Legislature(2017 - 2018)BARNES 124
02/20/2017 01:00 PM House RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB111 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 111 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 20, 2017
1:07 p.m.
MEMBERS PRESENT
Representative Andy Josephson, Co-Chair
Representative Geran Tarr, Co-Chair
Representative Dean Westlake, Vice Chair
Representative Harriet Drummond
Representative Justin Parish
Representative Chris Birch
Representative DeLena Johnson
Representative George Rauscher
Representative David Talerico
MEMBERS ABSENT
Representative Mike Chenault (alternate)
Representative Chris Tuck (alternate)
COMMITTEE CALENDAR
HOUSE BILL NO. 111
"An Act relating to the oil and gas production tax, tax
payments, and credits; relating to interest applicable to
delinquent oil and gas production tax; and providing for an
effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 111
SHORT TITLE: OIL & GAS PRODUCTION TAX;PAYMENTS;CREDITS
SPONSOR(s): RESOURCES
02/08/17 (H) READ THE FIRST TIME - REFERRALS
02/08/17 (H) RES, FIN
02/08/17 (H) TALERICO OBJECTED TO INTRODUCTION
02/08/17 (H) INTRODUCTION RULED IN ORDER
02/08/17 (H) SUSTAINED RULING OF CHAIR Y23 N15 E2
02/08/17 (H) RES AT 1:00 PM BARNES 124
02/08/17 (H) Heard & Held
02/08/17 (H) MINUTE(RES)
02/13/17 (H) RES AT 1:00 PM BARNES 124
02/13/17 (H) Heard & Held
02/13/17 (H) MINUTE(RES)
02/17/17 (H) RES AT 1:00 PM BARNES 124
02/17/17 (H) Heard & Held
02/17/17 (H) MINUTE(RES)
02/20/17 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
RICH RUGGIERO, Consultant
Legislative Budget and Audit Committee
Alaska State Legislature; Managing Partner
Castle Gap Advisors
Houston, Texas
POSITION STATEMENT: Provided a PowerPoint presentation
entitled, "Developing Petroleum Fiscal Policy," and dated
2/20/17.
ACTION NARRATIVE
1:07:09 PM
CO-CHAIR GERAN TARR called the House Resources Standing
Committee meeting to order at 1:07 p.m. Representatives Tarr,
Parish, Talerico, Drummond, and Josephson were present at the
call to order. Representatives Birch, Westlake, Rauscher and
Johnson arrived as the meeting was in progress.
HB 111-OIL & GAS PRODUCTION TAX;PAYMENTS;CREDITS
1:07:41 PM
CO-CHAIR TARR announced that the only order of business would be
HOUSE BILL NO. 111, "An Act relating to the oil and gas
production tax, tax payments, and credits; relating to interest
applicable to delinquent oil and gas production tax; and
providing for an effective date."
1:08:36 PM
RICH RUGGIERO, consultant to the Legislative Budget and Audit
Committee, Alaska State Legislature, and managing partner,
Castle Gap Advisors, LLC., provided a PowerPoint presentation
entitled, "Developing Petroleum Fiscal Policy," and dated
2/20/17. Mr. Ruggiero gave a brief background of his energy
industry experience, including work for the Department of
Revenue (DOR) from 2007 to 2010 [slide 2].
MR. RUGGIERO introduced his presentation [slide 3]. He informed
the committee he would provide graphics representing the oil
industry worldwide and emphasized the issue is to determine how
to prepare the state for future events, while working from a
common understanding [slide 5].
1:13:22 PM
REPRESENTATIVE BIRCH asked Mr. Ruggiero whether he was involved
during the administration's development of Alaska's Clear and
Equitable Share (ACES) [passed in the 25th Alaska State
Legislature].
MR. RUGGIERO said yes. He added he spent 31 days working on the
legislation.
REPRESENTATIVE BIRCH further inquired as to Mr. Ruggiero's
involvement in the change to the initial iteration of ACES that
doubled Alaska's share.
MR. RUGGIERO said he was there to give the administration advice
on the effects of House and Senate committee substitutes to the
initial bill proposed by the governor. He deferred a further
question from Representative Birch to after the presentation.
