Legislature(2019 - 2020)BARNES 124

04/15/2019 01:00 PM RESOURCES

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01:03:02 PM Start
01:03:34 PM HB122
02:06:59 PM Presentation(s): Oil and Gas Taxes by the Department of Revenue
03:07:02 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony <Time Limit May Be Set> --
+ Presentation: Oil & Gas Industry Taxes by TELECONFERENCED
- Colleen Glover, Tax Director, Dept. of Revenue
- Dan Stickel, Chief Revenue Economist, Dept. of
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 15, 2019                                                                                         
                           1:03 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative John Lincoln, Co-Chair                                                                                           
Representative Geran Tarr, Co-Chair                                                                                             
Representative Grier Hopkins, Vice Chair                                                                                        
Representative Sara Hannan                                                                                                      
Representative Ivy Spohnholz                                                                                                    
Representative Chris Tuck                                                                                                       
Representative Dave Talerico                                                                                                    
Representative George Rauscher                                                                                                  
Representative Sara Rasmussen                                                                                                   
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 122                                                                                                              
"An Act relating to the Funter  Bay marine park unit of the state                                                               
park system; relating to protection  of the social and historical                                                               
significance of  the Unangax cemetery  located in Funter  Bay and                                                               
providing  for  the amendment  of  the  management plan  for  the                                                               
Funter  Bay marine  park  unit; and  providing  for an  effective                                                               
- HEARD AND HELD                                                                                                                
PRESENTATION:  OIL & GAS INDUSTRY TAXES BY THE DEPARTMENT OF                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 122                                                                                                                  
SHORT TITLE: FUNTER BAY MARINE PARK: UNANGAN CEMETERY                                                                           
SPONSOR(s): REPRESENTATIVE(s) HANNAN                                                                                            
04/03/19       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/03/19       (H)       RES, FIN                                                                                               
04/15/19       (H)       RES AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
HUNTER MEACHUM, Staff                                                                                                           
Representative Sara Hannan                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:     On  behalf  of   Representative  Hannan,                                                             
sponsor,  reviewed HB  122 by  way of  a PowerPoint  presentation                                                               
entitled, "HB  122, Funter Bay  Marine Park:   Unangan Cemetery,"                                                               
dated 4/15/19.                                                                                                                  
RICKY GEASE, Director                                                                                                           
Central Office                                                                                                                  
Division of Parks and Outdoor Recreation                                                                                        
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  On behalf of DNR, testified in support of                                                                
HB 122.                                                                                                                         
PRESTON KROES, Superintendent                                                                                                   
Southeast Region                                                                                                                
Division of Parks and Outdoor Recreation                                                                                        
Department of Natural Resources (DNR)                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions regarding HB 122.                                                                     
RIC IANNOLINO, Spokesperson                                                                                                     
Friends of Admiralty Island                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 122.                                                                          
DANIEL MONTEITH, PhD, President                                                                                                 
Friends of Admiralty Island                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 122.                                                                          
MARTIN STEPETIN                                                                                                                 
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 122.                                                                          
NIKO SANGUINETTI, Curator of Collections and Exhibits                                                                           
Juneau City Museum                                                                                                              
City and Borough of Juneau (CBJ)                                                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 122.                                                                          
CHUCK SMYTHE, PhD, Director                                                                                                     
Department of History and Culture                                                                                               
Sealaska Heritage Institute                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 122.                                                                          
REED STOOPS                                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HB 122.                                                                          
BRUCE TANGEMAN, Commissioner Designee                                                                                           
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:     Co-provided  a  PowerPoint  presentation                                                             
entitled, "Alaska Oil and Gas  Production Tax Calculation ('Order                                                               
of Operations')," dated 4/15/19.                                                                                                
DAN STICKEL, Chief Economist                                                                                                    
Tax Division                                                                                                                    
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:     Co-provided  a  PowerPoint  presentation                                                             
entitled, "Alaska Oil and Gas  Production Tax Calculation ('Order                                                               
of Operations')," dated 4/15/19.                                                                                                
ACTION NARRATIVE                                                                                                              
1:03:02 PM                                                                                                                    
CO-CHAIR  JOHN  LINCOLN  called   the  House  Resources  Standing                                                             
Committee meeting  to order at  1:03 p.m.   Representatives Tuck,                                                               
Hannan,  Talerico,   Rauscher,  Rasmussen,  Hopkins,   Tarr,  and                                                               
Lincoln  were  present at  the  call  to order.    Representative                                                               
Spohnholz arrived as the meeting was in progress.                                                                               
        HB 122-FUNTER BAY MARINE PARK: UNANGAN CEMETERY                                                                     
1:03:34 PM                                                                                                                    
CO-CHAIR  LINCOLN  announced that  the  first  order of  business                                                               
would be HOUSE  BILL NO. 122, "An Act relating  to the Funter Bay                                                               
marine  park  unit   of  the  state  park   system;  relating  to                                                               
protection  of  the social  and  historical  significance of  the                                                               
Unangax  cemetery located  in Funter  Bay and  providing for  the                                                               
amendment of the  management plan for the Funter  Bay marine park                                                               
unit; and providing for an effective date."                                                                                     
1:04:12 PM                                                                                                                    
REPRESENTATIVE HANNAN,  sponsor, stated  HB 122  is a  project 77                                                               
years  in  the making,  including  about  two decades  of  active                                                               
political work,  to preserve the  Unangan cemetery in  Funter Bay                                                               
[on the northwest  coast of Admiralty Island].   She related that                                                               
during World War  II (WWII), people of the  Aleutian Islands were                                                               
relocated  to six  camps in  Southeast Alaska  when the  Japanese                                                               
started  invading the  Aleutians.   Funter Bay  was probably  the                                                               
worst of the camps,  she said, in that it had  one of the highest                                                               
death ratios.  Unlike the  other campsites, she noted, the Funter                                                               
Bay cemetery is on state property  and unpreserved.  She said two                                                               
of the six  relocation campsites were located in  Funter Bay, one                                                               
at the mine  site and one at  the cannery site.   The other camps                                                               
were  located   at  Killisnoo  near  Angoon,   which  is  private                                                               
property;  Ward  Cove  outside of  Ketchikan,  which  is  federal                                                               
property  and  has  been  preserved   as  part  of  the  Civilian                                                               
Conservation Corps  (CCC) camp;  Wrangell Institute  in Wrangell;                                                               
and Burnett [Inlet],  where today there is a fish  hatchery.  She                                                               
pointed  out  that  the  people   relocated  to  the  Funter  Bay                                                               
campsites had already once been  relocated from their traditional                                                               
Aleutian  Island homelands  when in  the late  1700s Russian  fur                                                               
trappers  moved them  to  the Pribilof  Islands  where they  were                                                               
forced to hunt furs.                                                                                                            
REPRESENTATIVE  HANNAN stated  the  Funter  Bay relocation  camps                                                               
were  also known  as internment  camps because  the men  at these                                                               
camps were forced to leave their  families in Funter Bay to go to                                                               
U.S.  government sealing  camps  on the  Pribilof Islands  during                                                               
harvest  time.   The families  left behind  were ill  prepared to                                                               
survive  because of  the marginal  conditions at  the Funter  Bay                                                               
camps and  a large cemetery ensued.   About two decades  ago, she                                                               
continued, people started  to work on ensuring  that the cemetery                                                               
didn't disappear.   Some of  the camp people's  descendants still                                                               
live  in the  region today  and some  returned to  the Pribilof's                                                               
post WWII,  she said,  and they have  sought protection  for that                                                               
land.   While  she happens  to have  the privilege  of being  the                                                               
person in office  who is bringing to culmination  the bill before                                                               
the committee, the  dialogues for preserving this  land have been                                                               
around for  at least  two decades,  she said.   She noted  that a                                                               
number of the people involved  in that dialogue are present today                                                               
to provide  expertise.   She acknowledged  the leadership  of the                                                               
executive branch  as well as  the director and  regional director                                                               
of the Division of Parks  and Outdoor Recreation who continued to                                                               
shepherd things to  this step.  She explained that  a land survey                                                               
was done that would provide  for the preservation of the cemetery                                                               
and  HB 122  would  protect  it by  moving  the  upland that  the                                                               
cemetery  is located  on from  the Division  of Land,  Mining and                                                               
Water into  marine park  status under the  Division of  Parks and                                                               
Outdoor Recreation.                                                                                                             
1:08:31 PM                                                                                                                    
HUNTER MEACHUM,  Staff, Representative Sara Hannan,  Alaska State                                                               
Legislature,  on   behalf  of  Representative   Hannan,  sponsor,                                                               
reviewed HB  122 by  way of  a PowerPoint  presentation entitled,                                                               
"HB  122,  Funter Bay  Marine  Park:    Unangan Cemetery."    She                                                               
explained that HB 122 would transfer  the parcel of land that the                                                               
cemetery  is on  in Funter  Bay  from the  Department of  Natural                                                               
Resources  (DNR), Division  of  Land, Mining  and  Water, to  the                                                               
Division  of  Parks  and  Outdoor   Recreation  to  preserve  the                                                               
cemetery's social  and historical significance.   She displayed a                                                               
photograph on  slide 3 of the  cemetery as it is  today and noted                                                               
it is  well maintained due to  the efforts of family  members and                                                               
the organization, Friends  of Admiralty Island.   Moving to slide                                                               
4, she  showed a  photograph of  the headstone  for a  child born                                                               
about  a  month   before  relocation  to  the   Funter  Bay  camp                                                               
[5/23/42], and  who died in  October because the  conditions were                                                               
so terrible.  Ms. Hunter brought  attention to the land survey in                                                               
the committee packet depicting the cemetery's location.                                                                         
1:11:40 PM                                                                                                                    
REPRESENTATIVE  RAUSCHER remarked  that  it sounds  like a  great                                                               
idea.  He inquired whether any municipal land is involved.                                                                      
REPRESENTATIVE HANNAN replied no.                                                                                               
REPRESENTATIVE RAUSCHER asked how much area would be involved.                                                                  
MS. MEACHUM responded that the total acreage is 537 acres.                                                                      
REPRESENTATIVE  HANNAN   said  DNR  is  online   to  address  the                                                               
committee.  She noted that DNR  is suggesting the whole parcel of                                                               
state land under the Division of  Mining, Land and Water be moved                                                               
into park  status, so it is  contiguous and not just  an outlying                                                               
piece of burial plots.                                                                                                          
1:13:22 PM                                                                                                                    
RICKY  GEASE, Director,  Central  Office, Division  of Parks  and                                                               
Outdoor  Recreation,  Department   of  Natural  Resources  (DNR),                                                               
testified that  HB 122 has  the department's full support  at all                                                               
levels.  He  said it has been a privilege  to work and coordinate                                                               
with the  diverse groups of  knowledgeable people,  agencies, and                                                               
organizations  that have  been working  hard  to further  protect                                                               
this  historical and  culturally significant  site.   [This will]                                                               
