Legislature(2005 - 2006)CAPITOL 124

04/28/2006 01:00 PM RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Bills Previously Heard/Scheduled
= HB 498 TAX CREDITS NONCONVENTIONAL OIL/GAS
Moved CSHB 498(RES) Out of Committee
= HB 497 TRANSFER CLARK BAY TERMINAL
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 28, 2006                                                                                         
                           1:21 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Jay Ramras, Co-Chair                                                                                             
Representative Ralph Samuels, Co-Chair                                                                                          
Representative Jim Elkins                                                                                                       
Representative Carl Gatto                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Paul Seaton                                                                                                      
Representative Harry Crawford                                                                                                   
Representative Mary Kapsner                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Kurt Olson                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 498                                                                                                              
"An Act  authorizing tax  credits against  the production  tax on                                                               
oil  and  gas  for  qualified   expenditures  for  challenged  or                                                               
nonconventional  oil or  gas and  for qualified  expenditures for                                                               
nonconventional  or renewable  energy resources;  giving the  Act                                                               
contingent effect; and providing for an effective date."                                                                        
                                                                                                                                
     - MOVED CSHB 498(RES) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 497                                                                                                              
"An Act providing for the transfer of property at Clark Bay to                                                                  
the Inter-Island Ferry Authority."                                                                                              
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 498                                                                                                                  
SHORT TITLE: TAX CREDITS NONCONVENTIONAL OIL/GAS                                                                                
SPONSOR(s): RULES                                                                                                               
                                                                                                                                
04/03/06       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/03/06       (H)       O&G, RES, FIN                                                                                          
04/11/06       (H)       O&G AT 8:00 AM CAPITOL 120                                                                             
04/11/06       (H)       Moved Out of Committee                                                                                 
04/11/06       (H)       MINUTE(O&G)                                                                                            
04/12/06       (H)       O&G RPT 2DP 1NR 3AM                                                                                    
04/12/06       (H)       DP: ROKEBERG, KOHRING;                                                                                 
04/12/06       (H)       NR: SAMUELS                                                                                            
04/12/06       (H)       AM: GUTTENBERG, DAHLSTROM, MCGUIRE                                                                     
04/12/06       (H)       LETTER OF INTENT WITH O&G REPORT                                                                       
                         (FORTHCOMING)                                                                                          
04/19/06       (H)       RES AT 1:00 PM CAPITOL 124                                                                             
04/19/06       (H)       Heard & Held                                                                                           
04/19/06       (H)       MINUTE(RES)                                                                                            
04/20/06       (H)       RES AT 1:00 PM CAPITOL 124                                                                             
04/20/06       (H)       Heard & Held                                                                                           
04/20/06       (H)       MINUTE(RES)                                                                                            
04/21/06       (H)       CORRECTED O&G RPT 2DP 2NR 2AM                                                                          
04/21/06       (H)       DP: ROKEBERG, KOHRING;                                                                                 
04/21/06       (H)       NR: SAMUELS, DAHLSTROM;                                                                                
04/21/06       (H)       AM: MCGUIRE, GUTTENBERG                                                                                
04/21/06       (H)       RES AT 1:00 PM CAPITOL 124                                                                             
04/21/06       (H)       Heard & Held                                                                                           
04/21/06       (H)       MINUTE(RES)                                                                                            
04/27/06       (H)       RES AT 1:30 PM CAPITOL 124                                                                             
                                                                                                                                
BILL: HB 497                                                                                                                  
SHORT TITLE: TRANSFER CLARK BAY TERMINAL                                                                                        
SPONSOR(s): TRANSPORTATION                                                                                                      
                                                                                                                                
03/29/06       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/29/06       (H)       RES, FIN                                                                                               
04/26/06       (H)       RES AT 1:00 PM CAPITOL 124                                                                             
04/26/06       (H)       Heard & Held                                                                                           
04/26/06       (H)       MINUTE(RES)                                                                                            
04/27/06       (H)       RES AT 1:30 PM CAPITOL 124                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
REPRESENTATIVE NORM ROKEBERG                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT: Discussed HB 498 as sponsor.                                                                                
                                                                                                                                