MR. RUGGIERO observed from his 40 years of experience, the only
constant in the oil industry is change, not stability, and the
need for companies and other parties to be nimble and open
minded to changes in price, policy, people, technology, and
fiscal systems [slide 7].
REPRESENTATIVE RAUSCHER noted the presentation was related to
developing petroleum fiscal policy and opined the state has a
policy in place.
MR. RUGGIERO stated his intent if that the committee recognize
there never is a period of true stability, thus state policy
must be prepared to address a constantly changing environment.
REPRESENTATIVE RAUSCHER expressed his concern about too frequent
changes.
1:19:01 PM
CO-CHAIR TARR pointed out of past changes, one-half have been
requested by industry.
MR. RUGGIERO acknowledged these are trying times in the oil
industry, but not more so than in the past [slide 8]. He
recalled in 2005, studies indicated the U.S. was expected to
import eight billion cubic feet per day of liquefied natural gas
(LNG) between 2012 and 2015; however, in 2015, the U.S. was in a
position to liquefy and export an equal amount of natural gas.
He said, "That's a sixteen bcf a day flip, and the implications
of that ... actually impacted the size, the timing, and the cost
of projects on five different continents" [slide 9]. Whenever
increasing government take is discussed, there are three
responses from the operators: more instability; less
competitive; jobs jeopardized. Mr. Ruggiero said oil companies
are for-profit entities whose shareholders expect the highest
return, thus the aforementioned responses are a natural reaction
[slide 10].
1:23:55 PM
REPRESENTATIVE JOHNSON, speaking as a business owner, said any
business wants to maximize its profitability and reduce what the
government earns. Returning attention to slide 10, she
suggested "detractor themes" are really business concerns, such
as stability, competition, and jobs. She inquired as to how an
oil company should react to increased government take.
MR. RUGGIERO acknowledged oil companies and other businesses
want to make a profit. He said there will be extensive
[negative] reaction from the industry, and stressed in his
experience in other venues there is more open dialogue from oil
companies about their projects, costs, volumes, timelines, and
types of fiscal systems. Also, in other regimes, he has seen
more of "a[n] oil company/government partnership, instead of an
oil company versus the government type relationship."
REPRESENTATIVE JOHNSON questioned the meaning of partnership,
and restated business concerns are valid.
MR. RUGGIERO opined the state's issues associated with oil and
gas taxation would benefit from the industry's help with the
policies that would support development; there needs to be more
dialogue with the operators related to projects, so that the
state can negotiate from a position of understanding and
insight, rather than from speculation.
REPRESENTATIVE TALERICO returned attention to slide 10 and
expressed offense at the tenor of the presentation. Given the
recent availability of shale oil in North America, he asked
whether the competition for Alaska's oil industry has changed in
the last 10-15 years.
1:30:47 PM
MR. RUGGIERO advised with every technological advancement, the
field of competition moves around the globe. If Alaska is in
competition with the Lower 48, he agreed there have been changes
in the last 10 years.
REPRESENTATIVE TALERICO stated that "jobs are at risk due to
potential lower activity" is not a theme but a reality. He
pointed out when activity declines, there is always the risk of
losing jobs.
MR. RUGGIERO said yes, that is a statement of fact.
REPRESENTATIVE WESTLAKE agreed with the previous comments
although instability in the state has negatively affected public
education, public safety, and essential programs. From the
perspective of Alaska businesses and its social programs,
Alaskans are being negatively impacted. The issues of
competition and job losses are well known.
REPRESENTATIVE BIRCH asked Mr. Ruggiero whether he has
encountered a perfect taxing structure.
MR. RUGGIERO said no, because each regime differs with variables
such as the value of gas versus oil, offshore versus onshore
resources, and the volume of gas versus oil. However, some
aspects are being used to help governments and oil companies
achieve stability; for example, self-correcting legislation or
fiscal policy that responds to changing conditions in the market
and in development. Mr. Ruggiero presented slides 11 and 12
showing other regimes that have increased or lessened government
take from the years 2001 to 2011, especially during 2009. He
concluded Alaska is not unstable when compared to other regimes.