help inform  Alaskans about  the importance  of the  cemetery and                                                               
the hardships  imposed on the  Aleut people  of St. Paul  and St.                                                               
George islands while in the Funter Bay area during WWII.                                                                        
1:14:26 PM                                                                                                                    
REPRESENTATIVE RAUSCHER offered his  understanding that tracts 37                                                               
and  38, plus  multiple lots,  are included  for a  total of  537                                                               
acres involved in the transfer.                                                                                                 
MR. GEASE offered his belief  that the aforementioned is correct.                                                               
He  deferred to  Mr.  Preston Kroes  for  answering any  specific                                                               
questions about the specific lots involved.                                                                                     
1:15:23 PM                                                                                                                    
REPRESENTATIVE HOPKINS inquired whether this  is the first bit of                                                               
land  to be  added  to  the marine  park.    He further  inquired                                                               
whether the  land management plan  for this marine park  would be                                                               
MR. GEASE answered  that to his knowledge there is  some land and                                                               
HB 122  would add two  additional lands that are  currently under                                                               
the Division  of Mining, Land and  Water.  The bill  would ensure                                                               
that these  lands are protected  under the Division of  Parks and                                                               
Outdoor  Recreation and  there is  the authority  for enforcement                                                               
that comes  with state park lands.   He deferred to  Mr. Kroes to                                                               
answer about the land management plan.                                                                                          
1:16:48 PM                                                                                                                    
PRESTON  KROES,  Superintendent,  Southeast Region,  Division  of                                                               
Parks  and Outdoor  Recreation, Department  of Natural  Resources                                                               
(DNR), stated the parcel the  cemetery is located on is currently                                                               
under the  Division of Mining,  Land and Water and  designated to                                                               
be  managed as  part  of the  state park.    Therefore, he  said,                                                               
nothing  really will  change as  far  as management;  it will  be                                                               
managed pretty  much the same as  it currently is and  just be an                                                               
addition to the current state marine park.                                                                                      
1:17:43 PM                                                                                                                    
CO-CHAIR  TARR asked  whether a  full assessment  of the  state's                                                               
public lands has  been done for important historical  sites.  She                                                               
further asked whether Mr. Kroes is  aware of any other sites like                                                               
this one that the committee should be thinking about.                                                                           
MR. KROES offered  his belief that unfortunately a  lot of things                                                               
like this  are missed.  He  said that is why,  upon hearing about                                                               
it, the division  was more than happy to have  it extend into the                                                               
state marine park  to protect it and ensure it  will be there for                                                               
the cultural  history.  He  pointed out  that it wouldn't  be any                                                               
additional  budgetary   burden  as  the  state   marine  park  is                                                               
relatively undeveloped.  He added  that the division hopes to get                                                               
some interpretive panels put out in that area.                                                                                  
1:18:59 PM                                                                                                                    
REPRESENTATIVE TALERICO  inquired about  the ownership  status of                                                               
the lands adjacent to the boundary of the cemetery parcel.                                                                      
MR. KROES replied there are  some surrounding private parcels [by                                                               
the cemetery], as  well as U.S. Forest  Service property adjacent                                                               
to the state marine park and  the parcel that [the park] would be                                                               
expanding into.                                                                                                                 
1:19:41 PM                                                                                                                    
REPRESENTATIVE RAUSCHER asked  how many people are  buried in the                                                               
REPRESENTATIVE HANNAN responded that  there are 32 identified and                                                               
marked gravesites  and the  oral records  suggest there  could be                                                               
some unmarked graves that are further outside the marked graves.                                                                
REPRESENTATIVE  RAUSCHER inquired  whether there  is one  in each                                                               
[of the plots of the survey].                                                                                                   
REPRESENTATIVE HANNAN answered no  and stated that Representative                                                               
Rauscher is  asking if  there are gravesites  within each  of the                                                               
survey plots 1, 2,  11, and 12.  She offered  her belief that all                                                               
the gravesites are  located in tract A.  She  explained that [the                                                               
survey] shows all  the state land that is  being transferred, but                                                               
that the  cemetery is in a  very concentrated area.   She further                                                               
explained  the survey  shows  a  full township  and  some of  the                                                               
township is federal land, not state land.                                                                                       
REPRESENTATIVE RAUSCHER offered his  understanding that "each one                                                               
of those is a section in the township."                                                                                         
REPRESENTATIVE HANNAN replied yes.                                                                                              
REPRESENTATIVE RAUSCHER asked about the need for all of that.                                                                   
MR. KROES explained  that the reason for asking for  the full 537                                                               
acres  is to  make a  continuous boundary  for the  current state                                                               
marine park because otherwise the  cemetery parcel alone would be                                                               
a far outlier.  This way,  he continued, it is one big continuous                                                               
park that includes the cemetery.                                                                                                
1:22:17 PM                                                                                                                    
REPRESENTATIVE RASMUSSEN inquired about the cemetery's size.                                                                    
MR. KROES answered he isn't  sure [the division] has that number,                                                               
but he estimates that it is roughly three-quarters to one acre.                                                                 
REPRESENTATIVE  RASMUSSEN stated  she supports  the cemetery  but                                                               
questions the need for 537 acres for something that is one acre.                                                                
MR. KROES  displayed a map  and noted  the current state  park is                                                               
depicted  in  purple.   He  pointed  to  the tract  proposed  for                                                               
addition  and  said this  way  it  would  be  connected.   To  do                                                               
otherwise,  he stated,  the cemetery  would just  be an  asterisk                                                               
with  quite a  bit of  property in  between that  is Division  of                                                               
Mining, Land and Water,  which is also part of DNR.   Since it is                                                               
already DNR state  property, he said, the thought was  to make it                                                               
all  part of  the state  marine park  and eliminate  jurisdiction                                                               
confusion.   He  showed another  map  and pointed  out the  state                                                               
marine park, the tract proposed for addition, and the cemetery.                                                                 
1:24:30 PM                                                                                                                    
CO-CHAIR TARR  surmised that without a  contiguous boundary there                                                               
would be a  need to create some kind of  access that could become                                                               
complicated, while if contiguous it would be uncomplicated.                                                                     
MR.  KROES  replied  that  it would  definitely  make  the  whole                                                               
management plan,  jurisdiction matters, and everything  much more                                                               
clearly cut and easy to do.                                                                                                     
1:25:09 PM                                                                                                                    
REPRESENTATIVE  SPOHNHOLZ  offered  her understanding  that  this                                                               
proposal is not  a swap, but rather a transfer  of lands from the                                                               
category of  mining and other  natural resources to  the category                                                               
of parks.                                                                                                                       
MR. KROES responded that it would  basically be a title change as                                                               
it would  go from the DNR  Division of Mining, Land  and Water to                                                               
the DNR Division of Parks and Outdoor Recreation.                                                                               
REPRESENTATIVE SPOHNHOLZ  asked whether there are  any commercial                                                               
resources  on this  land that  would then  not be  extractable if                                                               
this title change occurred.                                                                                                     
MR. KROES answered  no and explained that part of  the reason for                                                               
including this parcel  under state parks is to  better protect it                                                               
because  the   Division  of  Parks  and   Outdoor  Recreation  is                                                               
different in that it doesn't  have commercial resource activities                                                               
on its  parcels like the Division  of Forestry does.   This would                                                               
better protect the cemetery and adjacent lands, he added.                                                                       
REPRESENTATIVE  SPOHNHOLZ  stated  it  makes sense  in  that  the                                                               
primary  objective is  to  protect the  cemetery.   However,  she                                                               
continued, she would  like to have it said on  the record that in                                                               
moving this  land over to  the park  there is not  an opportunity                                                               
cost that is  being missed since it is property  that wouldn't be                                                               
developed otherwise.   All that  is being  done, she said,  is to                                                               
protect an  important resource for  the Unangan people  and there                                                               
is no other factor that could cloud the committee's decision.                                                                   
MR. KROES replied correct.                                                                                                      
1:27:27 PM                                                                                                                    
The committee took an at-ease from 1:27 p.m. to 1:29 p.m.                                                                       
1:29:16 PM                                                                                                                    
RIC  IANNOLINO,   Spokesperson,  Friends  of   Admiralty  Island,                                                               
testified that  he did the archival  work to prepare for  a visit                                                               
[to the  cemetery on 5/20/17]  by the survivors and  officials of                                                               
the Aleutian  Pribilof Islands  Association of  St. Paul  and St.                                                               
George.   At  this  75th memorial  anniversary,  he related,  the                                                               
Russian Orthodox Church performed a  blessing of the graves and a                                                               
12-foot-high cedar cross was put up.                                                                                            
MR. IANNOLINO  stated he  did his research  at the  state library                                                               
and archive  and at the  Sealaska Heritage  Institute's archives.                                                               
He said  that in a  Sealaska archive  he found a  presentation by                                                               
Roy Peratrovich,  the 1942 Grand  President of the  Alaska Native                                                               
Brotherhood  and Alaska  Native  Sisterhood.   He paraphrased  as                                                               
follows from Mr. Peratrovich's presentation:                                                                                    
     Approximately 500  Natives of Aleut, Kenai,  and Eskimo                                                                    
     descent have  been evacuated from the  Aleutian Islands                                                                    
     by the U.S.  Navy to Killisnoo and Funter Bay  as a war                                                                    
     safety measure.  These people  came with very little of                                                                    
     their  personal goods,  and living  conditions will  be                                                                    
     extremely difficult for them,  especially this fall and                                                                    
     winter.   It is our  patriotic duty to offer  every aid                                                                    
     and  comfort  to these  fellow  countrymen,  a gift  of                                                                    
     friendship,  advice, and  assistance.   At the  present                                                                    
     time secondhand fishing gear of  all kinds is needed by                                                                    
     them  to help  them put  up  their winter  food.   U.S.                                                                    
     Employment Service ... is trying  to find jobs for them                                                                    
     and  their   main  interest   right  now   is  building                                                                    
     temporary homes in Killisnoo and Funter Bay.                                                                               
MR. IANNOLINO pointed  out that these people  were, in actuality,                                                               
interned.   He related that despite  a court case that  said they                                                               
couldn't be interned  because they were U.S.  citizens, they were                                                               
interned for a year from 1942 to 1943.                                                                                          
MR.   IANNOLINO   noted   that  Friends   of   Admiralty   Island                                                               
participated in the  5/20/17 cemetery visit by  the survivors and                                                               
members  of their  families.   He  said 100  people  went to  the                                                               
cemetery for  the ceremony and  a blessing  of the graves  by the                                                               
Russian Orthodox  bishop.  He  stated it was called  the "Healing                                                               
Path,"  and shared  some  of  the words  that  were  said at  the                                                               
     In 1942  the steamer  Delarof sailed from  the Pribilof                                                                    
     Islands towards Southeast  Alaska, destination unknown.                                                                    
     Their cargo was 380 St.  Paul ... villagers and 180 St.                                                                    
     George villagers  and an  additional 38  villagers from                                                                    
     Atka, all were  being evacuated from the war  zone.  As                                                                    
     the  Delarof entered  the  Gulf  of Alaska,  government                                                                    