BILL VAN DYKE, Director                                                                                                         
Division of Oil and Gas                                                                                                         
Department of Natural Resources                                                                                                 
POSITION STATEMENT: Answered questions regarding HB 498.                                                                        
                                                                                                                                
ROBERT MINTZ, Assistant Attorney General                                                                                        
Oil, Gas, and Mining Section                                                                                                    
Department of Law                                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Answered questions regarding HB 498.                                                                        
                                                                                                                                
MICHAEL HURLEY,                                                                                                                 
ConocoPhillips Alaska, Inc.                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Answered questions regarding HB 498.                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CO-CHAIR  RALPH  SAMUELS  called  the  House  Resources  Standing                                                             
Committee  meeting  to  order at  1:21:38  PM.    Representatives                                                             
Elkins, Ramras,  Samuels, Gatto, and  Seaton were present  at the                                                               
call  to order.   Representatives  LeDoux, Crawford,  and Kapsner                                                               
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
HB 498-TAX CREDITS NONCONVENTIONAL OIL/GAS                                                                                    
                                                                                                                                
CO-CHAIR  SAMUELS  announced that  the  first  order of  business                                                               
would  be HOUSE  BILL NO.  498, "An  Act authorizing  tax credits                                                               
against  the  production  tax  on   oil  and  gas  for  qualified                                                               
expenditures  for challenged  or nonconventional  oil or  gas and                                                               
for  qualified  expenditures  for  nonconventional  or  renewable                                                               
energy  resources;   giving  the   Act  contingent   effect;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
CO-CHAIR  RAMRAS  REPRESENTATIVE  moved to  adopt  the  committee                                                               
substitute  (CS)  to  HB 498,  24-LS1817\S,  Chenoweth,  4/26/06.                                                               
Hearing no objections, Version S was before the committee.                                                                      
                                                                                                                                
1:22:24 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SAMUELS listed  the changes in the CS  from the original                                                               
bill.    He  said  the CS  eliminates  research  and  development                                                               
credits  and delineates  geographical  areas of  known heavy  oil                                                               
fields.  The CS allows  the Department of Natural Resources (DNR)                                                               
to  determine  new  heavy  oil   areas  and  then  report  it  to                                                               
Legislative  Budget  and  Audit  and the  Department  of  Revenue                                                               
(DOR), which will issue the credit  after 30 days.  The credit is                                                               
non transferable,  and the CS  "tightens up some of  the language                                                               
on  qualified  capital  expenditure."    The  CS  eliminates  the                                                               
alternative energy section  of the bill because  it was exclusive                                                               
to the oil industry,  and he said gas was left  in the CS because                                                               
heavy oil  doesn't have  much gas within  it.   Exploration costs                                                               
will not be eligible for the challenged-oil credit, he added.                                                                   
                                                                                                                                
1:25:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE NORM ROKEBERG thanked  Co-Chair Samuels, the staff                                                               
at DOR  and DNR,  and ConocoPhillips  Alaska, Inc.  for "spending                                                               
the weekend with  me."  He noted  that the CS is  a light version                                                               
of the bill.   He said the key element  is defining everything as                                                               
qualified development expenditures  rather than qualified capital                                                               
expenditures.   He said  one of  the amendments  being considered                                                               
relates to page 3, line 21  (i), and the definition of challenged                                                               
oil pools,  and it  "includes the Ugnu  or Schrader  Bluff within                                                               
the  Prudhoe  Bay unit  or  the  Milne  Point Unit,  except  that                                                               
portion of a  pool in the Schrader Bluff  formation produced from                                                               
the drill site  "s"...and then the West Sac  Ugnu within Kuparuk,                                                               
except those portions  in the pool West  Sac information produced                                                               
and  from  drill site  1c,  1d,  e,  and 1i...and  including  the                                                               
Lisburne."  He  said there is an email to  remove the exceptions.                                                               
He said he  has been specific to minimize the  application of the                                                               
credit and  left the door  open to encourage other  companies "to                                                               
enter and  develop formations on  the North Slope or  anywhere in                                                               
Alaska."  With  a few tweaks, it is a  good piece of legislation,                                                               
he opined.   He wants the  bill to go to  House Finance Committee                                                               
to include  it in [the  legislation for the  petroleum production                                                               
tax], where they  might want to substitute portions  of this bill                                                               
into that one.   He said, "This  is more of a rifle  shot area at                                                               
the area that we  as the citizens of the State  of Alaska want to                                                               
develop, and not a broad-brushed, open-ended credit."                                                                           
                                                                                                                                
