02/20/2012 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HCR23 | |
| HB263 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HCR 23 | TELECONFERENCED | |
| *+ | HB 263 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 20, 2012
1:03 p.m.
MEMBERS PRESENT
Representative Eric Feige, Co-Chair
Representative Paul Seaton, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Alan Dick
Representative Neal Foster
Representative Bob Herron
Representative Cathy Engstrom Munoz
Representative Berta Gardner
Representative Scott Kawasaki
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE CONCURRENT RESOLUTION NO. 23
Establishing and relating to the Alaska Arctic Policy
Commission.
- MOVED CSHCR 23(RES) OUT OF COMMITTEE
HOUSE BILL NO. 263
"An Act relating to information concerning oil and gas taxes,
including information about expenditures that must be provided
in order to claim an oil and gas production tax credit for those
expenditures, and relating to the disclosure of that
information; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HCR 23
SHORT TITLE: ALASKA ARCTIC POLICY COMMISSION
SPONSOR(s): FINANCE BY REQUEST OF AK NORTHERN WATERS TASK FORCE
02/03/12 (H) READ THE FIRST TIME - REFERRALS
02/03/12 (H) RES, FIN
02/07/12 (H) FIN AT 1:30 PM HOUSE FINANCE 519
02/07/12 (H) <Pending Referral>
02/20/12 (H) RES AT 1:00 PM BARNES 124
BILL: HB 263
SHORT TITLE: PRODUCTION TAX CREDIT; DISCLOSURES
SPONSOR(s): GARDNER, GARA, TUCK, KAWASAKI
01/17/12 (H) PREFILE RELEASED 1/13/12
01/17/12 (H) READ THE FIRST TIME - REFERRALS
01/17/12 (H) RES
02/20/12 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
REPRESENTATIVE REGGIE JOULE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced HCR 23 on behalf of the House
Finance Committee, sponsor by request of the Alaska Northern
Waters Task Force.
CHRISTINE HESS, Staff
Representative Reggie Joule
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: During hearing of HCR 23, answered
questions.
REPRESENTATIVE BRYCE EDGMON
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified in support of HCR 23.
JOHN LARSEN, Audit Master
Tax-Production Audit Group
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 263, answered
questions.
LENNIE DEES, Audit Master
Tax-Production Audit Group
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 263, answered
questions.
DONNA KEPPERS, Audit Master
Tax-Production Audit Group
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: During the hearing on HB 263, answered
questions.
ACTION NARRATIVE
1:03:35 PM
CO-CHAIR PAUL SEATON called the House Resources Standing
Committee meeting to order at 1:03 p.m. Representatives Dick,
Foster, Gardner, Kawasaki, Feige, and Seaton were present at the
call to order. Representatives P. Wilson, Herron, and Munoz
arrived as the meeting was in progress.
HCR 23-ALASKA ARCTIC POLICY COMMISSION
1:04:23 PM
CO-CHAIR SEATON announced that the first order of business would
be HOUSE CONCURRENT RESOLUTION NO. 23, Establishing and relating
to the Alaska Arctic Policy Commission.
1:04:42 PM
REPRESENTATIVE REGGIE JOULE, Alaska State Legislature, speaking
on behalf of the House Finance Committee, sponsor by request of
the Alaska Northern Waters Task Force, explained that HCR 23
proposes establishing an Alaska Arctic Policy Commission, which
was one of the recommendations from the Alaska Northern Waters
Task Force (ANWTF). The ANWTF was established in 2010 in
response to the discussions being held in Washington, D.C., the
Canadian North, and the Circumpolar North regarding the Arctic
and Alaska's Arctic waters. One of the goals of ANWTF was to
get the legislature engaged in these conversations as opposed to
waiting for budgetary items to come forward. In the process of
engaging the legislature, the task force would also engage the
communities and seek areas of expertise to provide information.
The task force held a series of meetings around the state. He
characterized the process as a very interesting journey.
1:06:55 PM
REPRESENTATIVE JOULE directed the committee's attention to the
information in the committee packet from the National Security
Presidential Directive and Homeland Security Presidential
Directive. These directives were created in January 2009 under
the George W. Bush Administration. He told the committee that
the committee packet should include information regarding
Canada's strategy with the Arctic, but he would provide the
committee with information regarding Denmark's strategy with the
Arctic. The aforementioned illustrates that other countries
have been developing policies related to the north. He then
informed the committee that the Arctic Council is currently
chaired by Sweden. In 2013 Canada will assume the chair of the
Arctic Council for two years, which will be followed by the U.S.
chairing the council, he highlighted. Therefore, for a four-
year period the Arctic Council will be chaired by North America.
By working with Canada and by chairing the council, there's the
ability to have some impact on the policies and decisions of the
Arctic Council. The aforementioned is, in part, why this
resolution is before the committee. Collectively, the ANWTF
believed that the next step should be taken because although
there is a national policy regarding the Arctic, there is no
strategy in terms of implementation of that policy. In
conclusion, Representative Joule opined that establishing the
Alaska Arctic Policy Commission would help Alaska stay engaged
in the conversation regarding the Arctic.
1:10:22 PM
REPRESENTATIVE GARDNER recalled testimony from Canadian visitors
who relayed that Canada already views itself as an Arctic
nation. However, the U.S., save Alaska, is largely unaware of
the Arctic issues. She, therefore, asked if the Canadian
territories and provinces that border the Arctic have a separate
policy or commission separate from the national policy or
commission. She then questioned in what ways Alaska's Arctic
policy would be different than that of the U.S. national policy.
