Legislature(2015 - 2016)HOUSE FINANCE 519
04/09/2015 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| HB116 | |
| HB100 | |
| HB81 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 116 | TELECONFERENCED | |
| += | HB 155 | TELECONFERENCED | |
| += | HB 100 | TELECONFERENCED | |
| *+ | HB 176 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 81 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 9, 2015
1:39 p.m.
1:39:53 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 1:39 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Scott Kawasaki
Representative Tammie Wilson
MEMBERS ABSENT
Representative Cathy Munoz
Representative Lance Pruitt
ALSO PRESENT
Laura Stidolph, Staff, Representative Kurt Olson; Jane
Pierson, Staff, Representative Steve Thompson; Tom Wright,
Staff, Representative Mike Chenault; Representative Mike
Chenault, Sponsor; Donald Bullock, House Majority Staff;
Adam Diamond, Manager, Government Relations, Agrium
Incorporated; Steve Wendt, Kenai Plant Manager, Agrium
Incorporated; Paul Grossi, Representative, Plumbers and
Pipefitters and Iron Workers; Representative Cathy Tilton,
Sponsor; Daniel Bellerive, Staff, Representative Cathy
Tilton.
PRESENT VIA TELECONFERENCE
Aeron Plikat, President, Building and Construction Trades
Council of South Central Alaska, Anchorage; Paul Carr,
Vice-President, Building and Construction Trades Council of
South Central Alaska, Anchorage.
SUMMARY
HB 81 EXEMPTION: LICENSING OF CONTRACTORS
HB 81 was HEARD and HELD in committee for further
consideration.
HB 100 UREA/AMMONIA FACILITY TAX CREDIT
CSHB 100(FIN) was REPORTED out of committee with
a "do pass" recommendation and with a previously
published zero fiscal note: FN1 (DOR).
HB 116 EXTEND ALCOHOLIC BEVERAGE CONTROL BOARD
HB 116 was REPORTED out of Committee with a "do
pass" recommendation and with a new fiscal impact
note from the Department of Commerce, Community
and Economic Development.
HB 155 FEES; WAIVERS; CREDITS; DEDUCTIONS; TAXES
HB 155 was SCHEDULED but not HEARD.
HOUSE BILL NO. 116
"An Act extending the termination date of the
Alcoholic Beverage Control Board; and providing for an
effective date."
1:40:54 PM
LAURA STIDOLPH, STAFF, REPRESENTATIVE KURT OLSON, presented
HB 116. She explained that the legislation extended the
termination date for the Alcoholic Beverage Control Board
(ABC) through June 30, 2018. She informed the committee
that the fiscal note (new FN (CED) included the estimated
costs of regulating marijuana due to a stipulation in the
voter initiative that legalized marijuana and tasked the
board with regulation. However, if HB 123 (Establish
Marijuana Control Board) was subsequently adopted the
funding for regulating marijuana will be removed from the
fiscal note.
There were no questions from committee members.
Co-Chair Thompson OPENED public testimony.
Co-Chair Thompson CLOSED public testimony.
Co-Chair Neuman MOVED to report HB 116 out of Committee
with individual recommendations and the accompanying fiscal
note.
There being NO OBJECTION, HB 116 was REPORTED out of
Committee with a "do pass" recommendation and with a new
fiscal impact note from the Department of Commerce,
Community and Economic Development.
1:43:38 PM
AT EASE
1:45:03 PM
RECONVEYNED
HOUSE BILL NO. 100
"An Act establishing a credit against the net income
tax for an in-state processing facility that
manufactures urea or ammonia; and providing for an
effective date."
1:45:43 PM
Co-Chair Neuman MOVED to ADOPT the proposed committee
substitute for HB 100, Work Draft 29-ls0423\G, Nauman,
4/7/15.
There being NO OBJECTION, it was so ordered.
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON,
explained the changes in the committee substitute (CS). She
reported that on page 1, lines 2, 4, and 5 the CS included
a credit for gas-to-liquid products were added. She
continued that on page 2, lines 10 and 12 the addition of
"gas-to-liquid" was added. Found on page 2, lines 18
through 20 contained the definition of "gas-to-liquid
product" she read the following:
…in this subsection, "gas-to-liquid product" means a
liquid produced by a processing facility that
combines, breaks up, or rearranges atoms present in
natural gas, but does not include liquefied natural
gas.
Ms. Pierson furthered that page 2, lines 25 and 26 and page
3, line 11 referenced gas to liquid products. The final
change was included on page 3, line 20 and noted the length
of the credit was changed to five years by inserting the
date to January 1, 2022.
TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT, provided a
brief synopsis of the bill. He voiced that the legislation
created a new corporate income tax credit for owners of
facilities that manufacture urea or ammonia, and gas to
liquids. He referenced a study by the McDowell Group
(titled, "Potential Impacts of Agrium's Operation on State
of Alaska Revenues") (copy on file) that concluded that
reopening the Agrium facility using a single train would
require approximately 28 billion cubic feet (bcf) of gas
per year with 21(bcf) derived from state leases. The
anticipated royalty payment to the state was approximately
$15 million annually.
Co-Chair Neuman commented that he had been working on a
gas-to-liquids scenario in an attempt to add value to
Alaskan products, diversify the economy, and create jobs.
He referenced that Alaska Industrial Development and Export
Authority (AIDEA) released a report on November, 2014
published by a company called Nexant that provided gas-to-
liquid advisory services. He detailed that the report
provided the value of products and the amount of investment
that was needed. He added the language in anticipation of a
large end product user for an in-state gas pipeline which
would help the economics of an in-state gas pipeline and
would create jobs. He cited the reports figures of a total
private industry investment of up to $6.5 billion and the
creation of 5000 permanent jobs. He liked that HB 100 was
attributed to an industry that added value to Alaskan
products. He emphasized that he added the gas-to-liquid
products credit to HB 100 after discussions with the
sponsor to endeavor to diversify the state's economy, help
the economics of an in-state gas pipeline, and create jobs
in the state.
Vice-Chair Saddler wanted a brief history of the Agrium
plant.
Mr. Wright responded that he did not know all of the
history. He reported that if the plant reopened, planned
rehabilitation costs were $275 million and would employ a
temporary workforce of 440 workers with a payroll of
approximately $75 million over the two year rehabilitation
timeframe. He continued that the reopened plant would
employ 140 direct jobs and the payroll would amount to
approximately $14 million and approximately 340 "total"
jobs that "included direct, indirect, and induced within
the state with an approximate payroll of $30 million.
Vice-Chair Saddler inquired further about the history of
the plant. Mr. Wright deferred to representatives from the
industry in the audience.
Vice-Chair Saddler asked who the gas-to-liquid provision
might apply to. Mr. Wright answered that a temporary gas-
to-liquid plant had been in operation on the Kenai
Peninsula by BP. He alluded to "some interest" currently
but did not know specific information.
Representative Kawasaki wondered about the amount of
natural gas available in Cook Inlet Basin. He referred to
the Interior Energy Project (IEP) slated for Fairbanks,
which proposed utilizing a natural gas supply from Cook
Inlet. He was wondering about the total amount of natural
gas reserves available in Cook Inlet and whether enough
Cook Inlet gas was available for the Agrium project.
REPRESENTATIVE MIKE CHENAULT, SPONSOR, responded that he
did not know the total gas supply in Cook Inlet and
expressed uncertainty that it was possible to determine
with certainty. He emphasized the importance to "bring on
more gas supply to fill the need of the gas market" whether
in Fairbanks or for the Agrium plant.
1:54:44 PM
Representative Kawasaki commented that he could provide a
transcript of discussions about an "abundance of fear" that
there would not be enough gas supply in Cook Inlet for the
Fairbanks IEP. He wanted assurances that an abundant
natural gas supply existed in Cook Inlet for both projects.
Representative Chenault responded that he never stated
concerns over the Cook Inlet supply for the IEP. He
believed that the more gas that was discovered in Cook
Inlet meant increased opportunities to supply gas to
Alaskans. He added that more natural gas consumers whether
in Fairbanks or for Donlin Creek or the Agrium facility
meant more money being spent on exploration to fill the
markets.
Vice-Chair Saddler reported that he was previously a member
of the House Resources Committee and was familiar with a
study from the Department of Natural Resources, Division of
Geologic and Geophysical Sciences on the Cook Inlet Basin.
He ascertained that the basin contained a large volume of
gas but was complicated and necessitated much exploration
and drilling. He agreed that increased market demand
increased exploration and produced more gas. He asked
whether the plant offered any ancillary benefits to the
consumers in Southcentral Alaska.
Representative Chenault commented that the benefits of the
facility would start with jobs and spread indirectly
through the economy. He opined that more people working
provided more dollars into the economy. He added that when
the plant was in operation benefits spread throughout the
state. He reported that the barley farmers located much
farther north of the plant purchased urea for approximately
$199. per ton. When the facility shut down the cost
increased by $500 to $700 per ton and increased costs to
local consumers. He mentioned that the Department of
Transportation and Public Facilities used urea to de-ice
airport runways. He related that the closure of the Kenai
facility had a large impact on the local community.
Vice-Chair Saddler hoped to hear more about how an anchor
consumer like the Agrium plant could encourage more
exploration in Cook Inlet and generate a more reliable
heating supply for the Anchorage area.