1:30:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SAMUELS said a lot of  people heard the comments made by                                                               
Pedro van Meurs in  the last few days.  "But  I would concur with                                                               
the rules chairman, that if we  get this to the next committee we                                                               
may be able to  use some of the language ...  I wouldn't see that                                                               
this bill would  pass as a stand-alone bill."   He stated that he                                                               
did not get  a chance to meet  with Dr. van Meurs, but  he has no                                                               
problem with getting HB 498 to the next committee.                                                                              
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said  Daniel  Johnston,  a  legislative                                                               
consultant, issued  "what I would  call a glowing  endorsement of                                                               
the idea  of having  heavier, challenged  oil having  ... greater                                                               
incentives  [indecipherable]  so  we  have  the  two  consultants                                                               
diametrically opposed,  and my  opinion of  Mr. Johnston  went up                                                               
significantly after I read his letter."                                                                                         
                                                                                                                                
1:32:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  said  the  30-day notice  [of  heavy  oil                                                               
determination] to  Legislative Budget  and Audit (LB&A)  is short                                                               
for  such projects,  especially  if  there will  be  any kind  of                                                               
challenge to the designation.                                                                                                   
                                                                                                                                
REPRESENTATIVE  ROKEBERG  said he  was  involved  in a  bill  for                                                               
royalty relief  12 years ago,  and he and  Representative Kohring                                                               
fixed the  bill three  years ago to  narrow down  the legislative                                                               
and governor  reviews.  He  said this  30-day period is  only the                                                               
period after there's been notice.                                                                                               
                                                                                                                                
CO-CHAIR SAMUELS  said LB&A is  inundated with  everything coming                                                               
to the legislature.   He asked how  long it would take  DNR to go                                                               
through seismic  and geologic data  to come  up with a  ruling on                                                               
whether there was heavy oil.                                                                                                    
                                                                                                                                
1:35:16 PM                                                                                                                    
                                                                                                                                
BILL VAN DYKE,  Director, Division of Oil and  Gas, Department of                                                               
Natural Resources (DNR),  said it is unlikely  that someone would                                                               
apply for the credit for only one  well, unless it is a well that                                                               
expands an  existing pool.   "You  are building  your information                                                               
over time...the  actual determination would probably  just take a                                                               
month or  two."   There would  be a lot  information by  then and                                                               
"you'd sort of know where you were going to likely go with it."                                                                 
                                                                                                                                
CO-CHAIR  SAMUELS asked  about the  timeline and  not delaying  a                                                               
project.   He said it  would depend on the  time of year,  but he                                                               
wondered if a few more weeks would really matter.                                                                               
                                                                                                                                
1:36:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG said  the bill allows six  months for DNR                                                               
to make a determination after an application from the industry.                                                                 
                                                                                                                                
CO-CHAIR SAMUELS  asked about sending  a copy of  the application                                                               
to the committee so the members could follow the process.                                                                       
                                                                                                                                
REPRESENTATIVE ROKEBERG said he  didn't think the committee would                                                               
want "a stack of technical data."                                                                                               
                                                                                                                                
1:37:48 PM                                                                                                                    
                                                                                                                                
MR. VAN DYKE said most of the information will be confidential.                                                                 
                                                                                                                                
CO-CHAIR SAMUELS said he doesn't have an opinion.                                                                               
                                                                                                                                
REPRESENTATIVE   SEATON   asked   about   qualified   development                                                               
expenditures, and he said on line  13, page 4, the bill states: a                                                               
lease  expenditure under  AS43.55.160,  the  primary purpose  for                                                               
challenged  oil and  qualified capital.    He said,  "As this  is                                                               
constructed, they're all 'ands', right?   We're not talking about                                                               
ordinary operating  costs, and  I just wanted  to make  sure that                                                               
wasn't an opening.  I wanted to  make sure that those three -- a,                                                               
b, and c -- were all 'ands'."                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG  said they  are all conjunctive  and they                                                               
have to all apply.                                                                                                              
                                                                                                                                