REPRESENTATIVE JOULE confirmed that Canada does have an Arctic
policy and three of Canada's Arctic provinces/territories have
put forth their own Arctic visions. Therefore, he recommended
that Alaska should do much the same.
1:12:02 PM
CHRISTINE HESS, Staff, Representative Reggie Joule, Alaska State
Legislature, related that the Nunavut and Northwest Territories'
Arctic policies are new and Canada's [national] policy was
established in 2009. Canada's Arctic policy is geared toward
military and national sovereignty and resource development,
whereas the Arctic policies of Nunavut, the Northwest
Territories, the Yukon, and Greenland are more about regional
cooperation and economically sustainable communities and
resource development. Therefore, the policy of the territories
and provinces are more regionally based.
1:13:03 PM
REPRESENTATIVE DICK expressed concern from his constituents that
this proposal might result in the U.S. sacrificing a bit of its
national sovereignty and joining a global [effort]. He
requested assurance that is not the case.
REPRESENTATIVE JOULE remarked, "I guess one of the options is to
do nothing; where would that take us?" Because of Alaska's
location, the U.S. sits on the Arctic Council as one of the
Arctic nations. With regard to whether it's appropriate to
allow the federal government to make the decision and follow its
lead, he opined that Alaska has a bit of independence and would
like to be able to influence some of the decisions being made at
the federal level as well as at the international level. He
suggested, "If anything, it would be asserting our sovereignty."
1:14:53 PM
REPRESENTATIVE HERRON, referring to the membership of the Alaska
Arctic Policy Commission, asked if the intent is for the members
to be Alaska residents.
REPRESENTATIVE JOULE answered that for the most part the members
of the commission should be Alaska residents.
1:15:41 PM
REPRESENTATIVE HERRON then inquired as to the reasoning behind
requiring the final report one year after the preliminary report
is due.
REPRESENTATIVE JOULE responded that the preliminary report
provides an update to the legislature, basically a progress
report.
1:16:51 PM
REPRESENTATIVE HERRON inquired as to what state should stand up
for its interests in the Arctic.
REPRESENTATIVE JOULE answered Alaska.
REPRESENTATIVE HERRON then questioned who should respond when
actions are taken by others that impact Alaska's national
interest and undermine relationships the state has built or lack
sensitivity to Alaska's interests and perspectives.
REPRESENTATIVE JOULE again answered Alaska.
1:17:49 PM
REPRESENTATIVE FOSTER commended Representative Joule for his
work on this. He pointed out that the task force focused on
ensuring that the benefits would be shared amongst those who are
most effected. He then asked if the Inuit Circumpolar Council
(ICC) would be an example of an international Arctic
organization from which one of the members of the commission
would represent.
REPRESENTATIVE JOULE replied yes.
1:19:01 PM
REPRESENTATIVE P. WILSON inquired as to whether these will be
permanent positions since there is no mention of rotating the
membership. She related her belief that it's advisable to have
the rotation go through a governor's terms in order to provide
some continuity between administrations.
REPRESENTATIVE JOULE clarified that once appointed the
individuals would serve on the commission; there would be no
rotation. The membership is a little larger than the membership
of the ANWTF because it was realized that there were some
individuals that would have been helpful to have involved with
ANWTF. For instance, the oil and gas industry, the University
of Alaska and its research capabilities, and tribal members
weren't members of ANWTF. The membership of the proposed Alaska
Arctic Policy Commission would bring more of the stakeholders
together to shape this policy. He them emphasized that one of
the important pieces of ANWTF was the dialogue with communities
and continuing that effort is very important.
1:22:00 PM
CO-CHAIR SEATON recalled from Representative Joule's earlier
remarks that the majority of the membership of the proposed
Alaska Arctic Policy Commission should be Alaskans. Therefore,
he surmised that there should be a qualification for the
language on page 3, lines 8-17, to specify the members are to be
Alaskans.
MS. HESS pointed out that the member representing an
international Arctic organization may or may not be an Alaskan.
Therefore, the Alaskan qualification would refer to the
membership on page 3, lines 8-16.
REPRESENTATIVE JOULE interjected that he wanted to leave that
option open, but added that ICC would likely be the
international Arctic organization from which the membership
would come.
1:23:19 PM
CO-CHAIR SEATON directed attention to the language on page 3,
lines 26-29, as follows:
FURTHER RESOLVED that the public members and, if
the member representing the federal government does
not receive reimbursement for expenses from the
federal government, the federal government member of
the commission may receive per diem and travel
expenses authorized for boards and commissions under
AS 39.20.180;
CO-CHAIR SEATON questioned whether the intent is to cover the
expenses of the individual or is the desire for [the member of
the international Arctic organization] to be an Alaskan.
REPRESENTATIVE JOULE said that he would consider an amendment to
require all the members of the commission be Alaskans as a
friendly amendment.
MS. HESS, drawing from the experience with ANWTF, related that
although ANWTF provided for international fees, about $100,000
was left over because not everyone could attend every meeting.
Therefore, that $100,000 could be re-appropriated to help cover
the expenses of this proposed Alaska Arctic Policy Commission.
She suggested that if there was an international member on the
proposed commission, the cost of that member could be absorbed
into the budget.
1:25:10 PM
CO-CHAIR SEATON clarified that he is trying to understand how
the sponsor would like to structure this.
REPRESENTATIVE JOULE stated that he would like for the
membership of commission [specified on page 3, lines 8-17] to be
composed of Alaska residents, particularly since it would be an
Alaska strategy and policy.
CO-CHAIR SEATON commented that was his thinking that as well.
1:25:40 PM
CO-CHAIR SEATON recalled discussions of other legislation
involving Norway and the Arctic Council that revealed they were
about nation-to-nation interactions. This proposal would
provide the state with a structure to influence and participate
in the Arctic Council. He asked if that is part of the
intention of this resolution.