Representative Chenault commented that Vice-Chair Saddler
was correct. He shared that when in operation, the Agrium
plant and the Conoco LNG (liquefied natural gas) facility
had provided stability. He mentioned that in the
summertime, Railbelt gas consumption dropped dramatically
and in the wintertime demand increased. During extremely
cold periods, both plants would back gas out of the
facility to ensure enough gas supply for the consumer
market. Both plants provided a relief valve and long-term
stable demand that drove exploration.
2:01:14 PM
Vice-Chair Saddler understood that a storage facility in
Cook Inlet reduced the need for a facility to back out gas.
He wondered whether the Agrium plant was still willing to
back out gas in periods of high demand.
Representative Chenault was unsure and could not speak for
the company. He shared that Agrium had always been good
neighbors in the past and reduced consumption in times of
high demand.
Representative Gara referred to a time in 2008 when the
Palin Administration proposed a small gasline north to
Fairbanks and was told by many Anchorage legislators that
the Cook Inlet gas supply was not sufficient for the
project. He related that continued exploration in Cook
Inlet would produce more gas but that exploration was not
continuous. He argued that the argument kept shifting on
whether enough gas existed in Cook Inlet. He referred to
the credits for the gas-to-liquid products in the CS. He
asked if any facilities currently existed in the state that
would benefit from the tax credits and whether any were
coming online. He didn't want "to give away money" to
companies that were moving forward without the credit.
Representative Chenault mentioned that the BP gas-to-
liquids facility was only a test facility and closed two
years ago. He was not aware of any further use for the
facility.
2:04:50 PM
Co-Chair Neuman did not think that the Agrium company would
invest as large a sum of money as $275 million in startup
costs or that a company that wanted to operate a gas-to-
liquid facility that needed $6.5 billion to develop would
invest that amount of money without a long-term stable gas
supply. A gas-to-liquid facility would be dependent on an
in-state gasline not anticipated until 2024. He also
suggested that more demand would drive more exploration
which would create more jobs and lower the cost of gas. He
believed that Alaska exported most of its raw resources out
of state at the expense of the state's economy. He felt
that Alaska needed more legislation like HB 100 that drove
exploration, added value to a resource, benefitted the
economy, and created jobs. He relayed from testimony that
Agrium would still pay the state $15 million in taxes after
the proposed $3 million credit was deducted.
Representative Gara wondered if there was any other gas-to-
liquid operations in the state other than the BP test
facility. He also wanted to know if the credit would
benefit Point Thompson. Co-Chair Neuman responded that no
gas-to-liquid production existed in the state and that the
credit could benefit Point Thompson.
Representative Guttenberg expressed incredulity that after
$300 million in credits per year for Cook Inlet the state
did still not know whether there was enough gas in Cook
Inlet Basin for Anchorage let alone Fairbanks or other
projects. He was concerned about natural gas supply. He
noted the addition of the gas-to-liquid products credit and
wondered whether a gas-to-liquid facility was being
considered by Agrium.
Co-Chair Thompson believed that it was a job of the state
to encourage development and industry to Alaska and create
a diversified economy and that the legislation was in
concert in what the state should promote.
2:10:54 PM
Representative Guttenberg was in complete agreement. He
wished that the state's agriculture was more developed to
generate more need for the fertilizer. He requested that
someone from DNR could testify in regards to how much gas
was available in the Cook Inlet Basin.
Co-Chair Thompson deduced that a company would not invest
the huge amounts of money needed for startup costs without
a stable long-term gas supply.
Representative Gattis declared a conflict of interest with
Agrium because as a farmer she would purchase fertilizer
from the plant.
Vice-Chair Saddler asked how the royalty rate was re-
established after the credits expired. Representative
Chenault deferred to the House Majority Attorney.
DONALD BULLOCK, HOUSE MAJORITY STAFF, explained that the
royalty rate was set in terms of the leases. Provisions in
the oil and gas leasing statutes allowed for varying the
rates at different times depending on the economics of
production and when the leases were renewed. He detailed
that the legislation took the contract price negotiated
between a producer lessee and the Agrium plant and used the
plant as the value. Royalties were typically expressed as a
percentage of value or a percentage of production depending
on whether the state was receiving royalty in money or gas.
The safety valve for DNR was to examine the contract and
ensure that the contract and valuation was similar to the
kind of contract and valuation that was based on issues in
a subsequent royalty audit. Establishing the price in the
contract provided stability to the buyer of the gas and for
the producer who knew what the royalty was for the life of
the contract.
2:15:46 PM
Representative Wilson thought the bill was about offering
an incentive for a business to startup. Representative
Chenault responded affirmatively. Representative Wilson
asked whether one consequence of HB 100 was to encourage a
gas-to-liquid development. Representative Chenault believed
that was the intent of the new provision in the CS.
Representative Wilson reminded the committee that the
intent of the bill was pro-business.
Vice-Chair Saddler asked whether the state could owe the
company more than the amount of the credit. Mr. Wright
responded in the negative.
Co-Chair Thompson OPENED public testimony.