     agents  were   scrambling  to  find  housing   for  the                                                                    
     evacuees.   The ship  was radioed to  drop off  the St.                                                                    
     George and  St. Paul  villagers in  Funter Bay  and the                                                                    
     Atka villagers in  Killisnoo next to Angoon.   Over the                                                                    
     next several years their story  was one of people whose                                                                    
     government forgot them, ignored  them, and treated them                                                                    
     as less  than human.  ... Today we  visit this  site of                                                                    
     this dark  chapter of Alaska  history with some  of the                                                                    
     survivors  and family  members to  hear their  stories.                                                                    
     We sail into the same harbor  ... as did the Delarof 75                                                                    
     years ago.   We  walk the  same beach  path as  did the                                                                    
     evacuees.  We gather at the cemetery to remember...                                                                        
MR. IANNOLINO  interjected that 30-plus  graves was  mentioned in                                                               
the ceremony.   But, he said,  there were many infants  and their                                                               
graves  were not  marked and  so the  thought is  that there  are                                                               
about 44 graves.                                                                                                                
MR. IANNOLINO continued reciting from the Healing Path ceremony:                                                                
     ...the  30-plus  evacuees  ... who  never  returned  to                                                                    
     their  home villages.   We  come today  to honor  those                                                                    
     evacuees and  families and acknowledge  their suffering                                                                    
     and losses.   We  come today  to remind  all of  us how                                                                    
     easily fear can result  in creating victims, especially                                                                    
     of the less  empowered.  We come today  to pledge never                                                                    
1:34:28 PM                                                                                                                    
REPRESENTATIVE TUCK inquired about Mr. Iannolino's affiliation.                                                                 
MR. IANNOLINO replied  he is a Friends of  Admiralty Island board                                                               
member and he did archival work for the aforementioned event.                                                                   
CO-CHAIR LINCOLN requested a description  of Friends of Admiralty                                                               
MR.  IANNOLINO indicated  that the  next  witness [Dr.  Monteith]                                                               
would provide that information.                                                                                                 
1:35:06 PM                                                                                                                    
DANIEL  MONTEITH, PhD,  President, Friends  of Admiralty  Island,                                                               
testified he  has a  PhD in anthropology  and archeology  and has                                                               
worked in  Alaska for over  35 years.  He  thanked Representative                                                               
Hannan for  sponsoring HB 122  and the committee for  hearing it.                                                               
He said Friends  of Admiralty Island is  a nonprofit organization                                                               
dedicated to the research, education,  and outreach for Admiralty                                                               
Island  and Admiralty  Island National  Monument.   He noted  the                                                               
organization  currently  has over  350  members  residing in  the                                                               
communities of Angoon, Juneau, and other places.                                                                                
DR.  MONTEITH related  that  290  people from  St.  Paul and  190                                                               
people  from St.  George were  relocated  to Funter  Bay in  June                                                               
1942.  Over the course of a  few years at that location, he said,                                                               
there  were  32  documented  deaths  [plus  undocumented]  infant                                                               
mortality.  The location is  an Alaska historical site, he noted;                                                               
site Juneau 975.                                                                                                                
DR. MONTEITH said HB 122 is  very important in terms of the State                                                               
of Alaska  protecting the Unangan  historic cemetery site.   Some                                                               
of  the  Unangan  people  in  Killisnoo  were  buried  there,  he                                                               
related, and some of that has  gone over to private lands and the                                                               
people  cannot  even put  flowers  on  those graves  because  the                                                               
private residents say they will accuse  them of trespass.  So, he                                                               
continued,  this  is  an  important thing  that  is  being  done.                                                               
Transferring the cemetery from [the  Division of Mining, Land and                                                               
Water] to  the Division of  Parks and Outdoor  Recreation assures                                                               
its protection.   He urged the passage of HB  122 and stated that                                                               
respect for  one's ancestor  is important to  the respect  of the                                                               
Unangan culture and their descendants today.                                                                                    
CO-CHAIR LINCOLN noted the committee's  intent is not to move the                                                               
bill  today.   He explained  there  would be  an opportunity  for                                                               
amendments when the bill is taken up again at a later date.                                                                     
1:38:28 PM                                                                                                                    
REPRESENTATIVE TUCK asked  how Funter Bay was  chosen for holding                                                               
the Aleutian people.                                                                                                            
DR. MONTEITH responded that the  U.S. Department of Defense (DoD)                                                               
was  heading  down  to  Southeast  Alaska  and  was  looking  for                                                               
possible  sites.   In  Funter Bay  was an  old  cannery site  and                                                               
structures left  over from an  old mining operation, he  said, so                                                               
they utilized those  places in Funter Bay and  they also utilized                                                               
historic  sites in  Killisnoo.   He related  that they  also went                                                               
down  to Ward  Cove where  there were  old Civilian  Conservation                                                               
Corps  (CCC) structures  and also  to  Wrangell and  some of  the                                                               
young teenagers went to Wrangell  Institute.  He pointed out that                                                               
[WWII] prisoners of war were  sent to Excursion Inlet where there                                                               
was a cannery site.                                                                                                             
REPRESENTATIVE TUCK inquired whether  any other structures remain                                                               
at the Funter Bay site besides the cemetery.                                                                                    
DR. MONTEITH answered yes, quite a  few.  But, he continued, they                                                               
do not have much integrity  in terms of historical structures and                                                               
archeological sites.  He explained  that this is a very important                                                               
parcel because it  is a cemetery and ancestors  are buried there.                                                               
He said members could refer to  a nice site inventory done by the                                                               
National  Park Service  and Charles  Mobley, an  archeologist and                                                               
historian, which has  complete maps and a history  of the federal                                                               
government's relations with these tribal entities.                                                                              
1:40:47 PM                                                                                                                    
CO-CHAIR  LINCOLN stated  he doesn't  perceive any  opposition to                                                               
the intent  of the legislation,  but that there is  some question                                                               
over  the  amount  of  land  being transferred.    He  asked  Dr.                                                               
Monteith to speak to the transfer  of nearly 540 acres to protect                                                               
one acre.                                                                                                                       
DR. MONTEITH replied he would defer  to the Division of Parks and                                                               
Outdoor  Recreation.    He offered  his  understanding  that  the                                                               
philosophy is  to have  contiguous land from  the state  park and                                                               
not have  any parcels of  land that  are incongruent in  terms of                                                               
management and divisions.  The  bill, he said, would include that                                                               
entire area and  not cause any corridors of  differences in terms                                                               
of divisions.                                                                                                                   
1:41:43 PM                                                                                                                    
CO-CHAIR LINCOLN  inquired whether,  from the perspective  of the                                                               
intent being to  protect and honor the ancestors,  there is value                                                               
to having  that much land  or could  the task be  accomplished if                                                               
the bill were amended to a smaller amount.                                                                                      
DR.  MONTEITH responded  that  an adequate  buffer  is needed  to                                                               
protect the cemetery  and to keep the integrity of  the area from                                                               
being compromised,  and this is  what is trying  to be done.   He                                                               
added that  Friends of  Admiralty Island  has been  very involved                                                               
with  the  historical  interpretation  of  that  area  and  would                                                               
continue  to dedicate  money, time,  and effort  to helping  with                                                               
interpretative signing of the area to make it a respectful area.                                                                
1:43:06 PM                                                                                                                    
MARTIN STEPETIN  testified he  is from  St. Paul  Island, Alaska,                                                               
and is  a descendant of the  Pribilof people who were  brought to                                                               
Funter Bay.   He  said he  now lives in  Juneau and  got involved                                                               
with Friends  of Admiralty Island  during a  cruise in 2014.   He                                                               
noted he already  knew about this history, but  got really caught                                                               
up in it  as a result of this cruise.   He thanked Representative                                                               
Hannan and  the many people who  helped get things to  this point                                                               
of HB  122, which  would finally protect  the Funter  Bay Unangan                                                               
cemetery.  He continued as follows:                                                                                             
     Most of my  grandparents were taken to  Funter Bay from                                                                    
     St. Paul  Island in early  1942 and by God's  will they                                                                    
     all survived.   My dad was born here in  Juneau in 1942                                                                    
     at the  St. Ann's Hospital.   ...  I don't know  how my                                                                    
     grandparents got over here to  Juneau, but I'm thankful                                                                    
     they did, otherwise  my dad might not  have survived in                                                                    
     the cold  and rundown  camps in  Funter Bay  where many                                                                    
     perished.   My maternal  ... grandparents  actually got                                                                    
     married while  in Funter Bay.   They survived.   My mom                                                                    
     was born in 1951.                                                                                                          
     ... A  short timeline and  three good points of  why we                                                                    
     should pass this bill:  In  May 2014 my wife and I went                                                                    
     on  a Friends  of  Admiralty cruise  to Killisnoo  near                                                                    
     Angoon  where we  would bless  the graves  and place  a                                                                    
     plaque  on the  cemetery grounds  in remembrance  of 17                                                                    
     Atka Unangans  who died  before the  federal government                                                                    
     would bring  them home.   The Atka  cemetery is  in bad                                                                    
     shape and still  is to this day.   After this emotional                                                                    
     cruise I got  to meet all the board  members of Friends                                                                    
     of  Admiralty  and this  is  when  I learned  the  Atka                                                                    
     cemetery is  on private  land and the  owners, although                                                                    
     they let us  on the land to bless it,  was unwilling to                                                                    
     engage  with us  about  restoring the  cemetery or  any                                                                    
     kind  of   protection.     This  was   frustrating  and                                                                    
     heartbreaking.    After  joining Friends  of  Admiralty                                                                    
     board  we  quickly  began researching  the  Funter  Bay                                                                    
     cemetery trying  to figure  out who  owns the  land the                                                                    
     cemetery sits  on.  This  was not  an easy task  ... We                                                                    
     had to  do a  lot of research.   We  eventually figured                                                                    
     out that the cemetery sits  on Alaska state land and is                                                                    
     managed  by the  Department  of  Natural Resources,  or                                                                    
     DNR.  DNR  didn't even know they managed  the land that                                                                    
     the cemetery sits on; they had to look it up.                                                                              
1:46:25 PM                                                                                                                    
     ... This  is the first  point I  want to make:   Unlike                                                                    
     the Atka cemetery  or ... the other  five locations the                                                                    
     Unangan  Aleuts  were  kept, we  can  actually  try  to                                                                    
     protect   this   cemetery  from   future   development,                                                                    
     logging,  or  use  that  would  desecrate  this  sacred                                                                    
     place.    Working  with  Friends  of  Admiralty,  state                                                                    
     parks,  DNR  -  who   has  been  very  cooperative  and                                                                    
     accommodating through this whole  process and we are so                                                                    
     thankful  for  that  -  we   weighed  our  options  for                                                                    
     protecting the cemetery.   We learned there  was a past                                                                    
     effort to protect the cemetery  by Charles Mobley whose                                                                    
     book my  friend just showed  you. ... He tried  to have                                                                    
     the  cemetery  grounds  put on  the  National  Historic                                                                    
     Registry, but  the efforts failed because  of the rules                                                                    