REPRESENTATIVE SEATON  said he just  wants to make sure  that the                                                               
bill is not mistakenly allowing  "any lease expenditure; it's got                                                               
to be a lease expenditure that's  for challenged oil and also has                                                               
to be a capitalized expenditure."                                                                                               
                                                                                                                                
1:40:13 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 1:40 to 1:41 p.m.                                                                            
                                                                                                                                
CO-CHAIR  SAMUELS explained  Amendment 2,  labeled 24-LS1817\S.1,                                                               
April 27, 2006, as follows [original punctuation provided]:                                                                     
                                                                                                                                
     Page 3, Line 25-27                                                                                                         
                                                                                                                                
     Amend as follows:                                                                                                          
                                                                                                                                
     (ii) the Milne Point Unit; [except for that portion or                                                                   
       portions of a pool in the Schrader Bluff formation                                                                       
     produced from the drill site S area;]                                                                                      
                                                                                                                                
     Page 3, Line 29-30                                                                                                         
                                                                                                                                
     Amend as follows:                                                                                                          
                                                                                                                                
     ...River Unit; [, except for that portion or portions                                                                    
     of a pool in the West Sak formation produced from the                                                                      
     drill site 1C, 1D, 1E, or 1J drill site areas;]                                                                            
                                                                                                                                
CO-CHAIR SAMUELS said it looks like a conforming amendment.                                                                     
                                                                                                                                
MR.  VAN  DYKE said,  "If  you're  going  to define  viscous  oil                                                               
pools...in  the known  core area  oil pools--if  you're going  to                                                               
include  the   Prudhoe  Bay  Unit,   Ugnu,  and   Schrader  Bluff                                                               
formations,  and that  would be  on page  3, line  24.   If those                                                               
entire pools  are going to be  included, then I don't  see really                                                               
any justification to  exclude the core areas in  other oil pools.                                                               
It's  either all  the core  areas are  included or  all the  core                                                               
areas are excluded."   He said the  current bill is a  mix of the                                                               
two ideas;  line 24, page  3 includes  the core areas  in Prudhoe                                                               
Bay, and  lines 25-30 exclude  other core  areas, and he  said he                                                               
doesn't see the logic.                                                                                                          
                                                                                                                                
1:43:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG said Scott  Digert is the subsurface team                                                               
leader from BP and supports the amendment.                                                                                      
                                                                                                                                
CO-CHAIR SAMUELS said this was  discussed over the weekend and he                                                               
wants  the  bill  to "specifically  say  there  are  geographical                                                               
areas-we wanted  to eliminate  those four  drill sites  and leave                                                               
another one in.  That was the specific intent of the CS."                                                                       
                                                                                                                                
REPRESENTATIVE  ROKEBERG said  he received  Mr. Van  Dyke's email                                                               
prior  to  writing the  CS,  and  said  Mr.  Van Dyke  said  that                                                               
"removing them, given  the way we redefined  the eligible fields,                                                               
was inappropriate after we had  put the sideboards up by limiting                                                               
the scope of  the definition, therefore, not  making it necessary                                                               
to  accept  those  particular existing  drill  pads  because  the                                                               
credits  would only  be due  on future  development expenditures,                                                               
not retrospective  expenditures.   And those are,  like, projects                                                               
in progress, so you don't  want to-they're actually sinking money                                                               
down those  holes-you want to keep  them doing that, so  we don't                                                               
want to 'disincent' those and have  them get a credit for a drill                                                               
pad down the  block, a new one,  when you couldn't get  it on the                                                               
current one they're  working on to try to-because  these are test                                                               
pads. They're producing but you want to make them produce more."                                                                
                                                                                                                                
1:45:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SAMUELS said,  "What we  did is  we included  Orion and                                                               
Polaris  and excluded  the drill  sites because  the drill  sites                                                               
were actually producing."                                                                                                       
                                                                                                                                
MR. VAN DYKE said that is correct.                                                                                              
                                                                                                                                
CO-CHAIR SAMUELS said  he excluded 1c, 1d, 1e, 1j,  and there was                                                               
one  other because  they are  already  producing.   That was  the                                                               
middle ground that was reached by including Orion and Polaris.                                                                  
                                                                                                                                