Co-Chair Thompson asked whether reducing the length of the
credit from 10 to 5 years worked with Agrium's timeframe.
ADAM DIAMOND, MANAGER, GOVERNMENT RELATIONS, AGRIUM
INCORPORATED, answered that the company was seeking the
most attractive offer for the project to measure against
the company's other projects that were internally competing
for the same pool of capital expenditure funding. Any
reduction would impact the "attractiveness" of the project.
He noted that the facility was tentatively scheduled to
open in July, 2017, and Agrium would lose half of one
year's credit.
Representative Gara commented that every startup business
in the state would like to receive a 5 year tax credit. He
wondered why the state would give Agrium the credit under
the logic that the business might startup without the
credit but that a credit further impacted the decision to
move forward.
Mr. Diamond responded that the bill contained provisions
that protected the state and offered significant
safeguards. He indicated that HB 100 generated revenue and
contained significant safeguards for the state. Royalty
revenue would be new revenue to the state and that the
state was currently not collecting tax revenue from the
plant and would not after the sunset date unless the plant
reopened. He deemed that the bill was "set up to protect
the state" and did not reduce an existing revenue stream,
nor necessitated any upfront state obligations,
commitments, or out-of-pocket expenses. Employing royalty
revenues as a benchmark prevented a "revenue negative"
scenario and actually "generated new revenue" for the
state.
2:21:54 PM
Representative Gara referred to Mr. Diamond's previous
testimony that the plant might reopen even without the tax
credits. He surmised that the state would lose revenue if
Agrium moved forward regardless of the tax credit. He
contended that the royalty revenue the state would gain
from new Cook Inlet gas generated by the facilities demand
would eventually be generated by another project or
increased consumer demand. The plant was not gaining the
state royalty revenue that it would not eventually receive
from demand; "it was just royalty revenue from a different
project." He wondered how the state prospered under the
scenario he described.
STEVE WENDT, KENAI PLANT MANAGER, AGRIUM INCORPORATED,
responded that the company was working with a number of
producers who emphasized the need for a "steady and
significant market" for their gas. He maintained that the
inexpensive and easily produced gas in Cook Inlet was
exhausted. He disagreed with Rep. Gara's statement that the
gas would be produced without demand from Agrium. He
maintained that new reserves were difficult to find and
market demand needed to be steady, year-round, and with
high returns to spur exploration investment. He furthered
that Agrium was asking for a credit to offset the premium
price they would be paying for gas in comparison with its
competitors who purchased Nymex natural gas at $2.60 per
thousand cubic feet.
Co-Chair Neuman assumed that if opening up the Agrium plant
was economically feasible the company already would have.
He deduced that the legislation was enough of an incentive
for Agrium to reconsider reopening the facility.
Mr. Diamond remarked that the tax credit would be a
significant factor in the company's deliberations. However,
he could not assure the committee that passage of the
legislation would guarantee the plant's re-opening.
Co-Chair Neuman restated that the plant would be in
operation if it was profitable for Agrium. Mr. Diamond
agreed with the statement.
Co-Chair Thompson commented that with the tax credit
benefit it was more likely that the facility would reopen
and would signal that Alaska wanted to be a business
friendly state.
2:26:16 PM
Representative Guttenberg asked how far the company had
progressed with the design of the plant in context to the
credit for gas-to-liquid products. He wondered whether it
had an impact on the current plant design. Mr. Wendt
responded that gas-to-liquid was a completely different
process and had nothing to do with the Agrium facility.
Representative Guttenberg asked if he knew of any other
urea/ammonia plant planned in the state. Mr. Wendt
responded in the negative. Representative Guttenberg
concluded that the gas-to-liquid language in the CS applied
to another type of plant.
Vice-Chair Saddler asked a technical question. He discerned
that in the urea process the natural gas was used to
capture nitrogen from the atmosphere and was not extracted
from the gas. He asked for confirmation.
Mr. Wendt replied that three main "feed stocks" for the
plant was air, which supplied nitrogen, water, which
supplied hydrogen, and methane from natural gas.
Co-Chair Thompson continued with public testimony.
AERON PLIKAT, PRESIDENT, BUILDING AND CONSTRUCTION TRADES
COUNCIL OF SOUTH CENTRAL ALASKA, ANCHORAGE (via
teleconference), spoke in favor of HB 100. He referred to
the North Kenai area as the "rustbelt." He delineated that
the first noticeable landmark when driving into Nikiski was
the idle Agrium facility that had provided the community
with 300 jobs. He viewed reopening the plant as a great
opportunity for jobs in the area. Over 400 construction and
restart jobs would be necessary and over 100 fulltime jobs
would be brought back to the Kenai. He felt that the plant
would spur opportunities for young people with workforce
development.