     of  not allowing  cemeteries on  the National  Historic                                                                    
     Registry and  the stringent  rules to  prove historical                                                                    
     significance.    We didn't  want  to  try the  National                                                                    
     Historic Registry  again and recently learned  that the                                                                    
     National  Historic  Registry doesn't  actually  provide                                                                    
     very much protection in the  first place.  For example,                                                                    
     the infamous  Fourth Avenue Theater in  Anchorage is on                                                                    
     the  National Historic  Registry, but  is slated  to be                                                                    
     torn down  possibly.  Our  friends at DNR  suggested an                                                                    
     Interagency Land  Management Agreement, or ILMA.   This                                                                    
     would be a  great way to protect the  land except ILMAs                                                                    
     can  be changed,  renegotiated, or  completely canceled                                                                    
     at any  time in  the future by  people who  don't value                                                                    
     the cemetery as we do.   So we knew that this would not                                                                    
     be  a wise  way  to protect  the cemetery  permanently.                                                                    
     That's  when  Friends  of Admiralty  and  I  approached                                                                    
     Representative  Sam Kito  last year  about getting  the                                                                    
     cemetery legislatively  protected.  But it  was already                                                                    
     too late  into the session  and we couldn't get  a bill                                                                    
     This  is my  second point:   The  cemetery is  on state                                                                    
     land ...  but this is  not the  state's fault.   ... By                                                                    
     protecting  this land  we would  recognize the  history                                                                    
     with all  the most  important things about  the history                                                                    
     ....  Those  who don't remember it are  bound to repeat                                                                    
     it.  ...  My grandma, ... into her late  90s, ... would                                                                    
     say things like, "I hope it never happens again." ...                                                                      
     My third point  is simple:  The Funter  Bay Marine Park                                                                    
     will be expanded a little,  but it won't cost any money                                                                    
     to  manage  the land.    The  value of  protecting  the                                                                    
     social and  historical significance  of this  land will                                                                    
     cement the history  for good and we will  never have to                                                                    
     repeat this history again.                                                                                                 
1:50:23 PM                                                                                                                    
CO-CHAIR LINCOLN noted that invited testimony on HB 122 was now                                                                 
concluded and opened public testimony on the bill.                                                                              
1:50:41 PM                                                                                                                    
NIKO  SANGUINETTI, Curator  of Collections  and Exhibits,  Juneau                                                               
City  Museum, City  and Borough  of Juneau  (CBJ), testified  she                                                               
became  involved  with  this  project   when  she  first  started                                                               
[employment with the museum].  She  stated that as someone new in                                                               
Juneau and someone who didn't grow  up in Alaska, she didn't know                                                               
about  this  history  because  it's an  event  that  isn't  often                                                               
covered  in historical  texts or  in classrooms  around the  U.S.                                                               
When she  took on  her new  post, she  said, she  was immediately                                                               
greeted by  this large and  ambitious project.  She  related that                                                               
as part  of this project  the City Museum  is planning to  do its                                                               
summer 2020  exhibition on the  Funter Bay internment camps.   In                                                               
preparing for this exhibition, she  noted, much research was done                                                               
far in advance and she  has benefitted greatly by Mr. Iannolino's                                                               
research and  digging through  the scant  amount of  records that                                                               
MS.  SANGUINETTI pointed  out that  this  [relocation] event  was                                                               
characterized by  a lot of  confusion.   Trying to iron  out what                                                               
really happened  has been  very difficult,  she said,  because so                                                               
many  agencies were  involved and  so many  people were  taken to                                                               
places  that were  never planned  to house  humans at  any point.                                                               
There  is now  this  opportunity to  protect  this cemetery,  she                                                               
continued, which is  the resting place for people  who were moved                                                               
without their consent  and without knowing where  they were going                                                               
to end up when they boarded that ship.                                                                                          
MS. SANGUINETTI  addressed the questions about  the space between                                                               
the cemetery and  the state park.  She stated  that [the goal is]                                                               
to  ensure that  future generations  of  people will  be able  to                                                               
visit this  site unimpeded, that it  is going to be  protected in                                                               
perpetuity, and that  the area around it will  also be protected.                                                               
As  many people  know  with historic  sites,  she continued,  the                                                               
historic site  itself can  be protected, but  if right  next door                                                               
things are being dug up and the  ground is being shaken, a lot of                                                               
unseen damage is  being caused that can create  trouble later on.                                                               
Therefore, that connection between  the parkland and the cemetery                                                               
land  ensures protecting  the cemetery  as well  as the  people's                                                               
right to visit  it and visit their ancestors, and  to continue to                                                               
do so for many years to come.                                                                                                   
MS SANGUINETTI  thanked Representative  Hannan for  putting forth                                                               
HB  122, the  committee for  hearing it,  and the  wonderful team                                                               
that worked  on this for many  years long before she  was able to                                                               
join it.                                                                                                                        
1:54:03 PM                                                                                                                    
CHUCK  SMYTHE,  PhD,  Director,  History  and  Culture,  Sealaska                                                               
Heritage Institute,  testified in favor  of HB  122.  He  said he                                                               
got to know  the significance of this site in  1981 when he first                                                               
went to St.  Paul and St. George and heard  firsthand from people                                                               
whose  parents were  there  or  who were  there  themselves.   He                                                               
related that they  told of how they were brought  to this cannery                                                               
and the  experience they went through  - how there were  holes in                                                               
the  walls  and ceilings,  blankets  were  used to  separate  the                                                               
families' quarters,  it was  very cold,  there wasn't  much food,                                                               
and  that  without the  help  of  the Alaska  Native  Brotherhood                                                               
(ANB),  they might  have starved  during  that time  period.   He                                                               
further related  that they talked  about how they were  given two                                                               
or three hours to gather up  their belongings when the ships came                                                               
to  pick them  up.   He said  this cemetery  is a  very important                                                               
significant  site historically  for  the people  of the  Pribilof                                                               
DR. SMYTHE addressed  the question about whether  there should be                                                               
just  one  acre, or  a  larger  land  area  set aside  for  this.                                                               
Speaking  from  his  12  years  of  experience  working  for  the                                                               
National  Park  Service,  he  said  the  big  difference  between                                                               
protecting  a  one-acre  site  and  a larger  site  in  terms  of                                                               
funding,  recognition of  the site,  and ways  to protect  it, is                                                               
that  a larger  land area  provides  a more  significant type  of                                                               
recognition that enhances the ability to protect an area.                                                                       
1:56:59 PM                                                                                                                    
CO-CHAIR LINCOLN  stated he didn't  mean to imply that  anyone on                                                               
the committee  was seeking to set  aside only one acre.   Rather,                                                               
he said, he  was trying to get  a sense of whether  the whole 540                                                               
acres or somewhere  in between would be sufficient  to protect it                                                               
from adjacent development.   He asked whether the  full 540 acres                                                               
is the minimum Dr. Smythe would have in mind.                                                                                   
DR. SMYTHE replied he doesn't have an opinion on that.                                                                          
CO-CHAIR LINCOLN stated the bill would  be taken up again and the                                                               
committee would consider the acreage.                                                                                           
1:57:47 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
1:58:01 PM                                                                                                                    
CO-CHAIR  TARR thanked  Mr. Stepetin  for  sharing his  emotional                                                               
story.  She said that  whenever [the committee] works on righting                                                               
the wrongs  of the past,  it is  among the most  important things                                                               
that can ever be done.                                                                                                          
1:58:42 PM                                                                                                                    
REED  STOOPS  testified   he  is  before  the   committee  as  an                                                               
individual.  He said he bought  the old cannery site 30 years ago                                                               
and  it  is  in  the  middle of  the  property  adjacent  to  the                                                               
cemetery.  He stated he has  used the property half a dozen times                                                               
a year  since purchasing  it and is  therefore familiar  with the                                                               
history and  current status of  the cemetery  site.  He  noted he                                                               
once  worked for  DNR  dealing  with land  management,  so he  is                                                               
familiar with  that perspective as  well.  He stated  he supports                                                               
HB 122 and that it is a good idea.                                                                                              
MR. STOOPS  discussed the size of  the parcel.  He  said there is                                                               
no other  commercial value  of that  property and  that it  is de                                                               
facto recreation.   About 20  cabin sites  are in Funter  Bay, he                                                               
stated, that are used for  recreational purposes mostly by people                                                               
from  Juneau or  other places  in Southeast  Alaska.   He related                                                               
that many  commercial fishermen, recreational  boaters, kayakers,                                                               
and  campers use  Funter Bay  and  the areas  that are  privately                                                               
owned.   He pointed out that  while 500 acres sounds  like a lot,                                                               
it  is scattered  along  the shoreline  and not  very  deep.   He                                                               
further pointed out that there  is no commercial timber or mining                                                               
potential there  and it  is already  heavily used  for recreation                                                               
and is surrounded  by national monument.  Therefore,  he said, he                                                               
doesn't  think any  economic opportunities  would be  foregone by                                                               
protecting the area immediately around the cemetery.                                                                            
MR.  STOOPS addressed  Representative Tuck's  question.   He said                                                               
some of the old buildings are  still there on his property and he                                                               
saves what he  can save, but a  lot of them were  too far-gone to                                                               
save.   He stated that the  old bunkhouse where the  Aleut people                                                               
lived was  barely standing when  he first purchased  the property                                                               
and has now fallen down.   He said he couldn't imagine the living                                                               
conditions  for  the people  who  lived  there as  the  bunkhouse                                                               
wasn't  much  bigger  than  the  committee  room,  there  was  no                                                               
insulation, and  apparently 30  or 40 people  were living  in it.                                                               
It was not  something anyone would want to endure,  he added.  He                                                               
urged the committee to support HB 122.                                                                                          
2:01:11 PM                                                                                                                    
REPRESENTATIVE RAUSCHER inquired whether  Mr. Stoops' property is                                                               
considered private land.                                                                                                        
MR.  STOOPS responded  yes.   He explained  that the  old cannery                                                               
site, old  mining site, and  a few other trade  manufacture sites                                                               
were patented back in the early  1900s and have all been sold and                                                               
developed into recreational cabin sites.                                                                                        
REPRESENTATIVE RAUSCHER offered his  understanding that right now                                                               
it is a recreational area.                                                                                                      
MR. STOOPS answered yes.  It  is used heavily by mostly Southeast                                                               
Alaskans, he  said.   A lot  of boaters  go up  the bay  and many                                                               
commercial  fishermen use  it to  get out  of the  weather or  to                                                               
spend the night while fishing, he  continued.  He added that many                                                               
people go there for the weekend  to go salmon fishing and camping                                                               
on the beach or sleeping on their boats.                                                                                        
REPRESENTATIVE RAUSCHER asked how  many private properties are in                                                               
Funter Bay.                                                                                                                     
MR. STOOPS  estimated there are  20 private tracts, all  of which                                                               