REPRESENTATIVE JOULE acknowledged that the State of Alaska is
already engaged in some of the discussions regarding the Arctic.
The difference, in part, with this proposal is that this is an
opportunity for the state, including the legislature, to remain
active and engaged in discussions and the process of the Arctic
vision. A result of the "Findings & Recommendations of the
Alaska Northern Waters Task Force" report is that he and
Commissioner Hartig will travel to Washington, D.C., to meet
with the U.S. Arctic Council senior advisor. He noted that the
Department of Interior and the U.S. Coast Guard are very
interested [in ANWTF's findings and recommendations as well].
1:29:33 PM
REPRESENTATIVE P. WILSON agreed that this is an extremely
important issue that should be moved forward. She questioned
whether Arctic policy is an important enough issue that someone
from the House Finance Committee should be on the proposed
commission.
REPRESENTATIVE JOULE pointed out that the resolution
specifies there are to be three representatives appointed by the
Speaker of the House of Representatives and three senators
appointed by the President of the Senate. The members who are
appointed would be left to the discretion of the Speaker and the
President. He then highlighted that both co-chairs of the
Senate Finance Committee and himself, a member of the House
Finance Committee, were members of ANWTF as well as alternates
Representative Edgmon, member of the House Finance Committee,
and Senator Olson, member of the Senate Finance Committee.
1:30:48 PM
REPRESENTATIVE GARDNER said she was struck by the language used
regarding the membership of the proposed commission, which
include "appointed", "representing", and "from". She opined
that the language is problematic. For example, it is difficult
to represent the federal government unless he/she is an
ambassador. Therefore, she questioned how an Alaskan employed
by the federal government, perhaps through the Department of
Interior or the Bureau of Land Management, would have the
authority from their employer to represent the federal
government. She suggested that the language needs to be
wordsmithed a bit.
MS. HESS informed the committee that the language is the same as
that used for the resolution [that created ANWTF], which didn't
seem to cause any problem. She explained that [with ANWTF] the
member representing the federal government became a liaison
because the President of the U.S. would have to approve for the
individual to actually represent the federal government. The
ANWTF included two rear admirals as members and they were very
active contributing members. In further response to
Representative Gardner, she confirmed that the members
representing the federal government on ANWTF were in effect
delegated to represent the federal government.
1:32:34 PM
REPRESENTATIVE HERRON related his understanding that the U.S.
Arctic policy essentially says that the U.S. is an Arctic nation
and that it is the policy of the U.S. that it will involve
Alaskan communities in the decisions impacting them. Therefore,
he encouraged the sponsor to include a "Whereas" clause that
speaks directly to the involvement of Alaskans. In response to
Co-Chair Seaton, Representative Herron specified that the
language he is referencing can be found in the National Security
Presidential Directives (NPDS) - 66 on page 2 in the Background
section where it says, in part, "The United States is an Arctic
nation, ..." and on page 2 in the Policy section where it says,
in part, "5. Involve the Arctic's indigenous communities in
decisions that affect them;".
1:34:22 PM
CO-CHAIR SEATON invited public testimony.
1:34:59 PM
REPRESENTATIVE BRYCE EDGMON, Alaska State Legislature, informed
the committee that he was an alternate member of the ANWTF and
was able to participate in all the meetings. He then related
his strong support for HCR 23 as there are a host of reasons to
discuss the importance of Alaska being fully engaged in the
opening of the Arctic. Moreover, he expressed the importance of
Alaska being engaged with the U.S. in terms of Alaska being
strategically aligned in the opening of the Arctic as a foreign
policy matter for the U.S. He stated that there are many
details from ANWTF that need to be shared. He then highlighted
the importance of keeping the commission going in order to keep
the awareness level current in Alaska.
1:37:07 PM
CO-CHAIR SEATON, after ascertaining no one else wished to
testify, closed public testimony.
1:37:16 PM
CO-CHAIR SEATON moved to adopt Conceptual Amendment 1, as
follows:
Page 3, line 6, following "follows";
Insert "of which (B) through (I) will be Alaska
residents"
1:37:43 PM
REPRESENTATIVE P. WILSON objected for discussion purposes and
questioned whether Conceptual Amendment 1 should include
subparagraph (A) on page 3, line 7.
CO-CHAIR SEATON explained that subparagraph (A) refers to the
federal government.
1:38:25 PM
CO-CHAIR FEIGE also questioned why not include subparagraph (A).
CO-CHAIR SEATON pointed out that there are a number of entities
for which individuals may work and who may be in the appropriate
status to represent the agency. He said he wasn't sure where it
would structurally make sense for the federal agencies, and
therefore he didn't include subparagraph (A).
1:39:27 PM
REPRESENTATIVE P. WILSON removed her objection to Conceptual
Amendment 1. There being no further objection, Conceptual
Amendment 1 was adopted.
1:39:55 PM
REPRESENTATIVE HERRON moved to adopt Conceptual Amendment 2,
which would insert language in HCR 23 relating that "the United
States calls itself an Arctic nation and it does have a policy
that does involve the Arctic's indigenous communities and
decisions that affect them." The aforementioned essentially
says that Alaskans do as well.
CO-CHAIR SEATON surmised then that Conceptual Amendment 2 would
say that "The policy of the United States for the Arctic region
is that the United States will involve Arctic indigenous
communities in decisions that affect them." He related his
understanding that Conceptual Amendment 2 would essentially be
an additional "WHEREAS" clause.
REPRESENTATIVE HERRON replied yes.