MR. VAN  DYKE said there are  viscous oil drill sites  in Prudhoe                                                               
Bay that  are producing today,  and one or  two yet to  be built.                                                               
Prudhoe Bay  is a mix.   He said his  email had excluded  most of                                                               
it, and that  is where the debate  is.  It is hard  to divide the                                                               
Prudhoe Bay viscous oil pools by drill sites, he opined.                                                                        
                                                                                                                                
1:47:13 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SAMUELS  said the email  said, "except the  oil produced                                                               
from those four drill sites," and  you also want to exclude Orion                                                               
and Polaris.                                                                                                                    
                                                                                                                                
MR. VAN DYKE  said that is correct, the email  from last week had                                                               
drill site  "s" in  Milne Point;  drill sites 1c,  1d, 1e,  1j in                                                               
Kuparuk; plus  an area in  Prudhoe Bay.   He said the  CS adopted                                                               
that idea  from Milne Point  and Kuparuk, but not  his suggestion                                                               
from Prudhoe Bay.   He said he had discussions  with the "Kuparuk                                                               
and Milne  Point folks" and then  indicated in his email  that it                                                               
may be wiser to not exclude  those areas.  He stated that carving                                                               
out areas creates disincentives.                                                                                                
                                                                                                                                
CO-CHAIR SAMUELS  said, "We could  go back to your  original view                                                               
and take  out Orion and Polaris,  but we drafted the  entire bill                                                               
based on the  conversation we had this weekend, and  we took most                                                               
of what you wanted and we put Orion and Polaris there."                                                                         
                                                                                                                                
MR. VAN DYKE said, "At Prudhoe  Bay you could name a couple drill                                                               
sites in  Prudhoe and  that would  leave room  for any  new drill                                                               
sites to  earn credits, and  that would be the  way...to approach                                                               
Prudhoe Bay."   He said by going the "exclusion  route," the bill                                                               
would exclude w and z pads.                                                                                                     
                                                                                                                                
1:49:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  read an  email from  Scott Digert  of BP                                                               
saying that BP would need to  spend $10 million to $30 million to                                                               
target additional reservoir layers from  the Milne pad.  There is                                                               
a sound  argument for  not excluding those  drill pads  when they                                                               
are still under development, he said.                                                                                           
                                                                                                                                
CO-CHAIR SAMUELS said  that argument could have been  made a week                                                               
ago.                                                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG said, "Yea, [in] a perfect world."                                                                      
                                                                                                                                
1:50:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON moved  Amendment  2,  as described  above.                                                               
Hearing no objections, Amendment 2 carried.                                                                                     
                                                                                                                                
CO-CHAIR SAMUELS  asked if  Mr. Van  Dyke agrees  with conceptual                                                               
Amendment  1,  which  "appears to  be  a  technical  definition."                                                               
Conceptual Amendment  1, labeled  24-LS1817\S.2, April  27, 2006,                                                               
is as follows [original punctuation provided]:                                                                                  
                                                                                                                                
     Page 3, Line 20                                                                                                            
                                                                                                                                
     Amend as follows:                                                                                                          
                                                                                                                                
       ...in an oil pool[.] and the method to be used to                                                                      
      determine the average permeability of an oil pool's                                                                     
     reservoir rock.                                                                                                          
                                                                                                                                
MR. VAN DYKE said he agrees that it is a technical definition.                                                                  
                                                                                                                                
REPRESENTATIVE  SEATON  said he  would  move  it but  he  doesn't                                                               
understand it.                                                                                                                  
                                                                                                                                
MR. VAN DYKE  said the amendment is similar to  a regulation that                                                               
would  state  how one  would  determine  API [American  Petroleum                                                               
Institute] gravity  for a  pool.  This  language would  state how                                                               
permeability is determined.   He noted that parts  of a reservoir                                                               
will differ, so there needs to be an average.                                                                                   
                                                                                                                                
1:54:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON asked if the  amendment refers to other oil                                                               
challenges rather than viscosity.                                                                                               
                                                                                                                                
MR.  VAN DYKE  said  yes;  it would  use  permeability to  define                                                               
challenged oil.                                                                                                                 
                                                                                                                                
Hearing no objections, conceptual Amendment 1 carried.                                                                          
                                                                                                                                