He referred to an oil industry annual survey [document not
provided] that reported the United Kingdom (UK) is the most
stable regime in which to invest, and noted UK has had four
changes - as indicated on slide 4 - and an additional three
changes within a period of 15 years. Mr. Ruggiero said the UK
is considered stable because when oil prices drop it is more
generous, and when prices increase it taxes windfall profits.
1:38:06 PM
REPRESENTATIVE BIRCH questioned whether governments increase
their share during periods of low oil prices.
MR. RUGGIERO responded most governments lessen their take during
periods of low prices.
REPRESENTATIVE BIRCH pointed out Alaska is considering an
increase in times of low prices.
REPRESENTATIVE TALERICO requested information through 2016 on
this issue.
MR. RUGGIERO said the point of slides 11 and 12 is regimes
around the world change their fiscal systems as often, or more
often, than Alaska.
CO-CHAIR TARR urged the presenter to provide more recent
information.
MR. RUGGIERO presented pie charts that illustrated the locations
of worldwide capital expenditures by the largest oil companies
from 1994 through 2006. In 1994, almost 70 percent of spending
was in Asia and Latin America, and in 2006, about 50 percent of
spending was in North Africa. In 2008, almost $40 billion in
capital spending was committed to Iraq. He observed the areas
of major capital spending changes, and Alaska needs a policy
that can react to competition from new regimes.
1:44:02 PM
REPRESENTATIVE BIRCH asked where North America is represented on
slide 13.
MR. RUGGIERO explained investment in North America was too small
to be represented on the chart as the major oil companies had
acquisitions, but no major capital investment programs in the
development of assets in the U.S. Lower 48.
REPRESENTATIVE BIRCH pointed out oil industry investment in
Alaska is over $6.5 billion per year.
MR. RUGGIERO said overall the industry spends $500-$600 billion,
an amount that "dwarfs" even an investment of $2-$3 billion.
REPRESENTATIVE BIRCH clarified the 2006 pie chart [on slide 13]
reflects a total investment of $500-$600 billion, thus the
investment in Alaska of $6.5 billion does not register on the
chart.
MR. RUGGIERO said correct. He referred to an ACES supporting
document that indicated the largest three oil companies spent
very little capital from 2004 through 2007 in the U.S. [document
not provided].
REPRESENTATIVE JOHNSON asked whether more current information
would show North America investments.
MR. RUGGIERO pointed out slide 13 shows investment for the
largest international oil companies (IOCs) - the supermajors -
and is not inclusive of all oil companies; the message remains
that the spending of capital on the upstream side moves around
the globe due to changes in regime, location, and technology,
for example, production from shale.
REPRESENTATIVE JOHNSON surmised other regimes can become more
attractive fairly easily.
MR. RUGGIERO indicated yes. Alaska is competing for investment
capital across the globe, and needs to understand why large and
small oil companies will or will not invest in the state. He
turned attention to how oil companies make investment decisions
and from his experience - using a rock, paper, and scissors
analogy - said rock, representing a great reservoir, can
overcome high taxes. Large oil companies spend a lot of money
in regimes with higher government take than Alaska because of
better and larger reservoirs driven by economy of scale. Great
rock and prospects can overcome a high tax regime. On the other
hand, profits not that large will overcome bad rock if profits
come quickly, as happens with shale oil production [slide 14].
1:51:23 PM
REPRESENTATIVE BIRCH observed Alaska can exert a painfully large
tax structure that could drive investment from the state and
questioned the logic of the analogy.
1:52:33 PM
[Due to technical difficulties, the committee took a brief at
ease.]
MR. RUGGIERO stated his point is oil companies are spending
investment capital disproportionately in countries that have
higher taxes than Alaska; however, he cautioned companies
working in Alaska face a difficult environment and a remote
location, thus the right risk/reward balance is required.
REPRESENTATIVE PARISH asked what regimes have higher government
take yet attract higher investment.
MR. RUGGIERO said Angola, Nigeria, Iraq, certain areas of
Indonesia, and perhaps Kazakhstan have higher government take.
At one time Angola had a marginal 90-plus percent tax rate and
$1 billion bids for licenses because of the quality of its
reservoirs. Norway has a flat 70 percent net tax and also
attracts investment from the large oil companies.
1:57:07 PM
REPRESENTATIVE JOHNSON pointed out Norway is the full owner of
its oil business.