PAUL CARR, VICE-PRESIDENT, BUILDING AND CONSTRUCTION TRADES
COUNCIL OF SOUTH CENTRAL ALASKA, ANCHORAGE (via
teleconference), related that he was also the business
manager for the Iron Workers Local 751. He spoke in support
of the legislation. He believed the project was appropriate
and much needed in the current economic downturn. He was
afraid of losing skilled Alaskan trade and construction
workers due to the economic downturn similar to a situation
in late 1980's. He was in the business of giving people in
Alaska the opportunity to make a living. He believed that
Agrium would provide "family-wage" jobs and offer
diversification of the state's economy.
2:33:22 PM
PAUL GROSSI, REPRESENTATIVE, PLUMBERS AND PIPEFITTERS AND
IRON WORKERS, spoke in favor of the bill. He concurred with
the previous testimony that the plant would create much
needed direct and indirect jobs for the Kenai. He believed
that the plant had the potential to generate state revenue
and bring in approximately $345 million over the 20 year
life of the plant. He was puzzled by any reluctance in
member's support of the legislation. He thought the bill
was positive for the state and urged support for the bill.
Representative Gara referred to previous testimony from
Agrium that the plant might move forward without tax
credits. He restated his concern over ceding state revenue
under the current scenario.
Mr. Grossi shared personal experience as a metaphor. He had
recently purchased a car. He purchased the car because the
dealer offered some special incentives. He looked at the
project in the same light.
Representative Gara reiterated previous testimony regarding
the possibility of the plant moving forward without tax
credits. He inquired about the chances of the company
moving forward without the tax credit. Co-Chair Thompson
though that the answer was a corporate board decision and
was not appropriate to reveal.
Representative Gara asserted that if the state was going to
be paying out over $3 million per year in a time of billion
dollar budget deficits he should be able to ask the
question.
Mr. Diamond was uncertain how to answer the question; odds
were not assigned. He reminded the committee of the
"inherent hurdles" that the project faced and thought he
could weigh the probabilities himself.
2:39:59 PM
Vice-Chair Saddler wondered about the rehabilitation costs
of $275 million over two years. He inquired about the
present condition of the facility.
Mr. Wendt answered that the company installed vapor face
corrosion inhibitors when the plant shut down in 2007 that
kept the plant in good condition. He expounded that
recently the plant was extensively inspected and the
company was "pleased" with its condition.
Vice-Chair Saddler wanted to know about any potential
interface with the AKLNG project. Mr. Wendt reported that
Agrium was actively participating in the governor's task
force and was "very interested" in seeing a gasline to
Nikiski.
Co-Chair Thompson CLOSED public testimony.
2:41:50 PM
Representative Gara MOVED to ADOPT Amendment 1.
Representative Wilson OBJECTED for discussion.
Representative Gara reviewed Amendment 1:
Page 1, line 4, following "ammonia;"
Insert "providing an optional exemption from
municipal property taxation for certain in-state
processing facilities that manufacture urea or
ammonia;"
Page 1, following line 6:
Insert a new bill section to read:
"* Section 1.AS 29.45.050 is amended by adding a
new subsection to read:
(x) A municipality may by ordinance approved
by the voters exempt or partially exempt
from taxation an in-state processing
facility whose primary function is the
manufacturing and sale of urea or ammonia to
third parties in arm's length transactions.
An exemption under this subsection may be of
limited or unlimited duration."
Page 1, line 7:
Delete "Section 1"
Insert "Sec. 2"
Renumber the following bill sections accordingly.
Page 2, line 27, following "section.":
Insert "A credit under this section may not
exceed $2,000,000 for each in-state processing
facility a year."
Page 3, line 11:
Delete "sec. 2"
Insert "sec. 3"
Page 3, line 14:
Delete "Sections 1, 2, and 4"
Insert "Sections 1 - 3 and 5"
Page 3, line 15:
Delete "Section 3"
Insert "Section 4"
Representative Gara explained the amendment. He stated that
the potential Agrium tax credit was $4 million per year.
The amendment would offer a $2 million tax credit from the
state and allowed the municipality to offer, through a vote
of its citizens, the ability to exempt or partially exempt
the plant from local taxes. He offered that the state had a
$3.5 billion deficit and would lose needed revenue and
thought the municipality that was benefitting from Agrium
should share the burden. He was troubled that the corporate
board members were not present to discuss whether the plant
would reopen without a tax credit.
Representative Wilson voiced that the credits were reduced
to five years and the amendment would add an additional
"hurtle" on the project. She believed the bill would help
to bring in new revenue during the economic tailspin and
created jobs for the Kenai. She ascertained that Agrium
determined it needed the credit to incentivize the project
and that the plant's reopening would vitalize the economy
and would help the state's deficit in the long run.