There being no objection, Conceptual Amendment 2 was adopted.
1:41:43 PM
CO-CHAIR FEIGE moved to report HCR 23, as amended, with
individual recommendations and accompanying fiscal notes. There
being no objection, CSHCR 23(RES) was reported from the House
Resources Standing Committee.
HB 263-PRODUCTION TAX CREDIT; DISCLOSURES
1:42:48 PM
CO-CHAIR SEATON announced that the next order of business would
be HOUSE BILL NO. 263, "An Act relating to information
concerning oil and gas taxes, including information about
expenditures that must be provided in order to claim an oil and
gas production tax credit for those expenditures, and relating
to the disclosure of that information; and providing for an
effective date."
1:43:18 PM
REPRESENTATIVE GARDNER moved to adopt CSHB 263, Version 27-
LS1053\E, Bullock, 2/17/12, as the working document. There
being no objection, Version E was before the committee.
1:43:50 PM
REPRESENTATIVE GARDNER, speaking as one of the joint prime
sponsors of HB 263, informed the committee that [Version E] was
offered as an amendment to HB 110 [in the House Resources
Standing Committee] and on the House floor. Although she
ultimately pulled the amendment to HB 110, she said she
understood there was support for it from members of the
committee. She then directed attention to a document in the
committee packet entitled "Disclosure Requirements for Film Tax
Credits". Those in the film industry who want to do business in
Alaska and claim the film tax credits must disclose the
following: name of the taxpayer, project title, amount of the
Alaska expenditure, production schedule, production type,
communities where expenditures occurred, wages paid to residents
and nonresidents, costs in in-state Alaska shipping, shipping to
Alaska, location fees, facility rentals, services, food,
lodging, and amount of tax credit that is rewarded. All of the
aforementioned is public record for the film tax credits. Over
a two-and-a-half year period, the tax credits have totaled
$24,329,051.20, which isn't a huge amount. However, for the $4
billion that the state has invested in the oil industry tax
credit, there is relatively little known.
1:46:07 PM
REPRESENTATIVE GARDNER surmised that most [legislators] are
supporters of various tax incentives and credits, and have goals
in terms of those. However, very little is known about what has
been purchased with those tax incentives and credits. She
opined that it's the legislature's problem that it didn't
establish [disclosure requirements for the oil and gas industry]
in the beginning. There is no knowledge, with any specificity
or detail, on what $4 billion [in tax incentives and credits]
has been spent. Therefore, the legislature can't pinpoint
what's really working, that is where the incentives are working
and where they are paying for work that would be performed
regardless of the incentives. She reminded the committee of
testimony from various experts including Dr. Pedro van Meurs and
Robin Brena, regarding how little the legislature knows about
what is being spent on the North Slope in comparison to what
Norway and other countries with much tighter control of their
data know. Although she acknowledged that perhaps the
Department of Revenue (DOR) may know the information, it doesn't
help the legislature make decisions. Representative Gardner
emphasized when the state spends $4 billion, the legislature
should know how effective [the tax incentives and credits] are
in getting oil in the pipeline.
1:48:16 PM
REPRESENTATIVE GARDNER explained that HB 263 is an effort to get
oil in the pipeline. The legislation specifies that
notwithstanding the normal taxpayer confidentiality, a taxpayer
that asks the state for money under the tax incentives and
credit program needs to be prepared to release to the public the
following: the taxpayer's name, a general description of the
category of work being performed, and the location where the
work is being performed. A lease that is being explored merely
requires the name of the lease or a broad idea of a unit. She
stressed that there is no desire to obtain trade secrets or
proprietary information rather she seeks responsible
accountability for what is being spent on the North Slope.
1:50:45 PM
REPRESENTATIVE P. WILSON said she didn't recall whether other
legislation includes the requirement to publish the information
on the Internet.
REPRESENTATIVE GARDNER explained that she discussed with DOR
what would be the easiest and most cost effective way to provide
the required information. She said she was merely trying to
avoid any additional expense and was only seeking efficiency.
1:51:37 PM
CO-CHAIR SEATON referred to a memorandum from Legislative Legal
Services dated February 16, 2012, regarding confidentiality and
the belief that perhaps the legislation should include another
section. He asked if that was accomplished with [the latest
version] of HB 263.
REPRESENTATIVE GARDNER responded that was the intention and she
believes it was accomplished with the language on page 3,
beginning on line 15 of Version E.
1:53:19 PM
REPRESENTATIVE FEIGE asked if the language in HB 263, Version E,
is the same language that applies to other tax credits. Or, if
information is what is sought, then he questioned why it isn't
required for all tax credits.
REPRESENTATIVE GARDNER answered that is something that might be
considered, but in this case it's the volume of money [that
raises the need for the information to be on the Internet]. For
smaller credits, she wasn't sure that it was necessary to have
regular reports and postings on the Internet, although as a
matter of principle it's probably a good idea. She offered the
public disclosures candidates for public office must file as an
example. In this case, the state is spending $4 billion and she
opined that it's irresponsible of legislators not to know with
certainty [whether tax incentives and credits are working]. She
acknowledged that there is always a cost/benefit ratio, but as a
matter of principle everyone should have the information.
1:55:00 PM
CO-CHAIR FEIGE expressed the need for the rules to apply to
everyone fairly and evenly. Applying this to one single
industry seems to be selective, even though he acknowledged that
the [oil and gas industry] does provide a considerable amount of
revenue to the state. Referring to the language in paragraph
(10) [on page 2], Co-Chair Feige reminded the committee that
there are existing laws that preclude the release of information
that would give competitive advantage to other companies in the
same industry. He recalled DOR's testimony from a previous
hearing, in which the department reminded the committee that it
can't make information public unless it's lumped together with
information from at least three other companies. Therefore, one
company can't determine what a particular company is spending in
a particular area. He opined that the language in paragraph
(10) "notwithstanding AS 40.25.100(a) and AS 43.05.230(a)" can't
be ignored otherwise it would be taking away competitive
advantages from these companies.