MR. RUGGIERO explained Norway has a single taxing entity as
opposed to Alaska that has state, local, and federal taxes. Mr.
Ruggiero informed the committee producers like quick returns
from high rates and then "sell out" in order to maximize rate of
return and return on investment; however, governments want costs
minimized and long term jobs. In reality, there is quick
production and decline, followed by sales to smaller companies
and more production, which is a combination of both priorities
over time [slide 15]. Further, as the fields change owners, new
owners come in with the latest technology and a fresh outlook;
for example, Apache Corporation got 80,000 barrels per day from
the Forties Field in the North Sea [slide 16]. Slide 17
provided another example of a field in Texas given up thrice,
but that continued to grow to 8.5 times its original projection.
It is important to bring new companies into the basins to unlock
potential, because the original developers pull out at the
beginning of decline; subsequent developers have different risk
profiles, business models, and new technology [slide 18].
Another emerging tool for the industry is the risk service
contract which is a different form of developing hydrocarbons on
behalf of governments. He stressed large service companies are
now providing capital, downhole technical expertise, tools,
field operations, and technology on behalf of governments [slide
19]. In response to Co-Chair Tarr, he said the blue line on
slide 19 represents Schlumberger Limited (SLB), the red line
represents Halliburton (HAL), and the light blue line represents
Baker Hughes (BHI).
REPRESENTATIVE BIRCH asked whether the risk service contract
companies have an equity position.
2:07:17 PM
MR. RUGGIERO advised the primary tenet of a risk service
contract is "no equity." Risk service contracts are "a
different form of governments getting the capital spent and a
different way of paying that capital back to the operator ... a
second major tenet of these type of contracts is that it's paid
back basically through production ...." He summarized the first
section of the presentation as follows: change is continuous;
tax increases generate comments; new players are very important;
the challenge is to determine fair share that creates growth for
the operators and the government [slide 20].
REPRESENTATIVE TALERICO was unsure whether there is a perfect
fair share for all parties.
REPRESENTATIVE JOHNSON asked what oil companies should do in
response to tax increases.
MR. RUGGIERO urged for oil companies to disclose their
prospects, and propose fiscal terms to advance projects, so the
state does not have to base its decisions on models of
hypothetical fields; in fact, this is the procedure in other
countries.
REPRESENTATIVE JOHNSON surmised companies are not inclined to
discuss their business plans with the government.
REPRESENTATIVE RAUSCHER referred to the importance of bringing
in new players and noted on slide 14, Mr. Ruggiero said the
first two years in a field are the most productive. Therefore,
profits for new players and the state from mature fields will be
lower.
MR. RUGGIERO clarified he was speaking of a shale well, of which
the majority of production is recovered in the first two years;
in contrast, in some of the Gulf of Mexico and Alaska fields,
recovery in the first two years may only be 20 percent of the
ultimate production. Total recovery is related to the
production facilities and to the nature of the field.
2:15:25 PM
REPRESENTATIVE JOHNSON expressed her understanding the presenter
is advocating for a different [tax] structure for differing
fields and types of production.
MR. RUGGIERO said he is not advocating for anything at this
time, but is providing information so "everyone comes from [the]
same general understanding of the landscape into which you must
create your fiscal policy." He returned to the presentation,
noting the importance of past events is not just what happened,
but why certain events happened. For example, locations in
which oil companies are investing today are not a predictor of
the future unless one knows why. In response to an earlier
question as to whether there is an ideal system, he explained
countries have different drivers, thus regime-to-regime
comparisons of tax rates are problematic. For example,
comparisons do not take into consideration the following:
domestic market obligations that are not required in Alaska;
local content, such as local service companies; infrastructure
development such as schools and hospitals; oil blends; refinery
and power station needs. He stressed the committee needs to
foresee Alaska's drivers in order to develop its fiscal policy
[slide 22]. Mr. Ruggiero cautioned that short term needs and
crises can cause governments to focus on short term solutions
instead of long term issues, which are more lucrative. He
listed several issues affecting Alaska [slide 24].
REPRESENTATIVE BIRCH restated the merits of Senate Bill 21 and
suggested the current tax structure should be allowed to provide
stability for a year or more.
