Legislature(2011 - 2012)BARNES 124

02/20/2012 01:00 PM RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HCR 23 ALASKA ARCTIC POLICY COMMISSION TELECONFERENCED
Moved CSHCR 23(RES) Out of Committee
*+ HB 263 PRODUCTION TAX CREDIT; DISCLOSURES TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled 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