REPRESENTATIVE GARDNER said that as a matter of policy it is
left to the legislature to determine if every single tax credit
should be a matter of public record. Although she said she
wouldn't object to the aforementioned, that's not what she is
trying to do with HB 263. She explained that she's not doing
the aforementioned, in part, because of the economies of scale.
Again, $4 billion is a lot of money as is the $24 million for
the film tax credits. Where state money is being spent, there
should be accountability in terms of the public knowing exactly
what the money is being spent on and who is the beneficiary, she
said. Representative Gardner opined that while she supports
taxpayer confidentiality, she also supports fiscal
responsibility on the legislature's part. She explained that
with this legislation, she is suggesting that the taxpayer
determines whether to participate in a state program and part of
the price of participating in this generous state tax credit
program is to release broad categories of information. She
specified that she wants to be able to tell Alaskans whether the
state is buying maintenance and what kinds of repairs or
exploration are being purchased, in general terms. Furthermore,
a taxpayer who wants to participate in the tax credit system
should have his/her name attached to the funds the taxpayer
receives.
1:59:00 PM
CO-CHAIR SEATON related his belief that legislators have been in
the dark about heavy oil production and tests on the North
Slope. He then expressed concern that if legislators don't
understand whether tax credits are being effectively used to
develop heavy oil, it doesn't seem that the state can target its
tax credits and determine whether more or less tax credits are
necessary. Is the purpose of HB 263 to obtain that sort of
discrimination of information in order to determine whether the
tax credits are going toward shale oil or heavy oil, he asked.
REPRESENTATIVE GARDNER agreed that is exactly what she wants to
know. She clarified that she wants to have a better idea in
terms of accountability, where the same money [tax credit] could
be more effective, or where to invest more because of the
ability to see that it actually stimulates the type of activity
desired.
2:00:40 PM
CO-CHAIR FEIGE asked whether it would make more sense to tie a
tax credit to actual performance.
REPRESENTATIVE GARDNER acknowledged that's another approach.
CO-CHAIR FEIGE pointed out that with such an approach, the state
wouldn't have to deal with issues of giving away competitive
edge.
REPRESENTATIVE GARDNER opined that there are complications,
strengths, and weaknesses with any approach. Currently, there
isn't enough information to know where the incentives and tax
credits are being effective. Therefore, HB 263 is her proposal
to address the issue.
2:01:47 PM
CO-CHAIR FEIGE pointed out that [on page 3, lines 13-14] the
legislation provides a "detailed description of the purpose of
the expenditure". He inquired as to what exactly "detailed"
means and how much extra would it cost to implement. He further
inquired as to what entity would establish the level of detail.
2:02:39 PM
JOHN LARSEN, Audit Master, Tax-Production Audit Group,
Department of Revenue, responded that there may be a couple of
different answers. Generally, when DOR obtains cost information
from companies, it has attached the account code and the
description of the account. Most often that description will
relate what's necessary to know about the expense without having
an additional language burden on the taxpayer.
2:03:21 PM
CO-CHAIR SEATON asked whether a modifier should be placed with
the language "detailed description" so that it's by account code
or something that reaches the level of description that the
sponsor has discussed but wouldn't be of concern to the
industry.
MR. LARSEN said a modifier doesn't immediately come to mind, but
he offered to give it some thought.
2:04:33 PM
CO-CHAIR SEATON, referring to Version E, asked whether there
would be confusion among DOR as to what "detailed description of
the purpose of the expenditure" means and whether a modifier is
necessary so that the industry would know exactly what is meant.
He asked whether the language is confined/explanatory enough
that both DOR and the industry would understand the meaning of
it or is a modifier necessary.
2:05:35 PM
CO-CHAIR SEATON, while waiting for Mr. Larsen to join the
meeting, opened public testimony on HB 263. Upon ascertaining
that no one wished to testify, he closed public testimony.
2:07:08 PM
MR. LARSEN said that he doesn't see the benefit of modifying the
language in the legislation. He offered to inform the committee
in regard to the information DOR is currently receiving.
CO-CHAIR SEATON clarified that he didn't want to insert language
in statute if it's unclear. He opined that it's clear to him
that the language "detailed description of the purpose of the
expenditure" is a more general description, but he wanted to be
sure DOR and industry understands the language. He requested
that Mr. Larsen provide the answer to the committee in writing.
2:08:41 PM
REPRESENTATIVE P. WILSON inquired as to whether DOR would be
able to obtain that [detailed description of the purpose of the
expenditure] information without "stepping on toes" in terms of
the proprietary information that has to be protected. In
further clarification to Mr. Larsen, Representative P. Wilson
specified that she is referring to the information being
requested from the producers.
MR. LARSEN answered that DOR currently receives information very
similar to what the legislation requests, if not the same
information. He said he didn't believe that would violate any
proprietary information because it's coming from a single
source. When information is received from a company it's only
coming from them about their operations and it's not being
shared on an individual basis with anyone else.
REPRESENTATIVE P. WILSON pointed out that the legislation
specifies that the information will be published on the Internet
and in a report to the legislature. Therefore, can DOR do that
without worrying about the proprietary information, she asked.
MR. LARSEN stated that personally he would want some advice from
the Department of Law regarding the applications of HB 263 as it
applies to AS 40.25.100 and AS 43.05.230. Additionally, DOR can
submit information under AS 43.55.890 and not be in conflict
with confidentiality provisions.