REPRESENTATIVE SEATON  moved Amendment 3,  labeled 24-LS1817\S.2,                                                               
Chenoweth, 4/27/06, as follows [original punctuation provided]:                                                                 
                                                                                                                                
     Page 2, line 30:                                                                                                           
          Delete "(i)(1)(A) - (D)"                                                                                              
          Insert "(m)(1)(A) - (D)"                                                                                              
                                                                                                                                
     Page 3, following line 12:                                                                                                 
     Insert new subsections to read:                                                                                            
          "(g)  If the department determines under (i) of                                                                       
     this  section that  the average  price of  Alaska North                                                                    
     Slope oil  on the United  States West Coast  during the                                                                    
     period April 1, 2006, through March  31, 2016, is $50 a                                                                    
     barrel or  more, a producer  that takes a  credit under                                                                    
     this section  shall repay to  the department,  no later                                                                    
     than  June 30, 2016,  the amount  of  the credit,  with                                                                    
     interest  at the  rate prescribed  in this  subsection.                                                                    
     Interest is at  a rate equal to the rate  of return, as                                                                    
     determined  by the  department, that  is earned  by the                                                                    
     budget  reserve fund  established under  art. IX,  sec.                                                                    
     17, Constitution of the State  of Alaska, from the date                                                                    
     the  credit  was  applied against  the  producer's  tax                                                                    
     liability until  the earlier of  June 30, 2016,  or the                                                                    
     date the  payment is made  to the  department. Interest                                                                    
     on  an amount  unpaid after  June 30, 2016,  is at  the                                                                    
     rate  prescribed  under  AS 43.05.225(1)  from  July 1,                                                                    
     2016  until  the  date  the  payment  is  made  to  the                                                                    
     department.                                                                                                                
          (h)  A producer that otherwise is allowed to                                                                          
     apply a  credit under  this section  against a  tax due                                                                    
     for  a month  ending  before April 1,  2016, may  defer                                                                    
     using  the credit  until after  April 30, 2016.  If the                                                                    
     department determines  under (i)  of this  section that                                                                    
     the  average price  of Alaska  North Slope  oil on  the                                                                    
     United  States West  Coast during  the period  April 1,                                                                    
     2006,  through  March 31,  2016,  is less  than  $50  a                                                                    
     barrel, the producer then may  apply the credit against                                                                    
     a  tax  due  under  AS 43.55.011(a) or  may  request  a                                                                    
     refund  from  the  department  of  the  amount  of  the                                                                    
     credit, with  interest at the  rate prescribed  in this                                                                    
     subsection. Interest is at a  rate equal to the rate of                                                                    
     return,  as  determined  by  the  department,  that  is                                                                    
     earned  by the  budget reserve  fund established  under                                                                    
     art. IX, sec. 17, Constitution  of the State of Alaska,                                                                    
     from  the date  the tax  under AS 43.55.011(e)  was due                                                                    
     against which  the amount of  a credit could  have been                                                                    
     applied  against   the  producer's  tax   liability  in                                                                    
     accordance with (c) of this section, until                                                                                 
               (1)  the date the amount of the credit is                                                                        
     actually applied  against a tax under  this subsection,                                                                    
     if it is  applied; or (2) the earlier of  90 days after                                                                    
     a  refund  request for  the  amount  of the  credit  is                                                                    
     received by the department or  the refund is paid, if a                                                                    
     refund is  requested. Interest on  an amount  unpaid 90                                                                    
     days  after  a  refund   request  is  received  by  the                                                                    
     department   is   at    the   rate   prescribed   under                                                                    
     AS 43.05.225(1)  from the  91st  day  after the  refund                                                                    
     request is received until the date the refund is paid.                                                                     
          (i)  The department shall, by regulation, specify                                                                     
     the method by  which the average price  of Alaska North                                                                    
     Slope  oil on  the United  States West  Coast shall  be                                                                    
     calculated,  with reference  to one  or more  published                                                                    
     sources  of  price  information. The  department  shall                                                                    
     make available  to the public  no later  than April 30,                                                                    
     2016, its determination of the  average price of Alaska                                                                    
     North Slope oil on the  United States West Coast during                                                                    
     the period April 1, 2006, through March 31, 2016.                                                                          
          (j)  For purposes of the period of limitations                                                                        
     provided under AS 43.05.260, an  amount that a producer                                                                    
     is obligated  to repay to  the department under  (g) of                                                                    
     this section is considered a  tax imposed by this title                                                                    
     for  which  a  return  is filed  on  June 30,  2016.  A                                                                    
     producer  that incurs  an  expenditure before  April 1,                                                                    
     2016, for which a credit  is claimed under this section                                                                    
     shall   maintain  until   July 1,  2019,   its  records                                                                    
     sufficient  to  show  whether   the  expenditure  is  a                                                                    
     qualified development  expenditure and to show  the tax                                                                    
     liability against which the credit  is or, under (h) of                                                                    
     this section, could have been applied."                                                                                    
                                                                                                                                
