.                                                                                         
     The  purpose of  the fund  is to  purchase transferable                                                                  
     tax credit  certificates issued under AS  43.55.023 and                                                                  
     production  tax  credit  certificates issued  under  AS                                                                  
     43.55.025  and  to  pay refunds  and  payments  claimed                                                                
     under AS 43.20.046 or 43.20.047.                                                                                       
                                                                                                                              
     Sec. 7. AS 43.55.028(g) 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(m)  or a                                                                  
     claim for refund under AS 43.20.046 or AS 43.20.047.                                                                   
                                                                                                                            
     Sec.  8. This  Act  takes effect  immediately under  AS                                                                
     01.10.070(c).                                                                                                            
                                                                                                                              
1:46:42 PM                                                                                                                    
                                                                                                                                
Representative Neuman  pointed to  page 7. He  asked whether                                                                    
the fund  to purchase transferrable tax  credits had already                                                                    
been established, or would a new fund be created.                                                                               
                                                                                                                                
Ms.  Pierson  responded  that  the  fund  had  already  been                                                                    
established and had been set in statute.                                                                                        
                                                                                                                                
Representative  Neuman asked  if  propane  was considered  a                                                                    
natural gas under the legislation.                                                                                              
                                                                                                                                
Ms. Pierson  responded in the  negative. She  furthered that                                                                    
the  storage  of propane  differed  from  that of  liquefied                                                                    
natural gas.                                                                                                                    
                                                                                                                                
Representative Neuman  asserted that  propane was  a natural                                                                    
gas liquid  and wondered  why it was  not covered  under the                                                                    
bill.                                                                                                                           
                                                                                                                                
Ms. Pierson replied that adding  propane to the language had                                                                    
been  considered and  ultimately disregarded.  She furthered                                                                    
that  it  was  cheaper  to   store  propane  than  to  store                                                                    
liquefied natural gas.                                                                                                          
                                                                                                                                
Representative   Neuman  queried   the  end   goal  of   the                                                                    
legislation.                                                                                                                    
                                                                                                                                
Representative  Thompson  responded   that  the  bill  would                                                                    
create  storage  tanks  that   could  be  used  by  multiple                                                                    
businesses and in various locations.                                                                                            
                                                                                                                                
Co-Chair Stoltze passed the gavel to Co-Chair Thomas.                                                                           
                                                                                                                                
1:49:23 PM                                                                                                                    
                                                                                                                                
Representative  Gara  asked  whether the  bill  would  apply                                                                    
statewide.                                                                                                                      
                                                                                                                                
Ms. Pierson responded in the affirmative.                                                                                       
                                                                                                                                
Representative   Gara   understood  that   the   legislation                                                                    
pertained  to  above-ground  storage  only,  and  would  not                                                                    
duplicate  the credit  already  available  for below  ground                                                                    
storage.                                                                                                                        
                                                                                                                                
Ms. Pierson said that was correct.                                                                                              
                                                                                                                                
Representative  Gara  asked  whether  the  credit  could  be                                                                    
duplicated above another credit.                                                                                                
                                                                                                                                
Ms. Pierson responded  that she did not believe  it could be                                                                    
added to another credit. She  noted that the credit would be                                                                    
the only one available for liquefied natural gas storage.                                                                       
                                                                                                                                
Representative Gara understood that  if a credit did already                                                                    
exist,  the  bill was  not  meant  to create  an  additional                                                                    
credit.                                                                                                                         
                                                                                                                                
Representative Thompson replied in the affirmative.                                                                             
                                                                                                                                
Ms. Pierson clarified that there  was a leasing provision in                                                                    
the bill which created two types of available credits.                                                                          
                                                                                                                                
Representative   Costello  referred   to  language   in  the                                                                    
sectional analysis  that stated that any  cost savings would                                                                    
be passed  on to  the storage  customer. She  wondered where                                                                    
the language was located in the bill.                                                                                           
                                                                                                                                
Ms. Pierson responded that it was located in Section 2.                                                                         
                                                                                                                                
1:51:51 PM                                                                                                                    
                                                                                                                                
Representative Costello requested the exact location.                                                                           
                                                                                                                                
Ms. Pierson read from Section 2:                                                                                                
                                                                                                                              