MR. RUGGIERO reiterated two bills related to oil and gas taxes
have been introduced to the legislature, thus the committee
should have a framework from which to address possible changes
during this legislative session. In further response to
Representative Birch, he said he has read HB 111.
REPRESENTATIVE BIRCH concluded the presenter is advocating for
changes to the current tax structure through the legislation
advanced by the co-chairs of the House Resources Standing
Committee.
MR. RUGGIERO restated at this time he is not advocating for any
legislation associated with oil tax.
CO-CHAIR TARR recalled during the debate on Senate Bill 21,
legislators never considered oil prices under $60 [per barrel].
MR. RUGGIERO turned attention to the discussion of the drivers
that became factors in the design of the ACES legislation in
2007, and advised different fiscal systems are appropriate for
different sets of drivers. At that time, the Alaska State
Legislature identified the drivers - listed on slide 24 - around
which to design ACES.
2:25:06 PM
REPRESENTATIVE BIRCH questioned why the ACES tax policy was
amended by the legislature to double the tax rate proposed by
the [administration of former Governor Sarah Palin, 12/06-7/09];
he recalled the Palin Administration proposal was a reasoned
progressive increase in the tax rate, and the legislature added
an egregious progression to an unknown tax rate. He asked for
the origin of the legislative amendment.
MR. RUGGIERO advised the administration proposed in ACES tax
policy progressivity of 0.2 percent, and the legislature changed
the rate to 0.4 percent and after 50 percent was reached, added
0.1 progressivity.
REPRESENTATIVE BIRCH opined the amendment prevented investment
and was a horrible mistake.
MR. RUGGIERO pointed out after ACES was enacted investment went
up, as did the number of jobs, and the rate of decline on the
North Slope was less; all of the improvements did occur to a
certain degree. He then presented his perspective of the goals
for Alaska fiscal design as follows: keep TAPS running with
additional investment in existing fields; encourage new players;
develop Cook Inlet gas; incent unconventional fields such as
heavy oil and shale; create a self-correcting fiscal policy that
is not tied to a specific price or production rate [slide 25].
He turned to finding the right balance of fair share, and
cautioned against reaching the "tipping point" for operators and
the government. He restated the importance of looking to the
future, recognizing the past may not be relevant [slide 27].
From Mr. Ruggiero's experience, finding the fair share is one
part science and three parts art, using creativity to factor in
the basins, the location, and the needs of the government [slide
28]. Slide 29 illustrated revenues that generally go to the
operator such as finding, development, and operating costs, and
the cost of capital, which causes debate. In theory, the
government collects money above the operator's return; however,
if government taxes are high, operators believe there should be
a higher cost of capital. A government that holds operators to
a certain rate will find that operators need additional capital
costs for successful fields to cover the cost of dry holes.
Further, many regimes can keep capital costs down and determine
a fair return [slide 29]. He noted the aforementioned theory
and practice illustrated on slide 29 will change if there is a
major reduction to federal corporate income taxes [slide 30].
REPRESENTATIVE BIRCH inquired as to whether Alaska includes the
owner's royalty share as a component of the government take
[shown on slides 29 and 30].
2:35:33 PM
MR. RUGGIERO said yes, royalty is included in rents to the
government. He continued, advising that a comparison of the
percentage of government take does not tell the whole story; in
fact, in developing fields, the timing of when the tax is taken
is critically important. Slide 31 was a graph of government
take for a hypothetical field calculated through the fiscal
regimes of several countries. The blue bars represented
government take prior to the operator recovering costs, the
yellow bars represented government take after a 15 percent
return on capital, and the green bars represented government
take after all costs, plus a 15 percent return on investment.
The timing of government take greatly affects the risk to the
operator: slide 32 illustrated the unfavorable, moderate, and
favorable risk levels for the same countries as determined by
the timing of their government take.
REPRESENTATIVE RAUSCHER asked whether Alaska is included within
the U.S. state take on slide 31, and risk level on slide 32.