2:11:17 PM
CO-CHAIR SEATON related his understanding that HB 263 would only
be for information, generalized description of those
expenditures, submitted by companies that wanted to obtain funds
from the state; that information would be publicly available to
the legislature. Basically, the state is buying information
that would then be public, he surmised. In other words, this
[information becoming public] refers only to expenditures that
qualify for credit, such that if the company didn't apply for
the credit the disclosure wouldn't occur.
2:12:39 PM
LENNIE DEES, Audit Master, Tax-Production Audit Group,
Department of Revenue, stated his agreement with Co-Chair
Seaton's understanding, and added that he understood that HB 263
would ask for information pertinent to expenditures for which a
tax credit was claimed. In accordance with AS 43.55.890, DOR
would be able to aggregate the information in order not to
violate any of the confidentiality provisions.
CO-CHAIR SEATON surmised that Mr. Dees is referring to
expenditures that are not the basis of a credit claim, for which
HB 263 wouldn't apply.
MR. DEES agreed that the information for which a credit is not
claimed wouldn't be part of this particular disclosure.
2:14:24 PM
CO-CHAIR FEIGE reminded the committee that these credit programs
were placed in statute to encourage a particular kind of
activity. Therefore, the committee must consider if requiring a
detailed description causes companies not to make that
expenditure, in which case the state isn't accomplishing
anything with its credit program. He then requested that DOR
provide a list of the types of expenditures and the level of
detail that the department currently receives. He related his
understanding that DOR receives a fair amount of information
with regard to production and expenditures related to that
production, much of which details down to the level of the
individual wellhead. However, due to confidentiality laws that
data can't be released to the public, although the state knows
that information.
MR. DEES confirmed that as part of DOR's data assessment, it has
been determining the many different levels of data received from
the various companies. The department would be able to provide
the committee with a list in order that it can have a sense of
the level of data the department currently receives.
2:17:38 PM
CO-CHAIR SEATON requested that the list also indicate what DOR
would interpret to be a "detailed description of the purpose of
the expenditure" for a group. He asked whether it would be
enough for a detailed description of a company to say they would
be building a pipeline or would it be necessary that there are
20 pre-welded elbows. He reiterated the need to know what DOR
would interpret as a "detailed description of the purpose of the
expenditure".
2:18:33 PM
CO-CHAIR FEIGE surmised that by requiring further levels of
detailed expenditures and to expose what is currently
confidential data, the language seems to imply that the data
being provided to the state is either somehow incomplete or
somehow erroneous or not representative of the purpose for which
the tax credit is being granted. He asked whether DOR has ever
had instances in which there were integrity issues with the data
that was provided.
MR. DEES informed the committee that DOR performs due diligence
and audits on those tax credits. Of course, there may be
instances in which the department disagrees with some of the
particulars of the expenditures, but that's at a very detailed
invoice level. Over the last year, in cooperation with industry
DOR has tried to develop some broader categories of
expenditures. The department is trying to develop definitions
of various categories of cost that would mean the same to each
company from which the data is obtained. The aforementioned
would provide an indication for what the money is being spent.
The department is still in the process of developing that list,
he said, particularly in terms of further refining the data to a
lower level that is meaningful to DOR and the industry without
getting into minutia.
2:21:55 PM
CO-CHAIR SEATON acknowledged that without some sort of detailed
description requirement, some charge that most of the credits
are being spent on maintenance rather than capital improvements.
Furthermore, at this point there is no statutory requirement for
DOR to provide the legislature with enough information to
determine whether the [tax credits] were spent on maintenance or
drilling a well.
2:22:52 PM
REPRESENTATIVE GARDNER clarified it is not her intention or
belief that any of the tax filings are incomplete, erroneous, or
not representative. She further clarified that she doesn't
fault the oil industry for not having this information, but
rather faults the legislature for not having the foresight to
realize the information would be necessary when it embarked on
the tax credit process. The information, she opined, is
necessary to understand in order to know how effective [the tax
credit process] is and to determine how it can be more
effective. She then emphasized that her goal with HB 263 is to
protect members of DOR and protect them from erroneously
releasing information. From the Gleason decision she read the
following:
The division broadly interprets what it considers
taxpayer confidential information under applicable
statutes and will not disclose such information to the
municipalities specifically or to the public
generally. The division considers all information
that it receives from a taxpayer as taxpayer
confidential, even if it doesn't contain the
particularities of a taxpayer's business affairs and
is obtainable from the public domain.
REPRESENTATIVE GARDNER noted that the Gleason case was about
property taxes. She then explained that she wants to protect
DOR from having to make a judgment decision. Therefore, she
wants the taxpayer to specify who they are and what they are
applying for in categories that make it adequate for the
legislature to know what they are doing in broad terms.
2:24:51 PM
REPRESENTATIVE P. WILSON said she knows the oil industry tracks
legislation being considered, and therefore she assumed it does
not object to HB 263 because no oil industry representative is
present to object to it.
2:25:36 PM
CO-CHAIR SEATON announced that HB 263 would be held over for
another hearing so anyone having concerns with HB 263 can come
forward. If no one comes forward to testify he, too, would
assume there is not a problem with the legislation. Co-Chair
Seaton then asked whether there is any current information that
the state is legally entitled to receive and that DOR has asked
companies to report that companies have refused to report.