Sec. 2. AS 42.05.381(k) is amended to read:                                                                                   
          (k)  The cost to the utility of storing gas in a                                                                      
     gas storage  facility or storing liquefied  natural gas                                                              
     in  a liquefied  natural gas  storage facility  that is                                                                
     allowed  in  determining  a just  and  reasonable  rate                                                                    
     shall  reflect the  reduction in  cost attributable  to                                                                    
     any exemption from a payment  due under AS 38.05.096 or                                                                
     38.05.180(u), as applicable,  [AS 38.05.180(u)] and the                                                                
     value  of  a tax  credit  that  the  owner of  the  gas                                                                    
     storage  facility   received  under  AS   43.20.046  or                                                                
     43.20.047, as applicable.                                                                                              
                                                                                                                                
Ms. Pierson  explained that any savings  that occurred under                                                                    
the legislation must be passed onto the consumer.                                                                               
                                                                                                                                
Representative  Doogan  surmised  that the  bill  created  a                                                                    
subsidy to build the storage containers.                                                                                        
                                                                                                                                
Ms. Pierson responded in the affirmative.                                                                                       
                                                                                                                                
Representative  Doogan pointed  out  that the  bill was  the                                                                    
29th piece of legislation that  the committee had heard that                                                                    
included a tax credit.                                                                                                          
                                                                                                                                
Co-Chair Thomas  reminded the committee that  the bill would                                                                    
apply statewide.                                                                                                                
                                                                                                                                
Representative  Thompson suggested  that liquefied  gas from                                                                    
Cook Inlet  could be barged  to Bethel  and up and  down the                                                                    
Yukon River.                                                                                                                    
                                                                                                                                
Co-Chair  Thomas wondered  whether the  tax credit  would be                                                                    
needed if a gas pipeline was built.                                                                                             
                                                                                                                                
Representative Thompson  thought that the gasline  would not                                                                    
be running for at least 15  years. He said that the bill was                                                                    
an attempt to create a  "bridge" project until a gasline was                                                                    
established.                                                                                                                    
                                                                                                                                
Representative Wilson hypothesized that  the bill would help                                                                    
in Fairbanks with utilities that were using diesel.                                                                             
                                                                                                                                
Representative  Thompson responded  in  the affirmative.  He                                                                    
expounded that using natural  gas for electrical production,                                                                    
and at the refinery, would improve air quality.                                                                                 
                                                                                                                                
Representative  Wilson  asked  who would  benefit  from  the                                                                    
savings  if Flint  Hills shared  the storage  unit with  the                                                                    
major utility in Fairbanks.                                                                                                     
                                                                                                                                
Ms.  Pierson replied  that  under  the proposed  legislation                                                                    
Flint Hills would not receive the benefit.                                                                                      
                                                                                                                                
Co-Chair Thomas  asked how the  gas would be  delivered from                                                                    
the storage facility to homes.                                                                                                  
                                                                                                                                
Representative  Thompson explained  that there  were already                                                                    
1100  different locations  in Fairbanks  hooked  up for  the                                                                    
distribution of natural gas, and  more were planned once the                                                                    
gas became available. He stated  that electrical users would                                                                    
immediately  see  lower  electric   rates,  and  lower  home                                                                    
heating rates would follow.                                                                                                     
                                                                                                                                
1:56:54 PM                                                                                                                    
                                                                                                                                
Co-Chair Thomas  referenced a circulating  supplemental bill                                                                    
that would  allow communities to receive  low-interest loans                                                                    
for natural gas. He wondered  if Fairbanks would be included                                                                    
in  the  loan program.  He  believed  the loans  could  help                                                                    
expedite the  process of bringing  homes online  for natural                                                                    
gas heating.                                                                                                                    
                                                                                                                                
Representative  Thompson stated  that  he  was not  familiar                                                                    
with the legislation.                                                                                                           
                                                                                                                                
Representative  Gara  surmised  that  the  bill  could  help                                                                    
subsidize  programs such  as bringing  natural gas  from the                                                                    
North Slope to Fairbanks by truck.                                                                                              
                                                                                                                                
Representative  Thompson  answered  in the  affirmative.  He                                                                    
said that he paid $23.35 per  1000 cubic feet of natural gas                                                                    
for his rental home in Fairbanks,  compared with $8 to $9 in                                                                    
Anchorage. He asserted that whatever  could be done to lower                                                                    
heating costs would be beneficial.                                                                                              
                                                                                                                                
Representative Doogan  wondered if there would  be more than                                                                    
one 25,000 gallon unit of  liquefied natural gas stored at a                                                                    
time.                                                                                                                           
                                                                                                                                
Ms. Pierson  believed that  there would  be high  demand for                                                                    
the  units and  that  gas would  be  flowing throughout  the                                                                    
state.  She  said  that currently  in  Fairbanks  there  was                                                                    
discussion of  putting in an approximately  3 million gallon                                                                    
tank. She added  that the main utility  company in Fairbanks                                                                    
believed that the component would  be necessary to make sure                                                                    
there was enough gas to fulfill customer's needs.                                                                               
                                                                                                                                