MR. RUGGIERO said the U.S. representation is a generic that
includes royalty, severance taxes, and corporate income tax. In
further response to Representative Rauscher, he explained the
intent of the graph is to aid in understanding that all taxes at
a given percentage are not equal, when the timing and risk to
the project are considered. Mr. Ruggiero summarized designing
fiscal systems for countries relates to the following: no two
regimes are alike; take experiences from the past; look at a
country's needs; find the best design. Furthermore, just as
governments may seek certain factors from a fiscal policy, the
operators are also unique in size, capital structure, and
purpose [slide 33]. He directed attention to credits under
Alaska's past fiscal systems, and observed credits were designed
to help Alaska remain competitive. From the present activity
and production, it appears credit incentives have been
successful. The current production is predominately from
existing fields; although there have been new discoveries, the
large new fields will be in development for six to ten years,
and Alaska's tax regime must be sufficiently predictable and
known to instill confidence in investors during that time
period, and over the first ten to fifteen years of production
[slide 35].
2:43:36 PM
REPRESENTATIVE BIRCH reviewed the credits that were introduced
in 2013 with the intent to incent smaller companies. He noted
the governor's veto of the payments due for the credits, and
asked for Mr. Ruggiero's global perspective on credits.
MR. RUGGIERO advised Alaska cannot change its geography,
environmental issues, and higher cost of operation; in order to
attract capital and new operators away from other regimes, there
must be incentives to produce and reinvest in Alaska's oil and
gas fields. He said, "I do think that there is something that
needs to be done to encourage people to come and to encourage
the investment, but I've not yet got any recommendations with
respect to what form that takes and how that should be done."
Slide 36 listed examples of how to use various fiscal tools; for
example, royalty can be fixed, step, variable tied to production
or profitability, royalty relief, and first tranche petroleum,
in which royalty is split between the government and the
operator. One area of consideration for Alaska is credit versus
deduction. Slide 38 illustrated comparison data, including full
cycle economics, marginal dollar splits, and bonus payments. He
cautioned most comparisons are of marginal take with
assumptions.
REPRESENTATIVE JOHNSON asked for an explanation of full cycle
economics and marginal dollar splits.
MR. RUGGIERO said full cycle economics are economic analyses
over the life of a field from exploration to abandonment,
looking at the split between the operator and government.
Marginal dollar analyses are of the impact of additional revenue
or less cost on government take and operator profit.
2:49:48 PM
CO-CHAIR TARR informed the committee DOR will present life cycle
economics related to Alaska fields at an upcoming hearing.
REPRESENTATIVE BIRCH returned attention to slide 38 and pointed
out in Alaska government take is near 60 percent and increasing.
MR. RUGGIERO advised the slide represents government take during
1998 through 2007, when overall government take was 62.5
percent.
REPRESENTAIVE BIRCH said the percent represented is close to a
one-third, one-third, one-third target advocated by some.
MR. RUGGIERO restated the theory that an operator recovers their
costs plus a fair return, and the rest goes to the government.
REPRESENTATIVE PARISH questioned whether the governments on
slide 38 collect a corporate portion, or have non-sovereign
holders of royalties.
2:53:07 PM
MR. RUGGIERO advised the source of the data is Daniel Johnston,
who generally represents a marginal dollar split, thus he was
unsure what was included in the analysis. Slide 39 reviewed
factors of the marginal dollar versus the overall project split
economics based on a hypothetical North Slope project. The
overall project government take was 55 percent to 60 percent,
and for on a marginal dollar basis, depending on price, the
split was nearer 70 percent government take. Also in comparing
Alaska with other regimes, many comparisons fail due to
misunderstood credits, uplifts, waterfall priority, caps on
deductions or credits, sliding scales, and other factors. A
comparison of Alaska and Texas revealed in Texas, in the rare
instance of production from legacy state land, the royalty is
12.5 percent; on state land the royalty is 20 percent; private
leases are near 30 percent. In addition, Texas state severance
and ad valorem gross taxes range from 4 percent to 10 percent,
and acreage is sold at prices ranging from $2,500 to $30,000 per
acre. He concluded a typical horizontal shale well in Texas
produces between 300,000 and 500,000 barrels on 160 acres, and
costs to the operator for land, drilling, and operating expenses
would total approximately $20 to $40 per barrel. Therefore,
using a flat $60 oil price, in Texas the split of the profit
would be 30 percent to the operator and 70 percent to government
and the royalty holder [slide 40].