2:27:03 PM
DONNA KEPPERS, Audit Master, Tax-Production Audit Group,
Department of Revenue, answered that all the information DOR has
requested of the companies has been provided by the companies
through a series of workshops that has taken place over the last
year. The department has been able to provide all the
information it can while maintaining the confidentiality
provisions that are in place. She informed the committee that
with the five-year look back DOR could not disclose some of the
cost categories of some of the independents and majors because
of the inability to meet the three producer/explorer aggregation
rules of AS 43.55.890.
2:28:09 PM
CO-CHAIR SEATON related his understanding that there were some
categories of information requested that the state had the legal
right to obtain, but wasn't being provided to DOR. However, he
understood Ms. Keppers' testimony to be that all information the
state has a right to obtain and the state has requested has been
provided by the producers.
MS. KEPPERS clarified that all the information that DOR has
asked for from taxpayers for purposes of the five-year look back
and the cost categories has been provided. She said she wasn't
familiar with another type of information request for which the
information wasn't provided.
MR. LARSEN prefaced his comments by saying he wasn't sure if
this was to what Co-Chair Seaton was referring. He then related
that in the process of developing the categories for the five-
year look back DOR ran into difficulty because every company's
accounting system is unique to that company. Therefore,
depending upon how a company aggregates data within its own
organization, particularly in a look-back situation in which
historical information is being requested, to a certain degree
DOR had to settle on the "lowest common denominator" of
categories of cost. When the workshop process began, DOR had a
larger list than just the five categories of cost. In some
instances, some companies could provide a greater level of
detail on a particular cost category than others. Therefore, in
order to maintain consistency in the data and reporting, DOR
felt that it was important for every company to report on the
same categories of cost for purposes of the look back. In the
current workshops, DOR is trying to expand the categories of
cost to obtain a greater level of detail. He related his belief
that the aforementioned should be attainable in the future. In
order to obtain the information DOR requests, the company must
program its system such that how the company records its costs
can be mapped into what DOR wants reported.
2:32:15 PM
CO-CHAIR SEATON said he was not referring to the look back or
the categories for future accounting, but rather he was
referring to any categories under Alaska's Clear and Equitable
Share (ACES) that DOR wasn't receiving. He reiterated his
understanding that DOR is being provided all the information it
needs for auditing purposes.
MR. DEES replied that is correct; currently, in the area of cost
data, there isn't any that DOR isn't being provided.
2:33:05 PM
CO-CHAIR FEIGE asked whether there will be fewer problems making
the data public once the reporting and information categories
are equalized between all the players throughout the state
because DOR will be able to include more companies into its
collective database, and thereby be able to exceed the three
company minimum reporting requirement.
MR. DEES noted his agreement that an aggregate should be easier
to disclose. The problems with AS 43.55.890, the aggregation of
data, arise when DOR tries to perform analysis on the cost and
consider independent companies versus major companies and
producers versus explorers. In certain types of costs, there
may only be one or two companies with an expenditure of a
certain type. In terms of the state as a whole, there shouldn't
be problems with aggregation.
2:35:06 PM
CO-CHAIR SEATON posed a situation in which the state has
information on credits for Prudhoe Bay or Kuparuk, where
ConocoPhillips Alaska, Inc., BP, ExxonMobil Corporation, and
Chevron participate in the unit. Since there are at least four
companies, he asked whether DOR wouldn't release that
information because it's four companies in an aggregated
operation or would that information be released under the
current aggregation interpretation.
MR. LARSEN responded that he didn't believe DOR would have a
problem reporting that information under the provisions of AS
43.55.890 because with four companies the requirement would be
met. He offered to address any specific question related to a
specific report.
2:36:29 PM
CO-CHAIR SEATON surmised then that when credits are being
applied for on Prudhoe Bay then that would be released as
credits applied for and paid on Prudhoe Bay. He asked if the
individual credit and expenditure amounts can be obtained for
each [unit] that has three or more participants in the unit.
Co-Chair Seaton clarified that he is referring to DOR's
interpretation of aggregate. Therefore, is the amount of credit
that has been applied for by Kuparuk public information that's
available to the legislature because there are three or more
participants in the field, he asked.
MR. DEES replied no, he hasn't provided the credit information
by unit rather he has strictly provided the information
regarding whether the credits were earned via being deducted
from production tax liability as opposed to those that were
applied for in the form of transferrable tax credit
certificates. In further response to Co-Chair Seaton, Mr. Dees
confirmed that if the information is aggregated among three or
more producers or explorers, the information can be disclosed on
a unit basis per AS 43.55.890.
2:39:33 PM
CO-CHAIR SEATON, referring to language page 2, lines 21-22, that
says "detailed description of the purpose of the expenditure",
asked whether that language would describe the classes of
expenditures that DOR is creating.
MR. LARSEN pointed out that the language in paragraph (10) on
page 2 is the same as the language in paragraph (3) on page 3,
and therefore DOR will obtain the same information under both
paragraphs.
CO-CHAIR SEATON asked if a "detailed description of the purpose
of the expenditure" is basically the description DOR would use
and would encompass the categories that DOR would require going
forward.
MR. LARSEN replied yes.
2:41:09 PM
CO-CHAIR SEATON surmised that the difference in the categories
that DOR will require going forward is that it will be for DOR's
information, but not for the legislature.
MR. LARSEN responded no, and related that the categories that
DOR is working on for the future would be for aggregating the
data and reporting to the legislature and the public.
CO-CHAIR SEATON surmised then that the data would be aggregated
but wouldn't be available by companies based on the credits for
which they are applying.
MR. LARSEN replied yes. In further response to Co-Chair Seaton,
Mr. Larsen expressed concern that even if HB 263 passes, there
is a conflict with AS 43.55.890 in terms of releasing the data
by individual company. He reiterated the need to involve the
Department of Law prior to releasing any data. In response to
Co-Chair Seaton, Mr. Larsen agreed to contact the [department's]
attorney general regarding clarification on this matter.