Representative Kawasaki supported the amendment. He
suggested that due to the state's fiscal situation
municipalities will need to pay for more of its operations
with less support from the state. He added that the
municipality should contribute to the credit incentives
because it directly benefited from the plant. He supported
limiting the credit in light of the state's budget crisis.
He believed that the zero fiscal note was deceptive and
that the credit could result in a greater revenue impact
for the state.
2:46:47 PM
Mr. Wright stated that the sponsor opposed the amendment.
He agreed that municipalities will need to take over more
of its services. He believed the Agrium plant provided the
opportunity for a municipality to increase its tax base and
deliver more of its own services. He thought that the
amendment removed incentives to increase gas production on
state leases. The state wanted to increase gas usage to
spur gas production on state leases, which provided royalty
revenue. The amendment discouraged the goal.
Representative Guttenberg spoke in support of the amendment
as an appropriate action to take in challenging fiscal
times. He observed that the amendment did not
disincentivise the purpose of the bill. He thought that the
borough (Kenai Peninsula Borough) should have "buy-in" as
the main beneficiary through increased jobs, economic
development, increased property tax, etc. The borough was a
major player both in impacts and benefits. He commented
that the borough could actually do more to incentivize the
plant reopening than the amendment offered by waiving more
property tax or other infrastructure incentives.
Representative Wilson maintained her objection. A roll call
vote was taken on Amendment 1.
IN FAVOR: Gara, Guttenberg, Kawasaki
OPPOSED: Gattis, Saddler, Wilson, Thompson, Neuman
The MOTION FAILED (3/5). Amendment 1 failed.
2:50:24 PM
Co-Chair Thompson MOVED to ADOPT conceptual Amendment 2:
Page 3, line 22:
Delete "2022"
Insert "2024"
Representative Gara OBJECTED.
Co-Chair Thompson explained that the amendment increased
the number of tax credit years to 7. In the event that
Agrium was not operable by July 2017, the amendment gave
the company more time for startup and maintained the full
five years' worth of credits.
Representative Gara understood that the intent of the
amendment was to ensure Agrium received the five full years
of tax credits in case of a late start. He offered a
conceptual amendment.
Representative Gara MOVED to AMEND conceptual Amendment 2:
Add language: "The Company may not use the tax credit
for more than its first five years of operations."
Representative Wilson OBJECTED for discussion.
Representative Guttenberg asked for clarification. He
surmised that the intent was to grant the company a tax
credit for the first five full years of operation and not
include a sunset date.
Representative Gara indicated that the original amendment 2
gave Agrium 7 years of tax credits if the plant started up
immediately. The conceptual amendment offered 5 full years
of tax credits for the first five years of operation from
the date the facility opened.
Mr. Wright indicated that the original bill offered the tax
credit for ten years.
A roll call vote was taken on the amendment to conceptual
Amendment 2.
IN FAVOR: Guttenberg, Kawasaki, Saddler, Gara
OPPOSED: Gattis, Wilson, Edgmon, Thompson, Neuman
The MOTION FAILED (4/5).
Representative Gara WITHDREW his OBJECTION to conceptual
Amendment 2.
There being NO OBJECTION, conceptual Amendment 2 passed.
Co-Chair Neuman responded to Representative Guttenberg's
inquiry regarding the interest in the state for gas-to-
liquids products. He relayed that in 2009 he attended a
meeting with Senator Stevens and members of the Defense
Logistics Agency part of the Department of Defense that
purchased all of the fuel for the military worldwide. The
agency via its Defense Energy Support Center (DESC)
expressed interest in Alaska and in May 10 through 12, 2009
held a worldwide conference on the development of
alternative fuels and alternative fuel production in
Alaska. He reported that DESC spent a great deal of time
and money in an attempt to start an alternative fuels
program in Alaska, to the point of holding a worldwide
conference. He added that "the state could not get a
pipeline built for one reason or another." He declared that
the CS for HB 100 was "a good bill." He shared that the
sponsor permitted the addition of the gas-to-liquids
product provision. He communicated that he did not want to
hinder passage of the bill and wanted to revert to the
House Resources Committee Substitute version of the bill
and would continue to work on gas-to-liquids but not via
the legislation.
2:57:38 PM
Co-Chair Thompson requested that he make the changes in the
House Rules Committee. Co-Chair Neuman agreed and restated
that he wanted to avoid slowing down passage of the
legislation.
Representative Chenault, in regards to comments made by
Representative Guttenberg, elaborated that the small
producer credit for Cook Inlet ended next year. He believed
that the credits were successful and more gas was
discovered which benefitted the state. He cited the
testimony referring to North Kenai as the "rustbelt." He
asserted that people from the community he represented were
"proud" and wanted to work. The community was a rustbelt
subsequent to the plant's closure due to lack of natural
gas. He contended that currently his community [Nikiski]
was "very prosperous" with new businesses opening up due to
exploration tax credits that increased the [Cook Inlet] gas
supply. He mentioned the plan to supply Fairbanks with
excess Cook Inlet gas [Interior Energy Project]. He
believed that "the outlook in his community was fairly
bright" and if the state continued to help promote
development the future would be brighter for Alaska.