2:59:23 PM
MR. RUGGIERO provided information on Norway for the committee to
review [slide 41]. He observed Alaska's current tax system is
complex with many moving parts - which make it hard to
administer and audit - such as geographical separation,
allowances, credits, and minimum tax. Also, the system lacks
the data transparency needed to inform decisions, and the
industry needs to partner closer with the state. There are too
many factors tied to fixed events, and he suggested using self-
correcting mechanisms [slide 43]. He informed the committee of
the Extractive Industries Transparency Initiative (EITI), which
was instigated by World Bank and is active in many countries.
The initiative is a global movement to make public all payments
from companies in extractive industries to governments, and
slide 46 illustrated participating countries. In fact, in
Norway, all payments to the government are made public, and in
the United Kingdom (UK), all companies listed on the London
Stock Exchange must make tax payments public. He provided 2015
tax payments made to Alaska by BP. In 2018, the Federal
Communication Commission will require reporting for FY 17 [slide
47]. Lastly, he acknowledged taxpayer information is
confidential; however, in many countries detailed data is
available, and where governments grant licenses, they own or
have rights to all the data and it is published. Further,
historical data is published, as well as forward forecasts of
production, capital costs, and major refurbishments on existing
fields. The aforementioned information ensures the government
its fiscal system will generate investment and competitiveness
in the world market [slide 48].
REPRESENTATIVE BIRCH stated the Department of Natural Resources
is cataloging seismic data on the North Slope that will be
available to the public.
REPRESENTATIVE JOHNSON observed the current tax structure is
bringing in more revenue than would the ACES tax system, and
asked whether the state should return to ACES.
MR. RUGGIERO stated that is true for the current year when
viewed in "narrow isolation," however, ACES taxed heavily during
periods of windfall profits to accumulate savings for use in
periods of low profits. He agreed ACES would take less now, but
would take more during the good times.
[HB 111 was held over.]
3:07:21 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:07 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB111 Supporting Document-Castle Gap Advisors 2.19.17.pdf |
HRES 2/20/2017 1:00:00 PM |
HB 111 |
| HB111 Supporting Document - CY2016 Education Tax Credit Report from Revenue Commissioner Hoffbeck 2.15.17.pdf |
HRES 2/20/2017 1:00:00 PM |
HB 111 |
| HB111 ver O 2.8.17.PDF |
HRES 2/13/2017 1:00:00 PM HRES 2/17/2017 1:00:00 PM HRES 2/20/2017 1:00:00 PM HRES 2/22/2017 1:00:00 PM HRES 2/22/2017 6:30:00 PM HRES 2/24/2017 1:00:00 PM HRES 2/27/2017 1:00:00 PM HRES 3/1/2017 1:00:00 PM HRES 3/1/2017 6:00:00 PM HRES 3/6/2017 6:30:00 PM HRES 3/8/2017 1:00:00 PM |
HB 111 |
| HB111 Sectional Analysis 2.12.17.pdf |
HRES 2/13/2017 1:00:00 PM HRES 2/17/2017 1:00:00 PM HRES 2/20/2017 1:00:00 PM HRES 2/22/2017 1:00:00 PM HRES 2/22/2017 6:30:00 PM HRES 2/24/2017 1:00:00 PM HRES 2/27/2017 1:00:00 PM HRES 3/1/2017 1:00:00 PM HRES 3/1/2017 6:00:00 PM HRES 3/6/2017 6:30:00 PM HRES 3/8/2017 1:00:00 PM |
HB 111 |
| HB111 Sponsor Statement 2.12.17.pdf |
HRES 2/13/2017 1:00:00 PM HRES 2/17/2017 1:00:00 PM HRES 2/20/2017 1:00:00 PM HRES 2/22/2017 1:00:00 PM HRES 2/22/2017 6:30:00 PM HRES 2/24/2017 1:00:00 PM HRES 2/27/2017 1:00:00 PM HRES 3/1/2017 1:00:00 PM HRES 3/1/2017 6:00:00 PM HRES 3/6/2017 6:30:00 PM HRES 3/8/2017 1:00:00 PM HRES 3/13/2017 1:00:00 PM |
HB 111 |
| HB111 Fiscal Note DOR-TAX 2.12.17.pdf |
HRES 2/20/2017 1:00:00 PM |
HB 111 |