     Reletter the following subsections accordingly.                                                                            
                                                                                                                                
     Page 3, line 13:                                                                                                           
          Delete "(h)"                                                                                                          
          Insert "(l)"                                                                                                          
                                                                                                                                
CO-CHAIR SAMUELS objected.                                                                                                      
                                                                                                                                
REPRESENTATIVE  SEATON   said  Amendment   3  provides   a  price                                                               
guideline  [to qualify  for the  credits], which  is an  ANS West                                                               
Coast price of $50 [per barrel].   There is a look-back period in                                                               
applying for  credits, "just  as in  the bill,  or they  could be                                                               
delayed, and then  at the end of the ten-year  period, you'd look                                                               
at  the average  price of  the oil  and if  it had  exceeded that                                                               
price cap, then the company would  repay the state for the credit                                                               
because  it wouldn't  have  been...needed, because  it  was at  a                                                               
price  level that  was  economic  to develop."    Oil price  will                                                               
either exceed  a certain  amount or  there will  be a  credit, he                                                               
said.   He said he would  "conceptually change from the  price of                                                               
ANS West Coast to average price at point of production."                                                                        
                                                                                                                                
The committee took an at-ease from 1:57:05 PM to 1:57:11 PM.                                                                
                                                                                                                                
CO-CHAIR  SAMUELS  said  he  doesn't  know  the  consequences  of                                                               
changing the price to the point of production.                                                                                  
                                                                                                                                
REPRESENTATIVE  SEATON said  the  House  Finance Committee  could                                                               
look at that.                                                                                                                   
                                                                                                                                
REPRESENTATIVE ROKEBERG asked if  Representative Seaton wanted to                                                               
adjust the price.                                                                                                               
                                                                                                                                
REPRESENTATIVE SEATON said he will  leave it to the House Finance                                                               
Committee.  He  said "some of the  companies" suggested inflation                                                               
proofing, but  "that complicates everything."   He added  that if                                                               
it is incorporated into the PPT, it can be adjusted to conform.                                                                 
                                                                                                                                
CO-CHAIR SAMUELS said the Department of Revenue can look at it.                                                                 
                                                                                                                                
REPRESENTATIVE SEATON said Ms. Wilson of DOR did look at it.                                                                    
                                                                                                                                
REPRESENTATIVE  CRAWFORD noted  that Amendment  3 said  a company                                                               
"may defer using  the credit until after April, 30  2016," and in                                                               
the bill it says "shall calculate  and apply every month," and he                                                               
asked if that is a conflict.                                                                                                    
                                                                                                                                
1:59:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  said page  2, line 1,  of the  bill reads:                                                               
the producer  makes an election.   He said the producer  makes an                                                               
election and then  amortized it or...elects to put it  off to the                                                               
sunset period.                                                                                                                  
                                                                                                                                
REPRESENTATIVE ROKEBERG said there would  be a true-up period, so                                                               
this is  a cap on  the credit.  If  oil exceeds $50  [per barrel]                                                               
there is no credit.                                                                                                             
                                                                                                                                
ROBERT MINTZ,  Assistant Attorney  General, Oil, Gas,  and Mining                                                               
Section,  Department of  Law, said  line  12, page  1, states:  a                                                               
credit under  this subsection is  subject to the provisions  of g                                                               
to j.   He surmised that  "would tell you that,  where subsection                                                               
(b) says that you shall take  a credit every month, that wouldn't                                                               
apply if you were deferring it."                                                                                                
                                                                                                                                