Representative Wilson MOVED to REPORT CSHB 100(FIN) out of
committee with individual recommendations and the
accompanying fiscal note.
Representative Kawasaki OBJECTED.
Representative Wilson commented that she was an ardent
supporter of the bill. She referenced the closing of the
Flint Hills Refinery [North Pole] because of the lack of
incentives and higher operating costs in the state. She
believed that the community felt the repercussions of the
refinery closure. She supported incentivizing new business.
Representative Kawasaki discussed his objection. He
referred to the zero fiscal note (FN 1 REV) and surmised
that it was deceptive to think that the credit would not
cost the state anything. He stated that if the Agrium plant
opened the state would lose approximately $20 million to
$30 million dollars over 7 years. He felt that there was a
fiscal impact to the bill and that there were other state
priorities like school funding and senior benefits that
might be subject to budget cuts due to the economic crisis.
He relayed from testimony that Agrium might move forward
with the project regardless of the tax credit and commented
that the credit was most likely unnecessary and frivolous.
3:04:58 PM
Vice-Chair Saddler was supportive of the bill. He believed
that the opportunity to the state came at no cost and was a
net gain for the state and to the community and would spur
diversification of the economy and more Cook Inlet
exploration.
Representative Gara opposed the bill. He felt that the bill
was a giveaway of $4 million a year to a company that might
move forward on the project without a tax credit and was a
"terrible way to negotiate" in light of a $3.5 billion
budget deficit. He commented that the legislative refrain
was that "everybody had to feel the pain" of budget cuts
but the legislature would cede $4 million to big business.
He thought the priorities were wrong. He disagreed with the
argument that the state would gain additional royalties
from the legislation and thought that it was misleading. He
opined that if enough attainable gas was available in Cook
Inlet the state was going to gain the royalties anyway
because another entity would purchase the gas. He stated
that no one was going to leave affordable and recoverable
gas in Cook Inlet. He conveyed that the idea that the state
could not ask the local community that would benefit the
most through jobs and an expanded tax base was unfounded.
He felt that the negotiations around HB 100 had been
lacking and wondered why no one had asked the community to
contribute.
Representative Kawasaki maintained his objection.
A roll call vote was taken on the motion.
IN FAVOR: Saddler, Wilson, Edgmon, Gattis, Thompson, Neuman
OPPOSED: Guttenberg, Kawasaki, Gara
The MOTION PASSED (6/3).
CSHB 100(FIN) was REPORTED out of committee with a "do
pass" recommendation and with a previously published zero
fiscal note: FN1 (DOR).
3:09:13 PM
AT EASE
3:11:21 PM
RECONVEYEND
Co-Chair Neuman MOVED to ADOPT the proposed committee
substitute for HB 81, Work Draft 29-LS0346\E, Strasbaugh,
3/19/15.
There being NO OBJECTION, it was so ordered.
3:12:10 PM
AT EASE
3:12:41 PM
RECONVENED
HOUSE BILL NO. 81
"An Act relating to an exemption from the regulation
of construction contractors."
REPRESENTATIVE CATHY TILTON, SPONSOR, provided a brief
summary of the bill. She explained that HB 81 related to
the licensing of residential contractors. The bill did not
prevent owner-built Alaskan housing, selling an owner-built
home, or propose a new licensure. Due to a loophole in
current law, the "owner-builder exemption" created a
situation where unlicensed contractors had engaged in
business while avoiding requirements for licensing,
bonding, and insurance. She reported that the language
change in the new committee substitute was developed
through discussions between the Homebuilders Association,
individual Alaskans, and the Department of Labor and
Workforce Development. The bill "reasonably" included all
individuals engaged in home construction as a regular
course of business under the existing residential
contracting licensure. She relayed personal experience of
building her own home and stated that its common practice
for people living in rural areas to construct their own
home. She noted that according to existing statute an
owner-builder was allowed to sell their home after two
years.
DANIEL BELLERIVE, STAFF, REPRESENTATIVE CATHY TILTON,
reviewed the sectional analysis (copy on file) for the
committee substitute (CS). He read the analysis from a
prepared document:
Section 1(Page 1,lines 3-8) - Section 1adds a new
section stating that the intent of this bill is not to
limit the freedom and ability of a person to construct
or sell their own home.
Section 2 (Page 1,lines 9-15) - Section 2 adds a new
subsection directing that the department shall
investigate and take action if the notice and
circumstances of a sale under AS 08.18.161(11)
indicate that the owner is operating a business that
requires them to register as a contractor under this
chapter.
Section 3 (Page line 1through Page line 11) -
Section 3 accomplishes three things.