Representative  Doogan understood  that the  subsidies could                                                                    
total $30 million.                                                                                                              
                                                                                                                                
Ms. Pierson replied yes.                                                                                                        
                                                                                                                                
2:00:35 PM                                                                                                                    
                                                                                                                                
Vice-chair  Fairclough  discussed   the  fiscal  notes:  FN6                                                                    
(DOA), FN7 (DCCED), FN10 (DNR), FN9 (DOR).                                                                                      
                                                                                                                                
2:02:53 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:07:20 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-chair  Fairclough  clarified  that there  was  a  fifth                                                                    
fiscal note: FN8 (DOR).                                                                                                         
                                                                                                                                
Representative   Doogan  voiced   a  complaint   related  to                                                                    
indeterminate  fiscal notes.  He  opined that  it seemed  to                                                                    
have   become  policy   for   the   departments  to   attach                                                                    
indeterminate fiscal  notes to legislation.  He communicated                                                                    
that the finance  committee could not do  the most important                                                                    
part  of its  job  without accurate  information related  to                                                                    
costs.                                                                                                                          
                                                                                                                                
Co-Chair  Thomas agreed.  He hoped  that the  administration                                                                    
understood  the difficulty  the committee  faced; attempting                                                                    
to craft policy with indeterminate fiscal notes.                                                                                
                                                                                                                                
Representative Gara  echoed the  complaint and  believed the                                                                    
problem was  more extensive. He surmised  that Department of                                                                    
Revenue  (DOR)  was  waiting  for bills  to  report  out  of                                                                    
committee before determining what  their fiscal impact would                                                                    
be.                                                                                                                             
                                                                                                                                
Representative Wilson  MOVED to report CSHB  289(FIN) out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
                                                                                                                                
CSHB  289(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass"  recommendation and  with one  new fiscal  impact note                                                                    
and one  new indeterminate  note from Department  of Natural                                                                    
Resources,   one  new   indeterminate  note   Department  of                                                                    
Revenue,  one  new  zero  impact  note  from  Department  of                                                                    
Administration,   and  one   new  zero   impact  note   from                                                                    
Department of Commerce, Community and Economic Development.                                                                     
                                                                                                                                
2:10:56 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:15:17 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
HOUSE BILL NO. 296                                                                                                            
                                                                                                                                
     "An Act  relating to service  of process  on prisoners;                                                                    
     relating  to  the  crime of  escape;  relating  to  the                                                                    
     definition  of 'correctional  facility'; amending  Rule                                                                    
     4, Alaska  Rules of Civil Procedure;  and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
2:15:25 PM                                                                                                                    
                                                                                                                                
Vice-chair Fairclough  moved CSHB 296(JUD) 27-LS1199/E  as a                                                                    
working  document  before  the  committee.  There  being  no                                                                    
OBJECTION it was so ordered.                                                                                                    
                                                                                                                                
REPRESENTATIVE  MAX  GRUENBERG,  SPONSOR, relayed  that  the                                                                    
bill had been  drafted by the House  Judiciary Committee. He                                                                    
stated  that  the  office of  Legislative  Legal  created  a                                                                    
booklet every year  that discussed cases and  issues of that                                                                    
year that would benefit  from further legislative review. He                                                                    
added  that   often  the   court  would   recommend  further                                                                    
legislative review. He shared that  most of the cases in the                                                                    
booklet did  not warrant  further review,  but some  did. He                                                                    
highlighted Section 4  of the bill which was a  "repeal of a                                                                    
repealer". He  explained that  several years  ago a  law was                                                                    
passed that said  if someone was sentenced  for gang related                                                                    
activity, an electronic monitoring  device could be required                                                                    
after parole. He stressed the  importance of keeping paroled                                                                    
gang members separated; the device  would monitor if members                                                                    
congregated. He relayed that there  had been a 3 year sunset                                                                    
placed  on the  section that  was scheduled  to expire  very                                                                    
soon. He believed it was  essential that the section be kept                                                                    
in statute.                                                                                                                     
                                                                                                                                
Co-Chair Thomas  asked whether the provision  would be given                                                                    
another sunset date.                                                                                                            
                                                                                                                                