2:01:52 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SAMUELS said to pass it as a conceptual amendment.                                                                     
                                                                                                                                
CO-CHAIR  SAMUELS  removed his  objection.    Hearing no  further                                                               
objections, Conceptual Amendment 3 carried.   He said Amendment 4                                                               
will not be offered, and Amendment 5 is from Mr. Mintz.                                                                         
                                                                                                                                
REPRESENTATIVE SEATON moved Amendment 5 as follows:                                                                             
                                                                                                                                
     Page 4, line 20,                                                                                                           
                                                                                                                                
          Delete "producer"                                                                                                     
                                                                                                                                
          Insert "expenditure"                                                                                                  
                                                                                                                                
Hearing no objection, Amendment 5 carried.                                                                                      
                                                                                                                                
CO-CHAIR SAMUELS asked  Mr. Mintz if an "and" should  be added on                                                               
page  4,  line 13.    "Do  we need  to  put  an "and"  after  the                                                               
AS43.55.160 to make sure that we include all three of these?"                                                                   
                                                                                                                                
MR. MINTZ  said there is an  "and" at the  end of line 13;  it is                                                               
read as if it is a sentence in three parts.                                                                                     
                                                                                                                                
2:04:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON moved conceptual Amendment 6 as follows:                                                                  
                                                                                                                                
     Page 2, line 19                                                                                                            
                                                                                                                                
          Delete "30"                                                                                                           
                                                                                                                                
          Insert "45"                                                                                                           
                                                                                                                                
CO-CHAIR SAMUELS objected.                                                                                                      
                                                                                                                                
REPRESENTATIVE ROKEBERG  said he sees  "no purpose in  allowing a                                                               
piece of paper to sit on the desk of LB&A another 15 days."                                                                     
                                                                                                                                
CO-CHAIR SAMUELS  said the  point was to  give the  legislature a                                                               
voice, and  during the interim it  could take two weeks  to get a                                                               
quorum.  During the  session it is no problem.   "By the time you                                                               
got something, you read it, you  understood it on day 1, it would                                                               
still take you two weeks to get a quorum together."                                                                             
                                                                                                                                
2:06:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG said if someone  lights a fire, the chair                                                               
of  LB&A could  have a  meeting.   He said  politicians react  to                                                               
something that is brought to their attention.                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON said  he is not sure how  DNR would provide                                                               
the notice, but he assumes it would  go out to more than just the                                                               
chair of  LB&A.  Most of  these projects are long  term, he said,                                                               
and  it takes  awhile to  get delineation  and get  it sanctioned                                                               
after it was applied for.                                                                                                       
                                                                                                                                
CO-CHAIR  SAMUELS asked  the process  for ConocoPhillips  once it                                                               
completed testing  and got the information  to DNR.  He  asked if                                                               
the  Board of  Directors had  to be  informed and  if the  timing                                                               
between 30 and 45 days matters.                                                                                                 
                                                                                                                                
MICHAEL HURLEY,  ConocoPhillips Alaska,  Inc., said it  will take                                                               
awhile to do a project.  It is  always painful to have a piece of                                                               
paper sitting on somebody's desk,  "but it's going to take awhile                                                               
to get things done for a new pool."                                                                                             
                                                                                                                                
2:08:59 PM                                                                                                                    
                                                                                                                                
Hearing no further objections, Amendment 6 carried.                                                                             
                                                                                                                                
REPRESENTATIVE SEATON moved to report  the CS for HB 498, labeled                                                               
24-LS1817\S,  Chenoweth, 4/26/06,  as amended,  out of  committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
notes.   Hearing no  objection, CSHB 498(RES)  passed out  of the                                                               
House Resources Standing Committee.                                                                                             
                                                                                                                                
HB 497-TRANSFER CLARK BAY TERMINAL                                                                                            
                                                                                                                                
2:09:37 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SAMUELS asked Representative Elkins about HB 497.                                                                      
                                                                                                                                
REPRESENTATIVE ELKINS said he pulled  the bill because, "after we                                                               
had the  big discussion in  here," the interest group  decided to                                                               
pursue a lease from the state [instead of a land grant].                                                                        
                                                                                                                                
[HB 497 was heard and held]                                                                                                     
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 2:10 PM.                                                                

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