have cabins on them.                                                                                                            
REPRESENTATIVE RAUSCHER  inquired whether the  private properties                                                               
are close  to the park that  would be made contiguous  or whether                                                               
the properties go the other way.                                                                                                
MR. STOOPS  replied that the  bay is about  a mile deep  with the                                                               
majority of properties on the south side  of the bay and a few in                                                               
the  back.   One property  is  contiguous with  the cemetery,  he                                                               
said,  and his  property  is nine  lots and  almost  next to  the                                                               
cemetery.   There is plenty of  private property in the  bay that                                                               
has  already been  developed, he  advised,  and what  is left  is                                                               
probably best  left to public use  because if the rest  were sold                                                               
the public wouldn't be able to use any of the bay.                                                                              
2:03:06 PM                                                                                                                    
CO-CHAIR  LINCOLN  closed  public   testimony  on  HB  122  after                                                               
ascertaining no one else wished to testify.                                                                                     
CO-CHAIR LINCOLN held over HB 122.                                                                                              
2:03:26 PM                                                                                                                    
The committee took an at-ease from 2:03 p.m. to 2:06 p.m.                                                                       
^PRESENTATION(S):    OIL  AND  GAS TAXES  BY  THE  DEPARTMENT  OF                                                               
PRESENTATION(S):  OIL AND GAS TAXES BY THE DEPARTMENT OF REVENUE                                                              
2:06:59 PM                                                                                                                    
CO-CHAIR  LINCOLN  announced that  the  final  order of  business                                                               
would be a presentation by  the Department of Revenue on Alaska's                                                               
oil and gas tax structure.                                                                                                      
2:07:15 PM                                                                                                                    
BRUCE  TANGEMAN,  Commissioner  Designee, Department  of  Revenue                                                               
(DOR), began by  noting that Alaska's oil tax  system is complex.                                                               
He said  DOR's PowerPoint presentation entitled,  "Alaska Oil and                                                               
Gas  Production Tax  Calculation ('Order  of Operations'),"  is a                                                               
technical  walk-through of  how the  tax structure  works from  a                                                               
high level.  No policy or  politics will be discussed, he stated,                                                               
the presentation  is only about  how the math  calculation works.                                                               
He turned the presentation over to Mr. Dan Stickel.                                                                             
2:08:00 PM                                                                                                                    
DAN STICKEL,  Chief Revenue  Economist, Tax  Division, Department                                                               
of Revenue  (DOR), displayed a list  of acronyms on slide  2 that                                                               
are used  in oil tax  and production tax.   He turned to  slide 3                                                               
and  stated the  purpose of  the presentation  is to  explain the                                                               
nuts and  bolts of  how the state's  existing production  tax and                                                               
fiscal system  work.  He explained  he would start by  looking at                                                               
all of the sources  of oil and gas revenue to  the state and then                                                               
provide a  detailed walk-through of  the production tax  and each                                                               
step of  the calculation.   He said  the presentation  focuses on                                                               
North Slope  oil because that  is the  main source of  revenue to                                                               
the state,  except for federal  and investment revenue,  and that                                                               
the  presentation walks  through fiscal  year 2020  (FY 20).   He                                                               
further  stated that  the presentation  also looks  at cash  flow                                                               
distribution and ends with a five-year comparison.                                                                              
2:09:50 PM                                                                                                                    
REPRESENTATIVE RAUSCHER  inquired how it  was decided to  use the                                                               
years 2017-2021.                                                                                                                
MR.  STICKEL replied  the decision  was to  present two  years of                                                               
history, FY 17  and FY 18, and  two years of forecast,  FY 20 and                                                               
FY 21,  and FY 19  is the current year,  which comes up  with the                                                               
five-year period of FY 1721.                                                                                                    
2:10:23 PM                                                                                                                    
MR. STICKEL resumed the presentation.   He noted DOR's disclaimer                                                               
on slide 4 and said that  this presentation attempts to distill a                                                               
very  complex tax  system down  to understandable  and simplistic                                                               
pieces.   He explained  the presentation  is based  on aggregated                                                               
data  and  DOR's forecasted  estimates  for  different items  and                                                               
portions of the tax regime.   Given he is an economist, he added,                                                               
anything  he says  shouldn't be  interpreted as  an official  tax                                                               
interpretation,  but rather  an attempt  to walk  members through                                                               
the revenue forecast to illustrate the tax calculation.                                                                         
MR.  STICKEL moved  to  slide  5 and  outlined  the state's  four                                                               
primary oil and  gas revenue sources:   royalty, corporate income                                                               
tax, property tax,  and production tax.  Royalty  is received for                                                               
any production from state land, he  explained, as well as a share                                                               
of  royalty for  production on  federal  land.   A typical  state                                                               
royalty  is 12.5  percent or  one-eighth,  although some  royalty                                                               
rates  differ  from that.    The  corporate  income tax  that  is                                                               
received is  based on  worldwide net  income for  company's doing                                                               
business in Alaska.  That  worldwide net income is apportioned to                                                               
Alaska  and the  top marginal  rate  paid on  the Alaska  taxable                                                               
income is  9.4 percent.  Property  tax, he noted, is  paid to the                                                               
state on all oil and  gas production related property anywhere in                                                               
the  state   and  in  the  state's   three-mile  offshore  limit.                                                               
Production  tax, he  pointed  out, is  the  revenue source  being                                                               
focused upon  in the  presentation.   Production tax  is Alaska's                                                               
severance tax  on oil and gas,  and it applies to  all production                                                               
anywhere  in   the  state  and  within   the  state's  three-mile                                                               
jurisdictional   offshore  limit   regardless  of   whether  that                                                               
production  is on  state-owned,  federal-owned, or  private-owned                                                               
2:12:30 PM                                                                                                                    
CO-CHAIR LINCOLN observed from slide  5 that the corporate income                                                               
tax  applies to  C-corporations.   He surmised  limited liability                                                               
companies (LLCs) are not subject to paying this tax.                                                                            
MR.  STICKEL  responded correct.    He  explained that  LLCs  (or                                                               
partnerships) are  pass-through entities.  If  that income passes                                                               
through to a  C-corporation it would be taxable, he  said, but if                                                               
it passes through to an  individual return there is no individual                                                               
income tax at this time.                                                                                                        
CO-CHAIR LINCOLN noted that historically  production in the state                                                               
has been by  very large companies like BP.   He asked whether the                                                               
ratio of  C-corporations to  non-C-corporations has  changed over                                                               
time such that  these small companies are now  affecting what the                                                               
state collects in taxes.                                                                                                        
MR. STICKEL  answered correct.  He  said he doesn't have  a ratio                                                               
handy, but historically, as well  as currently, the vast majority                                                               
of production is  by C-corporations and that  currently some non-                                                               
C-corporations are involved in production.                                                                                      
2:14:03 PM                                                                                                                    
REPRESENTATIVE HANNAN posed a scenario  in which the state has an                                                               
individual income  tax.  She  surmised that in this  scenario the                                                               
state  would be  able to  "get a  taxation" from  those companies                                                               
that are operating as LLCs and non-C-corporations.                                                                              
MR. STICKEL replied correct.                                                                                                    
2:14:46 PM                                                                                                                    
MR. STICKEL  continued the  presentation.   He displayed  slide 6                                                               
and  compared the  revenue  from each  of the  four  oil and  gas                                                               
revenue sources  for the  five-year period of  FY 17  through the                                                               
forecast for FY 21.  He noted  that the property tax shown on the                                                               
slide is the state's share only,  but that in addition there is a                                                               
municipal  share that  is quite  a  bit larger  than the  state's                                                               
share.   Regarding the corporate  income tax, he said  there were                                                               
prior year  refunds that  impacted the collections  in FY  17 and                                                               
2018;  so now,  when looking  at the  FY 19  and 20  numbers, DOR                                                               
believes  that  the approximately  $200  million  per year  is  a                                                               
better estimate of what to  expect from corporate income tax over                                                               
the long run.   Production tax, he said, is  expected to generate                                                               
[$735] million  in FY  19.  He  explained that  royalties include                                                               
bonuses, rents,  and interest  and that the  royalty number  of a                                                               
little over  $1 billion a  year includes general  fund, permanent                                                               
fund, and  school fund  shares of royalty.   Mr.  Stickel pointed                                                               
out that  DOR's Revenue Sources  Book forecast also  includes two                                                               
other categories  of petroleum revenue.   One category,  he said,                                                               
is constitutional  budget reserve fund (CBRF)  settlements, which                                                               
are  any assessments  or resolution  of  disputes regarding  past                                                               
years  production  tax  royalty and  minerals  related  corporate                                                               
income tax.   The second  category, he continued, is  the state's                                                               
share  of  revenue  from the  National  Petroleum  Reserve-Alaska                                                               
(NPR-A), which is federal revenue.   He stated that currently the                                                               
numbers have been  small, $8 million in FY 19  and $11 million in                                                               
FY 20, but  the number is expected to exceed  $100 million a year                                                               
by FY 28 as new developments in the NPR-A come online.                                                                          
2:17:04 PM                                                                                                                    
CO-CHAIR TARR used  slide 6 to point out that  revenue from taxes                                                               
is dependent  upon oil  price and  during low  price environments                                                               
the  state loses  out in  every  revenue area  - production  tax,                                                               
corporate income  tax, and royalties.   For example,  she pointed                                                               
out,  low prices  in  FY  17 resulted  in  negative revenue  from                                                               
corporate income tax.                                                                                                           
MR.  STICKEL  explained  that  the corporate  income  tax  has  a                                                               
provision where  when a  company has  a net  operating loss  in a                                                               
given year it is  allowed to carry that loss back  for up to five                                                               
years and  claim refunds on taxes  paid in prior years.   He said                                                               
that was part of the story  that brought the corporate income tax                                                               
to a  net negative number in  FY 17 and  a lower number in  FY 18                                                               
than otherwise would have been the case.                                                                                        
2:18:42 PM                                                                                                                    
REPRESENTATIVE RAUSCHER  asked whether  everybody loses out  in a                                                               
low price environment and whether  that loss is shared equally or                                                               
MR.  STICKEL  replied that  this  question  is addressed  in  the                                                               
presentation's addendum.   He explained  that there  are elements                                                               
of the state's fiscal system that  are based on gross revenue, so                                                               
the companies actually lose out  disproportionately more in a low                                                               
price environment.                                                                                                              
REPRESENTATIVE RAUSCHER  inquired whether any  municipalities are                                                               
included within the NPR-A.                                                                                                      
MR. STICKEL  responded that the NPR-A  is located to the  west of                                                               
the  Alpine development  and encompasses  the Willow  and Greater                                                               
Mooses Tooth developments.  He  offered his belief that there are                                                               
communities within the NPR-A.                                                                                                   
2:20:09 PM                                                                                                                    
REPRESENTATIVE TUCK surmised the figures  depicted on slide 6 are                                                               
actuals  for  FY 17  and  18,  close to  actual  for  FY 19,  and                                                               
forecasts for FY 20 and 21.                                                                                                     
MR. STICKEL  answered correct.   He  said the  chart is  based on                                                               