Representative Gruenberg replied in  the negative. He warned                                                                    
that it would  be detrimental if judges could  not order the                                                                    
monitoring devices. He continued to  Sections 1 and 5 of the                                                                    
legislation. He explained that in  some cases prisoners were                                                                    
sued  and  that under  current  the  law  there was  no  one                                                                    
authorized  to serve  the papers  to the  prisoner. He  said                                                                    
that  as a  result  the  whole writ  of  execution had  been                                                                    
eliminated. The  sections allowed for the  superintendent of                                                                    
the institution  to serve the  legal papers to  the inmates.                                                                    
He  shared   that  the  change   had  been   recommended  by                                                                    
Legislative Legal. He said that  the language clarified that                                                                    
the statute was  an indirect court rule change  and could be                                                                    
implemented immediately.                                                                                                        
                                                                                                                                
2:20:14 PM                                                                                                                    
                                                                                                                                
Representative  Gruenberg   stated  that  the   third  issue                                                                    
addressed  in  the  legislation  related  to  the  crime  of                                                                    
escape. He  said that in  an example case the  defendant had                                                                    
initially been  charged with  a minor  crime, but  could not                                                                    
make  bail.  He  explained  that the  court  felt  that  the                                                                    
defendant was  not a flight risk  and had assigned him  to a                                                                    
halfway  house while  awaiting trial.  The defendant  walked                                                                    
away  from the  halfway house  and was  subsequently charged                                                                    
with  a class  B felony,  even though  he had  not yet  been                                                                    
formerly charged. The change would  make walking away from a                                                                    
non-secure  facility a  class B  misdemeanor.  He said  that                                                                    
Sections 2,  3, and  6 dealt with  the ambiguity  in statute                                                                    
pertaining to walking away from a non-secure facility.                                                                          
                                                                                                                                
2:23:39 PM                                                                                                                    
                                                                                                                                
Vice-chair  Fairclough  clarified  that  the  bill  did  not                                                                    
change the  use of a  facility; the definition of  a halfway                                                                    
house  was  not  being  changed  to  a  secure  correctional                                                                    
facility.                                                                                                                       
                                                                                                                                
Representative Gruenberg  replied that the zoning  would not                                                                    
change.                                                                                                                         
                                                                                                                                
Vice-chair Fairclough  understood that zoning was  not being                                                                    
changed.  She  explained  that  she  was  referring  to  the                                                                    
definition of what a correction  facility was. She expressed                                                                    
the desire to avoid any problems with land-use issues.                                                                          
Representative  Gruenberg replied  that the  bill would  not                                                                    
change the land-use terms.                                                                                                      
                                                                                                                                
Representative  Wilson  asked what  the  charges  were if  a                                                                    
prisoner escaped from a secure correctional facility.                                                                           
                                                                                                                                
Representative Gruenberg stated that  escaping from a secure                                                                    
facility would be a class B felony.                                                                                             
                                                                                                                                
Representative Wilson  felt that a prisoner  escaping from a                                                                    
halfway house understood that their  actions were wrong. She                                                                    
wondered why the punishment would be different for a non-                                                                       
secure facility escape.                                                                                                         
                                                                                                                                
Representative  Gruenberg replied  that a  person had  to be                                                                    
considered a non-risk to be  put into a halfway house; petty                                                                    
criminal charges and misdemeanors.  He said that most people                                                                    
who did not  return to the halfway house  when expected were                                                                    
out looking  for work or  visiting family. He  stressed that                                                                    
this was not  comparable to breaking out of  a secure prison                                                                    
and should therefore not be  treated the same under the law.                                                                    
He  added  that the  codification  would  also result  in  a                                                                    
significant cost savings to the state.                                                                                          
                                                                                                                                
Representative Wilson  thought that lowering  the punishment                                                                    
would entice more  inmates to walk away  from halfway houses                                                                    
before finishing  their sentence.  She believed that  it was                                                                    
just as  wrong to walk away  from a halfway house  as it was                                                                    
to escape from a secure prison.                                                                                                 
                                                                                                                                
2:29:32 PM                                                                                                                    
                                                                                                                                
Representative Gruenberg explained that  the inmate would be                                                                    
required to  serve the remainder  of their sentence  if they                                                                    
escaped  from a  halfway house.  He stressed  the importance                                                                    
that the punishment should fit the crime.                                                                                       
                                                                                                                                
Representative Gara expressed that he  did not want the bill                                                                    
to  change   the  land   use  designation   of  correctional                                                                    
facilities.  He pointed  to Page  1, lines  7 and  8 of  the                                                                    
bill:                                                                                                                         
                                                                                                                            
Section 1. AS 09.05.050 is amended by adding a new                                                                          
subsection to read:                                                                                                           
      (c)  In this section, "correctional facility" has the                                                                   
meaning given in AS 33.30.901.                                                                                                
                                                                                                                                