1. Page 2, lines 23-25 adds clarification explicitly
stating that AS 08.18.161(9) refers to existing
structures.
2. Page 2, lines 30 and 31 expand the exemption in
AS 08.18.161(11) to include owners acting as their own
contractor, as well as hired workers or
subcontractors. Previously this exemption strictly
applied to workers hired on an hourly basis.
3. Page 3, lines 3-7 add a requirement for an owner-
builder to provide notification if they advertise or
sell their home build under AS 08.18.161(11) before
the two year period in statute.
Section 4 clarifies that for the purposes of this
section, construction begins when the owner begins the
actual construction work or enters into an agreement
labor, act as a subcontractor, or provide materials
for the construction.
3:18:02 PM
Representative Gattis wanted clarification about when
construction ended. She wondered whether an owner-builder
could sell their house if it was not completed and the
owner discontinued construction. Mr. Bellerive replied that
regardless of the level of completeness if the construction
was ceased then the period of construction was over and the
owner could sell the house. Representative Gattis asked
whether the owner had to fill out a form or notify
government in order to sell the unfinished house. Mr.
Bellerive responded in the negative.
Representative Guttenberg referenced the two year period
provision and wanted to know the legal definition of the
period of construction.
Mr. Bellerive answered that a specific definition for a
period of construction did not exist in statute. He
indicated that the two year period referred to the two year
period after the construction ended. He added that
regardless of the level of completion the house could be
sold two years after construction had ceased.
Representative Guttenberg referred to page 3, line 5, the
words, "…on forms provided by the department." He wondered
how the home builder found out that a form had to be filled
out in order to sell the house, especially if the owner was
not using a bank or realtor. He asked how the state was
going to monitor owner-built house sales by owner.
Mr. Bellerive replied that an owner-builder living in the
house would qualify for exemption 9 and was further
protected from any obligation to submit notice. He cited
page 2, line 23 and read the following:
(9) [(10)] a person working on and existing structure
on that person's own property, whether occupied by the
person or not, and a person working on that person's
own existing residence, whether owned by the person or
not…
Mr. Bellerive detailed that the definition of a residence
was "an existing home being a residence previously occupied
as a residence." Regardless of what the subjective view of
a completed home was, if the owner-builder was claiming the
house as a residence exemption 9 applied instead of
exemption 11.
Representative Guttenberg was still unclear about what the
difference was between exemption 9 and exemption 11. He
read page 3, lines 3 through 5:
…an owner who advertises the structure under
construction for sale or sells the structure during
the period of construction or within two years after
the period of construction ends shall file, on forms
provided by the department…
Co-Chair Thompson voiced that the bill was not moving out
of committee today and he would help provide clarity at a
later date.
3:23:40 PM
Representative Kawasaki referred to the new language under
exemption 11. He deduced that the language seemed to place
the obligation on the person selling the house to obtain
the forms. He was uncertain about "the effect" of the
language. Mr. Bellerive deferred to the department.
Representative Gara surmised that the provision only
applied to an owner-builder and not someone assisting with
the construction. He asked for confirmation. Representative
Tilton confirmed the statement was correct.
Representative Gara provided a scenario where someone build
a cabin and occupied it unfinished for a period of over 10
years then finally completed construction and sold it after
two years. He wondered how that was allowed under the bill.
Mr. Bellerive commented that in the particular scenario the
only requirement for the owner would be to notify the
department. He reported that the department did not have
the authority to prohibit someone from selling their own
property and emphasized the use of the word notify, since
permission was not required. The notification ensured that
the sale was not viewed as a business transaction.
HB 81 was HEARD and HELD in committee for further
consideration.
3:27:08 PM
Co-Chair Thompson reviewed the agenda for the following
morning meeting.
ADJOURNMENT
3:27:45 PM
The meeting was adjourned at 3:27 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 176 WorkDraft CS.PDF |
HFIN 4/9/2015 1:30:00 PM |
HB 176 |
| HB 100 Agrium.docx |
HFIN 4/9/2015 1:30:00 PM |
HB 100 |
| HB 100 Support McGrath.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 100 |
| HB 100 Letter of Support-Furie.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 100 |
| HB 176 NEW FN LEG.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 176 |
| HB176-Judiciary-4-01-15.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 176 |
| HB 100 CS WORKDRAFT FIN VERSION G.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 100 |
| HB81 Draft Proposed CS ver E.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 81 |
| HB 155 NEW HFIN FN 40915.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 155 |
| HB 100 Amendment 1 Gara.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 100 |
| HB 155 CS WORKDRAFT N version.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 155 |
| HB 155 Sponsor Statement.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 155 |
| HB 155 Version Changes H-N.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 155 |
| HB 100 Cook Inlet Assumptions.pdf |
HFIN 4/9/2015 1:30:00 PM |
HB 100 |