DOR's spring  2019 forecast that was  issued in March, so  the FY                                                               
19 figure  represents a little  over half  a year of  actuals and                                                               
four to five months of forecasts.                                                                                               
2:20:44 PM                                                                                                                    
REPRESENTATIVE  SPOHNHOLZ  recounted Co-Chair  Tarr's  statements                                                               
about the low price environment having  a big impact on the State                                                               
of Alaska's  revenue in FY 17.   She asked what  accounts for the                                                               
lower revenues  that are forecast  for FY  20 and 21,  given that                                                               
oil prices  and production are  anticipated to  remain relatively                                                               
MR. STICKEL replied  that the Alaska North Slope  (ANS) oil price                                                               
is forecast to be slightly lower for  FY 20 and 21 and is part of                                                               
the story  of what  is going on.   He also  noted that  the state                                                               
received some  one-time payments on  production tax in FY  18 and                                                               
REPRESENTATIVE SPOHNHOLZ asked  whether the drop of  $3.80 in ANS                                                               
oil price  is what accounts  for the difference in  royalties and                                                               
production tax.                                                                                                                 
MR. STICKEL responded correct.                                                                                                  
2:22:10 PM                                                                                                                    
REPRESENTATIVE  HANNAN  inquired  about  the  big  drop  in  CBRF                                                               
settlements after FY 17.                                                                                                        
MR. STICKEL answered that FY 17  had an unusually large amount of                                                               
settlements  because some  major settlements  took place  in that                                                               
particular year.  He said the  range of $100-$150 million is more                                                               
indicative of what can be expected in a typical year.                                                                           
REPRESENTATIVE HANNAN offered  her understanding that settlements                                                               
mean  litigated  disputes with  the  State  of Alaska  that  were                                                               
settled that  year.   She therefore  surmised the  settlement was                                                               
received by the state that year, not earned that year.                                                                          
MR. STICKEL replied correct and  stated it could be litigation or                                                               
could be audit assessments.   He said the settlements received in                                                               
FY 17 could have been settlements for as long as a decade.                                                                      
2:23:32 PM                                                                                                                    
REPRESENTATIVE RASMUSSEN asked  whether it is accurate  that a $1                                                               
[price] change is equivalent to $100 million in revenue.                                                                        
MR.  STICKEL responded  that DOR  has been  using an  estimate of                                                               
about $70  million in terms of  general fund.  He  explained that                                                               
because the  production tax works  with a gross tax,  when prices                                                               
go above  the current price  it is  going to be  $70-$100 million                                                               
per $1  of price  change, and  when prices  go below  the current                                                               
price it is going to be a little less than $70 million.                                                                         
REPRESENTATIVE RASMUSSEN  inquired whether  DOR has  a comparison                                                               
of what  a $1 change  in the price  per barrel would  have looked                                                               
like under Alaska's Clear and  Equitable Share (ACES) tax plan as                                                               
far as revenues.                                                                                                                
COMMISSIONER TANGEMAN  answered that because the  State of Alaska                                                               
has a  net tax  system it is  impossible to go  back and  give an                                                               
accurate estimate  had a  different tax  structure been  in place                                                               
since  the biggest  drivers under  a net  tax system  are capital                                                               
expenditures  (CAPEX) and  operating expenditures  (OPEX).   This                                                               
presentation, he reiterated,  is sticking with just  the facts of                                                               
what DOR  knows.   The department  is not  going to  go out  on a                                                               
limb,  he continued,  and assume  CAPEX or  OPEX would  have been                                                               
affected one  way or the other  because then it would  be getting                                                               
into policy  and political decisions.   He stressed  that looking                                                               
backwards and  trying to apply  different tax structures  is very                                                               
difficult, especially  when looking  at rather high  prices under                                                               
ACES and  rather low  prices under Senate  Bill 21.   Consultants                                                               
can do this, he said, but  the Department of Revenue would rather                                                               
stay out of that game,  especially with such vastly different tax                                                               
REPRESENTATIVE RASMUSSEN  asked whether DOR  has a record  of the                                                               
income and daily production [under  ACES] and whether that record                                                               
would be available.                                                                                                             
COMMISSIONER TANGEMAN  replied yes.   He said the  department has                                                               
CAPEX, OPEX,  and all those  details and  they are laid  out very                                                               
well in the Revenue Sources Book.                                                                                               
2:26:46 PM                                                                                                                    
MR. STICKEL resumed  the presentation.  He displayed  slide 7 and                                                               
started to  review the production  tax "order of  operations" for                                                               
FY 20.   He pointed  out that this table  appears in the  back of                                                               
the  Revenue Sources  Book each  fall  and that  this version  is                                                               
updated for  the spring [2019]  forecast.  For  this calculation,                                                               
he began, DOR  started with an average price forecast  of $66 per                                                               
barrel  for  FY 20  and  a  daily  production estimate  of  529.5                                                               
thousand  barrels per  day.   Those numbers  calculate out  to an                                                               
annual production  of 194  million barrels for  a total  value of                                                               
$12.8 billion sale  price, he stated.  He advised  that the table                                                               
is an aggregation  of all the different  companies doing business                                                               
on  the North  Slope,  which  is the  state's  largest source  of                                                               
production and  revenue, and is  intended only to  illustrate the                                                               
production tax calculations.                                                                                                    
MR. STICKEL  moved to slide  8 and addressed step  1, calculation                                                               
of royalty  and taxable barrels.   He explained that  any royalty                                                               
barrels  are  subtracted  from  the  production  tax  calculation                                                               
regardless of  the ownership of  those royalty barrels.   He said                                                               
the typical  rate is  one-eighth, or  12.5 percent,  although the                                                               
rates do  vary.  For  example, he continued, the  average royalty                                                               
rate  in the  current  year is  actually a  little  less than  12                                                               
percent.   He explained that  federal and private  land royalties                                                               
are also  subtracted to get  to the  total taxable barrels.   For                                                               
example,  he  said, nontaxable  federal  land  would include  the                                                               
offshore  portion of  the  NorthStar  oil field  as  well as  the                                                               
Liberty  field once  it  is  online.   He  pointed  out that  the                                                               
calculation  arrives  at  an  estimate  of  172  million  taxable                                                               
barrels  in FY  20 with  a total  taxable value  of about  $11.36                                                               
2:29:40 PM                                                                                                                    
MR.  STICKEL, responding  to  Representative Hopkins,  reiterated                                                               
that the Liberty  field is outside of  the state's jurisdictional                                                               
limit in  federal waters.  He  further reiterated that a  part of                                                               
the NorthStar  field falls  within the state's  limit and  a part                                                               
falls outside the state's limit.                                                                                                
REPRESENTATIVE HOPKINS  offered his understanding that  the State                                                               
of Alaska would receive $0 from Liberty.                                                                                        
MR.  STICKEL responded  that, as  DOR currently  understands, the                                                               
barrels from  Liberty production would not  be considered taxable                                                               
barrels for production tax purposes.                                                                                            
REPRESENTATIVE HOPKINS  asked whether $0 in  revenue from Liberty                                                               
is just for these two lines on  the chart or includes all the way                                                               
to the end of the chart.                                                                                                        
MR. STICKEL answered that, as  DOR currently understands, Liberty                                                               
would not be taxable for production  tax purposes.  He said there                                                               
would  still be  some benefits  in property  tax for  any onshore                                                               
infrastructure as well as the  benefit of having production going                                                               
down the Trans-Alaska Pipeline System (TAPS).                                                                                   
REPRESENTATIVE HOPKINS asked how far out the island is located.                                                                 
MR. STICKEL replied that it is beyond the three-mile limit.                                                                     
2:31:05 PM                                                                                                                    
REPRESENTATIVE  TUCK  referenced  slide  5 and  recalled  it  was                                                               
stated  that severance  tax occurs  regardless of  whether it  is                                                               
state, private, or  federal land, but that  anything beyond three                                                               
miles of the state's shore is not subject to state tax.                                                                         
MR. STICKEL responded correct.                                                                                                  
2:31:32 PM                                                                                                                    
REPRESENTATIVE  RASMUSSEN  inquired  whether  Liberty  would  pay                                                               
state income tax.                                                                                                               
MR. STICKEL answered  that, to the extent that  the operators are                                                               
C-corporations and to the extent  that that project impacts their                                                               
property  and  sales in  the  state  of  Alaska, there  could  be                                                               
potential corporate income tax impacts.                                                                                         
2:32:23 PM                                                                                                                    
CO-CHAIR TARR  commented that  this example would  be one  of the                                                               
circumstances to  think about the carried  forward losses because                                                               
Liberty is  going to be a  very costly development and  so for at                                                               
least five  years any of  Liberty's net operating  expenses could                                                               
be carried forward and applied  against its corporate income tax.                                                               
When  modeling that,  she continued,  it would  be expected  that                                                               
those early  years would be very  low or negative because  of the                                                               
net operating loss carried forward.                                                                                             
MR.  STICKEL  replied  that  the  question  of  how  an  offshore                                                               
development, not  in state waters,  would impact  state corporate                                                               
income tax is a tricky math problem.   He said this is because it                                                               
would impact  the worldwide income  and could  potentially impact                                                               
the company's  apportionment factors.   He  pointed out  that the                                                               
State of  Alaska would  receive about 27  percent of  the royalty                                                               
for production from Liberty.   Responding to Representative Tuck,                                                               
Mr.  Stickel clarified  that 27  percent of  the royalty  portion                                                               
received by  the federal government  is shared with the  State of                                                               
Alaska under a sharing provision that is in place.                                                                              
REPRESENTATIVE TUCK asked whether  the 27 percent royalty applies                                                               
to anything  close to Alaska  that is  beyond the three  miles on                                                               
federal  property or  is  specific to  projects  in areas  within                                                               
MR. STICKEL  offered his  belief that  that provision  applies to                                                               
production  beyond three  miles and  out  to another  limit.   He                                                               
noted  that in  previous years  DOR has  provided a  handout that                                                               
lists all the  different land ownerships and how  those all apply                                                               
for tax and royalty purposes.                                                                                                   
2:34:54 PM                                                                                                                    
REPRESENTATIVE SPOHNHOLZ inquired whether  the percentage for the                                                               
federal royalty  is an  amount similar to  the State  of Alaska's                                                               
12.5 percent or something different.                                                                                            
MR.  STICKEL responded  he doesn't  know the  number and  that he                                                               
will get back to the committee in this regard.                                                                                  
REPRESENTATIVE SPOHNHOLZ  commented that it is  important to know                                                               
the number because 27 percent of  a much smaller number is a much                                                               
smaller percent than what committee members might be thinking.                                                                  
2:35:30 PM                                                                                                                    
REPRESENTATIVE HANNAN  asked if  the State  of Alaska's  share of                                                               
federal royalty is  the same percentage regardless  of whether it                                                               
is from federal offshore property or land like the NPR-A.                                                                       
MR. STICKEL answered it varies and  said he will get the document                                                               