2:43:55 PM
CO-CHAIR FEIGE opined that under the new categories although DOR
wouldn't be able to disclose the individual companies, the
information could be [aggregated] with three or more companies
that receive the credit to provide a fairly detailed explanation
to the legislature regarding how a particular credit program is
being spent.
MR. LARSEN answered that he believes that's correct.
CO-CHAIR FEIGE surmised then that the legislature would be able
to evaluate what the state's credit program is generating in
terms of expenditures.
MR. LARSEN, characterizing it as a matter of semantics,
clarified that the credit programs don't generate expenditures,
rather they reimburse expenditures that have been incurred for a
particular category of costs.
CO-CHAIR FEIGE explained that the legislature would know where
the state's expenditures, in the form of reimbursements, are
being spent in terms of categories but not necessarily which
company.
MR. LARSEN agreed that [DOR] would have a good accounting of the
categories of cost on an aggregated level, but not by individual
companies.
2:45:45 PM
REPRESENTATIVE P. WILSON recalled asking that question early on
to which she was told it wouldn't be a problem. She then asked
whether [DOR staff] is now saying it would be a problem.
MR. LARSEN replied no, and specified that disclosing the
information at a company level is the problem for DOR not the
disclosure of information. The lack of not having the
information aggregated is cause for concern.
2:46:23 PM
CO-CHAIR SEATON related his understanding then that DOR would
inform the legislature the amount of the credit by wells on the
North Slope, but wouldn't inform the legislature as to which
companies are actually drilling the wells because that would be
company specific data.
MR. LARSEN answered that's correct. As Mr. Dees indicated
earlier, the one way DOR has tried to break that down for people
is based on whether a credit has been received for those who
have a tax obligation. In other words, they deduct a credit
directly from their tax payment compared to those who do not
have a tax obligation, and therefore receive a transferrable tax
credit certificate. He noted that the original holder of the
transferrable tax credit certificate can redeem it for cash.
Therefore, rather than detailing the information on an
individual company basis, DOR has made an effort to provide
another level of detail on the gross cost reported themselves by
detailing it into those two categories.
2:47:53 PM
CO-CHAIR SEATON related his appreciation for DOR trying to get
around the restrictions that have been placed on the department
regarding not disclosing information on a company-by-company
basis. He surmised that DOR is trying to identify a grouping of
companies in order to provide some understanding because statute
requires a grouping of three or more companies in order to
disclose the data.
MR. LARSEN agreed with Co-Chair Seaton's assessment, but
clarified that DOR isn't trying to get around any statutory
regulations, rather it's trying to operate within the confines
of existing statute while providing the legislature and the
public with as much information as possible.
2:49:13 PM
CO-CHAIR SEATON recalled that public testimony had been closed
for HB 263, but announced that he will re-open it at the next
hearing of the legislation.
2:50:01 PM
REPRESENTATIVE GARDNER stated that she [and the other joint
prime sponsors] will work on the issue with AS 43.55.890 to make
the legislation explicit. She also stated that she [and the
other joint prime sponsors] will speak with DOR regarding its
categories and how well they comport with what the legislation
seeks in terms of understanding what is being done and paid for
without revealing any competitive secrets.
2:50:44 PM
CO-CHAIR SEATON requested that [at the next hearing] DOR explain
whether [all the companies] applied for credits on the
expenditures and whether the credits are going to be in two
different segments, that is will the AS 43.55.025 exploratory
tax credits be in the same category as the AS 43.55.023 regular
capital expenditure credits and did [all companies] apply in the
fiscal year in which the expenditures or loss carry forward
occurred that didn't get into credits. He requested that DOR
inform the committee in regard to how the credits are going to
definitely apply to the amount of expenditures. Many in the
legislature want to know by category what proportion of the
total spent is being taken by the state.
[HB 263 was held over.]
2:52:13 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:52 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HCR 23.pdf |
HRES 2/20/2012 1:00:00 PM |
HCR 23 |
| HCR 23 Sponsor Statement.pdf |
HRES 2/20/2012 1:00:00 PM |
HCR 23 |
| HCR 23 Fiscal Note.pdf |
HRES 2/20/2012 1:00:00 PM |
HCR 23 |
| HCR 23 Arctic Calendar.pdf |
HRES 2/20/2012 1:00:00 PM |
HCR 23 |
| HB 263.pdf |
HRES 2/20/2012 1:00:00 PM |
HB 263 |
| HB 263 Sponsor Statement.pdf |
HRES 2/20/2012 1:00:00 PM |
HB 263 |
| NWTF_Full_Report_Color.pdf |
HRES 2/20/2012 1:00:00 PM |
HCR 23 |
| CS For HB 263 Ver E.pdf |
HRES 2/20/2012 1:00:00 PM |
HB 263 |
| HB 263 changes between Version E and original.pdf |
HRES 2/20/2012 1:00:00 PM |
HCR 23 |
| HCR 23 Canada Arctic Policy.docx |
HRES 2/20/2012 1:00:00 PM |
HCR 23 |
| HCR 23 National Security Presidential Directive - 66.docx |
HRES 2/20/2012 1:00:00 PM |
HCR 23 |
| HB 263 Backup.pdf |
HRES 2/20/2012 1:00:00 PM |
HB 263 |
| HB 263 Legal Opinion on Confidentiality.pdf |
HRES 2/20/2012 1:00:00 PM |
HB 263 |
| HB 263 Sectional Analysis.pdf |
HRES 2/20/2012 1:00:00 PM |
HB 263 |