Representative Gara explained that "correctional facility"                                                                    
was changed only according to AS 09.05.050, which pertained                                                                   
to service of prisoners. He continued to Page 2, line 13                                                                      
and 14, which redefined "correction facility," but only in                                                                    
Section 3. He noted that the term was not being redefined                                                                     
for land-use.                                                                                                                   
                                                                                                                                
Co-Chair  Stoltze  argued  that  the bill  would  lower  the                                                                    
security  threshold.  He  thought  that the  threat  of  the                                                                    
felony  penalty  was  a strong  inducement  for  inmates  to                                                                    
follow the rules.                                                                                                               
                                                                                                                                
Co-Chair Thomas OPENED public testimony.                                                                                        
                                                                                                                                
SAM    EDWARDS,   DEPUTY    COMMISSIONER,   DEPARTMENT    OF                                                                    
CORRECTIONS, MAT-SU  (via teleconference), responded  to the                                                                    
concerns raised by Co-Chair Stoltze.  He said that the issue                                                                    
had  been  carefully  examined  by  LAW  the  Department  of                                                                    
Corrections  (DOC). He  believed  that each  case should  be                                                                    
weighed on an individual basis.                                                                                                 
                                                                                                                                
Representative  Wilson  maintained  her  concern  about  the                                                                    
lesser penalty for halfway house  escapees. She thought that                                                                    
lowering the  penalty would increase  the number  of inmates                                                                    
walking away  from halfway houses  before serving  out their                                                                    
sentences.                                                                                                                      
                                                                                                                                
Co-Chair Thomas understood the  bill related to misdemeanors                                                                    
and not felony offenders.                                                                                                       
                                                                                                                                
Representative  Gruenberg  replied  in the  affirmative.  He                                                                    
furthered that  a person  would not be  placed in  a halfway                                                                    
house if they were a threat  to the public. He stressed that                                                                    
the bill simply codified  the court's current interpretation                                                                    
of the law. He added that  an inmate that walked away from a                                                                    
halfway house before serving out  the full sentence would be                                                                    
placed in a secure facility when apprehended.                                                                                   
                                                                                                                                
2:37:53 PM                                                                                                                    
                                                                                                                                
Co-Chair Thomas  told a  personal story  about a  friend who                                                                    
had been  released from prison  and was living in  a halfway                                                                    
house. The  friend wore an electronic  ankle bracelet, which                                                                    
allowed him to be monitored at all times.                                                                                       
                                                                                                                                
Co-Chair Thomas CLOSED public testimony.                                                                                        
                                                                                                                                
Co-Chair Stoltze requested that  further public testimony be                                                                    
taken at the next hearing of the bill.                                                                                          
                                                                                                                                
ANNE CARPENETI,  ASSISTANT ATTORNEY GENERAL,  LEGAL SERVICES                                                                    
SECTION-JUNEAU,  CRIMINAL   DIVISION,  DEPARTMENT   OF  LAW,                                                                    
clarified  that  under  the bill  removing  oneself  from  a                                                                    
facility would be a class  A misdemeanor, which would result                                                                    
in 1 year in jail.                                                                                                              
                                                                                                                                
2:40:17 PM                                                                                                                    
                                                                                                                                
Representative  Guttenberg  stated  that the  issue  stemmed                                                                    
from the failure  of the courts to recognize  that a halfway                                                                    
house was  a correctional  facility. He understood  that the                                                                    
bill corrected that.                                                                                                            
                                                                                                                                
Ms. Carpeneti responded that the  court stated that in order                                                                    
for the  inmate to be  charged under the circumstances  of a                                                                    
class B  felony, escape in  the second degree;  the facility                                                                    
had to be secured with locks.                                                                                                   
                                                                                                                                
Representative  Guttenberg understood  that  the bill  would                                                                    
recognize   that   a   halfway  house   was   considered   a                                                                    
correctional facility.                                                                                                          
                                                                                                                                
Ms. Carpeneti reiterated that the  bill stated that in order                                                                    
to be  charged with a  class B  felony for escape  an inmate                                                                    
would  have  had  to  have escaped  from  a  secure,  locked                                                                    
facility.                                                                                                                       
                                                                                                                                
Co-Chair Stoltze requested a letter  of position from Joseph                                                                    
Schmidt, Commissioner, Department Of Corrections.                                                                               
                                                                                                                                
Co-Chair Thomas discussed housekeeping.                                                                                         
                                                                                                                                
HB  296  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:42:56 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:43 PM.                                                                                           

Document Name Date/Time Subjects