to the committee.                                                                                                               
2:36:10 PM                                                                                                                    
MR. STICKEL returned  to the presentation.  He  displayed slide 9                                                               
and talked about step 2, calculation  of the gross value at point                                                               
of production  (GVPP), also  referred to  as the  wellhead value.                                                               
He  said the  GVPP  is calculated  by subtracting  transportation                                                               
costs from the total taxable value.                                                                                             
2:36:40 PM                                                                                                                    
The committee took a brief at-ease.                                                                                             
[CO-CHAIR LINCOLN passed the gavel to Co-Chair Tarr.]                                                                           
2:36:53 PM                                                                                                                    
MR. STICKEL  continued to describe the  mechanism for calculating                                                               
the GVPP  (slide 9).   He  reiterated that  transportation costs,                                                               
also  known as  netback costs,  are subtracted  from the  taxable                                                               
value to arrive  at the GVPP.  He said  netback costs include the                                                               
tanker  costs for  getting from  Valdez  to the  West Coast,  the                                                               
tariff for  TAPS, the  tariff for any  feeder pipelines,  and any                                                               
quality bank adjustment.  He noted  that the ANS price of $66 per                                                               
barrel is  actually the price on  the West Coast when  the oil is                                                               
sold.  He stated that  subtracting DOR's estimated transportation                                                               
costs  of $8.81  per barrel  results in  a GVPP  of [$57.19]  per                                                               
barrel and a taxable value of about $9.8 billion for FY 20.                                                                     
2:38:12 PM                                                                                                                    
REPRESENTATIVE RAUSCHER inquired  whether the transportation cost                                                               
of $8.81 is a flat rate rather than an average.                                                                                 
MR. STICKEL replied  that the $8.81 is an average.   He said each                                                               
company has a slightly different marine cost.                                                                                   
2:38:48 PM                                                                                                                    
MR.  STICKEL moved  to  slide  10 and  looked  at  step 3,  lease                                                               
expenditures.    He said  the  production  tax is  essentially  a                                                               
modified version of a net profits  tax - companies are allowed to                                                               
deduct  both  capital  expenditures and  operation  expenditures.                                                               
For capital  expenditures, he  stated, DOR  relies in  general on                                                               
Internal  Revenue  Service  (IRS) guidelines  to  determine  what                                                               
qualifies  as  a   capital  expenditure.    He   noted  that  one                                                               
difference  from  an income  tax  is  that companies  receive  an                                                               
immediate  deduction  of their  capital  costs,  as there  is  no                                                               
depreciation  schedule   in  the   production  tax.     Operating                                                               
expenditures  are  essentially anything  that  is  not a  capital                                                               
expenditure, such as ongoing costs of operations and labor.                                                                     
MR. STICKEL added that when  looking at lease expenditures, there                                                               
are two  other terms to  understand in addition to  operating and                                                               
capital     allowable  lease expenditures  and  deductible  lease                                                               
expenditures.   He  said allowable  lease  expenditure refers  to                                                               
generally  any   cost  in  the  unit   directly  associated  with                                                               
producing the oil;  this is everything that is  allowed under the                                                               
production  tax  code.   Not  everything  is an  allowable  lease                                                               
expenditure, he continued; for example,  such things as financing                                                               
costs,  lease acquisition  costs, dispute  resolution costs,  and                                                               
dismantlement  and removal  and  restoration  costs.   Deductible                                                               
lease expenditure,  he advised, is  a term  of art that  DOR uses                                                               
solely  for  presentation  purposes;  it is  not  something  that                                                               
appears in  any statute  or regulation.   He explained  that when                                                               
presenting deductible  lease expenditures,  DOR is  talking about                                                               
that portion of allowable lease  expenditures that are applied in                                                               
the tax calculation in a given year  up to the GVPP.  He said any                                                               
expenditure  beyond  those  deductible lease  expenditures  turns                                                               
into a carry forward lease expenditure  that a company can use in                                                               
a future year to offset a future year's taxes.                                                                                  
2:41:16 PM                                                                                                                    
REPRESENTATIVE   HANNAN  recalled   Mr.   Stickel  stating   that                                                               
deductible capital  expenditures were not depreciated;  they were                                                               
within the year of use.  She  posed a scenario in which a company                                                               
buys a $1  million widget and offered her  understanding that the                                                               
company can deduct the entirety of that expense that year.                                                                      
MR. STICKEL responded correct.                                                                                                  
REPRESENTATIVE HANNAN  requested Mr.  Stickel to give  an example                                                               
of the kind of capital that is done in a year.                                                                                  
MR. STICKEL  posed an example  of constructing a building  on the                                                               
unit or drilling  a well, both things that will  have a long-term                                                               
life.  Under a corporate income  tax, he said, that cost might be                                                               
depreciated over  time, but  in the  state's production  tax that                                                               
cost would  be deducted entirely in  the year earned.   He stated                                                               
it is  typical in these types  of taxes around the  world to have                                                               
some sort of benefit for capital spending like that.                                                                            
REPRESENTATIVE  HANNAN asked  whether a  whole well  is typically                                                               
built in one  year, as she was thinking it  spanned a longer time                                                               
period.    She  offered  her   understanding  that  it  would  be                                                               
portioned  out between  ordering the  parts, shipping  the parts,                                                               
and getting  it put  up at  the drill site,  and that  that would                                                               
take more than one year.   She asked how that capital expenditure                                                               
would be differentiated.                                                                                                        
MR. STICKEL answered that that might  better be a question for an                                                               
auditor and  said he would  get back  to the committee  with some                                                               
clarity on what DOR does when there is a multi-year project.                                                                    
2:43:52 PM                                                                                                                    
REPRESENTATIVE RAUSCHER requested an  example of what constitutes                                                               
a lease expenditure.                                                                                                            
MR. STICKEL replied that a  lease expenditure is any operating or                                                               
capital expenditure - basically the  costs of operating the unit,                                                               
any  cost directly  associated  with the  producing  of the  oil.                                                               
Examples of lease expenditures,  he continued, include drilling a                                                               
well,  putting up  a facility  to  process the  oil, and  ongoing                                                               
costs of labor.                                                                                                                 
REPRESENTATIVE  RAUSCHER surmised  it  must be  performed on  the                                                               
MR. STICKEL responded, "Generally associated with the lease."                                                                   
REPRESENTATIVE RAUSCHER  further surmised  it must  be associated                                                               
with the lease but not necessarily on the lease.                                                                                
MR. STICKEL answered  yes and said costs can be  on the lease and                                                               
also associated with the lease.                                                                                                 
2:44:44 PM                                                                                                                    
REPRESENTATIVE  HOPKINS recalled  the  statement that  deductible                                                               
lease expenditure is  a term of art of what  is allowed under the                                                               
allowable lease expenditures up to  GVPP.  Referring to slide 10,                                                               
he  posed  a  scenario  in which  the  deductible  operating  and                                                               
capital expenditures add  up to $60 in  total lease expenditures.                                                               
He inquired  whether in  that scenario  the production  tax value                                                               
(PTV) would  be $0 [rather  than the  $29.93 shown on  the table]                                                               
and $2.81 would be carried over into the next year.                                                                             
MR. STICKEL  answered, "That's  generally the  right way  to look                                                               
at."  He noted that the  calculations on slide 10 show about $4.7                                                               
billion in  lease expenditures  that companies  would be  able to                                                               
use to offset their GVPP down  to $0.  After applying those lease                                                               
expenditures, he said,  there is an additional  $823.6 million of                                                               
lease expenditures  that were  not used  in the  tax calculation,                                                               
which is  highlighted in yellow at  the bottom of the  chart.  He                                                               
explained  this  could be  a  company  that doesn't  have  enough                                                               
production to  use up all  those lease expenditures or  a company                                                               
that is  still in  the exploration or  development phase;  so, in                                                               
the following year or five years  from now, the company could use                                                               
the $823 million carried forward.                                                                                               
REPRESENTATIVE HOPKINS  observed that the estimates  on the chart                                                               
show  the State  of Alaska  receiving $524  million in  total tax                                                               
paid in FY 20 and owing $823 million.                                                                                           
MR. STICKEL  replied that the  $823 million is a  carried forward                                                               
lease  expenditure that  can  be used  to  offset production  tax                                                               
value in a future year.  It is  not that the State of Alaska owes                                                               
$823 million,  he continued,  it is  an asset  to the  company to                                                               
potentially reduce  its taxes  in a future  year and  the maximum                                                               
benefit would be 35 percent of that lease expenditure amount.                                                                   
REPRESENTATIVE HOPKINS requested an  explanation of the number 35                                                               
2:47:18 PM                                                                                                                    
CO-CHAIR TARR responded that 35 percent is the tax rate.                                                                        
MR. STICKEL concurred.                                                                                                          
CO-CHAIR TARR provided  the committee members with a  copy of the                                                               
lease expenditure statute, AS 43.55.165.                                                                                        
2:47:38 PM                                                                                                                    
REPRESENTATIVE  RASMUSSEN  offered  her  understanding  that  the                                                               
chart shows  Alaska [companies]  paying [$8.81]  just to  get the                                                               
oil to market.  She asked  whether companies in the Lower 48 take                                                               
on that cost.                                                                                                                   
MR. STICKEL  answered that there is  a netback cost for  most oil                                                               
production  and that  it  varies  depending on  the  field.   For                                                               
example,  he said,  in some  areas in  Alberta the  production is                                                               
very far  from infrastructure,  so those  netback costs  are very                                                               
high.     There are  fields  that are  very close  to market,  he                                                               
continued, so those netback costs are much lower than in Alaska.                                                                
REPRESENTATIVE  RASMUSSEN, responding  to Commissioner  Tangeman,                                                               
clarified  that  her  understanding  is   that  the  $8.81  is  a                                                               
REPRESENTATIVE RASMUSSEN inquired how  the [$27.26] in deductible                                                               
total lease expenditures  compares to other states  such as Texas                                                               
and North  Dakota that don't  have major costs for  getting their                                                               
oil to market.                                                                                                                  
MR.  STICKEL replied  he doesn't  have with  him a  comparison of                                                               
Alaska's cost  structure to other  jurisdictions, but  in general                                                               
Alaska is a high cost jurisdiction.                                                                                             
REPRESENTATIVE RASMUSSEN  asked whether  Alaska has  higher costs                                                               
for   all   expenditures,   including  lease   expenditures   and                                                               
MR. STICKEL  responded it would be  safe to say Alaska  is either                                                               
similar or higher.  He added  that Alaska is definitely not a low                                                               
cost jurisdiction.                                                                                                              
2:49:50 PM                                                                                                                    
REPRESENTATIVE  SPOHNHOLZ noted  that net  operating loss,  as it                                                               
relates to  oil taxes, is not  included on the chart.   She asked                                                               
whether  net operating  loss is  a term  of art  that relates  to                                                               
deductible  and nondeductible  lease expenditures  or whether  it                                                               
isn't included in the chart at all.                                                                                             
MR.  STICKEL answered  that this  relates to  nondeductible lease                                                               
expenditures.   He explained that,  prior to calendar  2018 under                                                               
the previous tax  law, the $824 million would get  converted to a                                                               
net operating loss credit.  With  the tax changes that took place                                                               
beginning  in 2018,  he  continued, companies  no  longer earn  a                                                               
credit for those excess lease  expenditures and instead they have                                                               
the carry forward provision for those lease expenditures.                                                                       
REPRESENTATIVE SPOHNHOLZ offered her  understanding that they are                                                               
no  longer  called net  operating  losses  because they  are  not                                                               
actually cashable,  but they can  be carried forward as  a credit                                                               
for up to five years.                                                                                                           
MR.  STICKEL  replied  that  DOR  is  referring  to  those  lease                                                               
expenditures as a carried forward  annual loss, and a company can                                                               
carry those forward  indefinitely.  He said there  is a provision                                                               
where the  value erodes over time  if the company doesn't  use up                                                               
the carried forward  lease expenditure within 8 or  11 years, but                                                               
a company does get to  carry it forward indefinitely.  Responding                                                               
further to Representative Spohnholz,  he reiterated that they are                                                               
called carried forward annual loss.                                                                                             
2:51:46 PM                                                                                                                    
CO-CHAIR TARR  offered her understanding that  net operating loss                                                               
is  used for  the  corporate  income tax.    She  said the  lease                                                               
expenditure  carry  forward  could  be  differentiated  from  the                                                               
corporate income  tax loss in that  one is carry forward  and one                                                               
is net operating loss.                                                                                                          
MR. STICKEL responded correct.   He reminded members that today's                                                               
presentation is  only about the  production tax.  He  pointed out                                                               
that there  is a completely  separate carry forward  provision in                                                               
corporate income tax  and corporate income tax would  take up its                                                               
own presentation.                                                                                                               
2:52:54 PM                                                                                                                    
MR. STICKEL turned to slide  11 and addressed step 4, calculation                                                               
of the production tax value (PTV).   He explained that the PTV is                                                               
the gross  value at  point of  production (GVPP)  less deductible                                                               
lease expenditures and it is  essentially a measure of net profit                                                               
or the cash  left over after subtracting royalties  and all costs                                                               
of production.   He further explained that each  company is going                                                               
to have a separate PTV based  on all of its North Slope activity,                                                               
including all  fields and developments.   So, he continued,  if a                                                               
company is  operating an  existing field and  investing in  a new                                                               
field, both of those will  be pooled together for calculating the                                                               
company's  PTV.    He said  the  PTV  is  the  tax base  for  the                                                               
production tax  and that it is  also the basis for  any effective                                                               
tax rate  analysis and distribution  of cash flows  analysis that                                                               
DOR will be presenting in the addendum.                                                                                         
MR.  STICKEL  moved to  slide  12  and  discussed step  5,  gross                                                               
minimum tax.   He pointed out that two  parallel tax calculations                                                               
are essentially done side-by-side, the  gross minimum tax and the                                                               
net profits  tax, and said  that the  company pays the  higher of                                                               
those  two calculations.   Referring  to the  column for  minimum                                                               
tax, he advised that the minimum  tax for all prices over $25 per                                                               
barrel is  4 percent of the  GVPP.  So, he  continued, for fiscal                                                               
year 2020 the minimum tax is  4 percent times the $9.8 billion of                                                               
[GVPP], which equals [$393.9] million.                                                                                          
MR. STICKEL turned  to slide 13 and reviewed step  6, net tax and                                                               
gross value  reduction (GVR).   Drawing  attention to  the column                                                               
for calculating net tax, he said the  net tax is based on the PTV                                                               
of $5.15  billion minus a  gross value reduction provision.   The                                                               
GVR,  he explained,  is  an incentive  for  new development  that                                                               
excludes  a portion  of  the value  of new  fields  from the  tax                                                               
calculation to  get to the  adjusted PTV  and the 35  percent net                                                               
tax rate applies to that adjusted  PTV.  So, he continued, for FY                                                               
20  the 35  percent tax  rate before  application of  any credits                                                               
generates a tax before credits of $1.76 billion.                                                                                
2:55:36 PM                                                                                                                    
MR. STICKEL displayed  slide 14 and reviewed  step 7, calculating                                                               
tax credits  against liability.   He said the largest  tax credit                                                               
is  the  per-taxable-barrel credit  and  that  the two  different                                                               
varieties [non-GVR eligible and GVR  eligible] of this credit are                                                               
shown  in aggregate  on  the  chart.   He  stated  that the  vast                                                               
majority of these are non-GVR  eligible production and that those                                                               
fields  receive a  sliding scale  credit ranging  from $0-$8  per                                                               
taxable  barrel.   He explained  that the  $8 per  taxable barrel                                                               
applies  when the  wellhead value  is less  than $80  per barrel,                                                               
which is  roughly when  ANS prices  are less  than about  $89 per                                                               
barrel.   He said  GVR eligible production,  which is  new fields                                                               
during their  initial period  of production,  receives a  flat $5                                                               
per-taxable-barrel  credit.   He  pointed out  that  the $5  per-                                                               
taxable-barrel  credit can  reduce  [a  company's tax  liability]                                                               
below minimum  tax, while  the sliding  scale credit  for non-GVR                                                               
production  cannot reduce  a company's  tax  liability below  the                                                               
minimum  tax.   Mr. Stickel  further  pointed out  that any  per-                                                               
taxable-barrel  credits  not  used   in  the  year  incurred  are                                                               
forfeited.  He said they cannot  be carried forward and cannot be                                                               
refunded and that that is true  of any credits under this section                                                               
of the tax  code.  For example,  he continued, in FY  20 a little                                                               
over  $1.3 billion  of per-taxable-barrel  credits are  generated                                                               
based  on  the  amount  of production,  and  in  calculating  the                                                               
production tax  liability the companies  can claim a  little over                                                               
$1.2 billion.   Mr. Stickel drew attention to the  $22 million in                                                               
additional tax credits  against liability shown on  the chart and                                                               
explained  that this  includes some  small  producer credits  and                                                               
prior year credits.  He said  the total tax after credits is then                                                               
calculated  by subtracting  the credits  from the  higher of  the                                                               
tax, which is  the $1.76 billion net profits tax,  to arrive at a                                                               
total tax after credits of $481.3 million for FY 20.                                                                            
2:58:05 PM                                                                                                                    
MR. STICKEL  moved to slide  15 and outlined step  8, adjustments                                                               
and total  production tax paid to  the state.  He  explained that                                                               
the $43 million  in adjustments includes prior  year tax payments                                                               
and  refunds, private  landowner royalty  tax, hazardous  release                                                               
conservation surcharge, tax revenue  from ANS gas production, and                                                               
any net  tax liability from Cook  Inlet production.  He  said the                                                               
estimated  total  [production] tax  paid  to  the state  is  then                                                               
calculated by  adding the $43.4  million in other  adjustments to                                                               
the $481.3  million in total  tax after  credits, to arrive  at a                                                               
total forecast  of $524.7 million  in 2020.  That  represents the                                                               
total  cash that  DOR  is  estimating to  the  general fund  from                                                               
production tax in the budget year, he added.                                                                                    
MR.  STICKEL,  responding  to Co-Chair  Tarr  and  Representative                                                               
Hopkins,  explained  that  the figure  of  $2.80  represents  the                                                               
estimated  production tax  after  credits per  taxable barrel  of                                                               
North Slope oil production.                                                                                                     
2:59:49 PM                                                                                                                    
REPRESENTATIVE  SPOHNHOLZ  recalled  Mr. Stickel  describing  the                                                               
gross value reduction  (GVR) as an incentive  for new development                                                               
and that it is [a flat  $5 per-taxable-barrel] credit.  She asked                                                               
how long this incentive lasts and to what projects it applies.                                                                  
MR. STICKEL  replied that  the GVR is  a provision  that excludes                                                               
either 20  or 30 percent  of the  gross value of  production from                                                               
the production tax value calculation  for certain new fields.  It                                                               
is  20 percent  for  any qualifying  new field,  he  said, or  30                                                               
percent  if  a field  is  comprised  exclusively of  state-issued                                                               
leases with  greater than  12.5 percent  royalty.   Currently all                                                               
the GVR production is receiving  a 20 percent rate, he continued.                                                               
He  noted  that  this  benefit   expires  after  seven  years  of                                                               
production or any three years with greater than $70 ANS price.                                                                  
3:01:19 PM                                                                                                                    
REPRESENTATIVE  RAUSCHER  recalled  Mr. Stickel  stating  "if"  a                                                               
company decides to use the  [per-taxable-barrel] credit.  He said                                                               
he would think  it would be automatic and would  just happen when                                                               
the barrels are produced.                                                                                                       
MR. STICKEL  responded that when  filling out its  production tax                                                               
form  and the  calculations,  the company  chooses  to claim  the                                                               
credits  to which  it is  entitled.   He said  there are  certain                                                               
provisions  where  a company  may  elect  to  use one  credit  or                                                               
another credit to best serve the company's interest.                                                                            
3:02:14 PM                                                                                                                    
REPRESENTATIVE TUCK  brought attention  to slides  12 and  13 and                                                               
inquired whether  he is correct  in understanding that  a company                                                               
could either  do the gross minimum  tax method or do  the net tax                                                               
and gross value reduction method.                                                                                               
MR. STICKEL  answered correct.   He noted that the  gross minimum                                                               
tax shown on slide 12 actually  functions as a tax floor, and the                                                               
company pays the  higher of, in terms of the  tax before credits.                                                               
Drawing attention to  slide 12, he said the minimum  tax that DOR                                                               
is  estimating  for  FY  20   is  $394  million  before  credits.                                                               
Bringing  attention to  slide 13,  he said  the net  tax [DOR  is                                                               
estimating] is  $1.76 billion.   He explained that the  higher of                                                               
these two calculations becomes the tax before credits.                                                                          
3:03:40 PM                                                                                                                    
COMMISSIONER TANGEMAN pointed out that  the company doesn't get a                                                               
choice    both [the minimum tax  and the net tax]  are calculated                                                               
and then the company pays the higher of the two.                                                                                
REPRESENTATIVE TUCK  asked what percentage of  the $1.759 billion                                                               
is the gross minimum versus the net tax and gross value.                                                                        
MR. STICKEL replied he would get  back to the committee with that                                                               
3:04:32 PM                                                                                                                    
REPRESENTATIVE HOPKINS  inquired as to  how much of the  $8.81 in                                                               
transportation cost  is the  TAPS tariff.   He surmised  the TAPS                                                               
tariff is fairly static as opposed to the other shipping costs.                                                                 
MR. STICKEL  offered his belief  that the  TAPS tariff is  in the                                                               
range of $5-$6 per barrel.                                                                                                      
REPRESENTATIVE HOPKINS  offered his  understanding that  the TAPS                                                               
tariff is the majority, 50-60 percent, of the $8.81.                                                                            
MR. STICKEL  confirmed the  TAPS tariff  is the  largest portion,                                                               
but said he  doesn't have the breakout before him.   He stated he                                                               
would get back to the committee with that information.                                                                          
3:06:47 PM                                                                                                                    
CO-CHAIR  TARR reviewed  the  questions for  which  DOR would  be                                                               
getting answers back to the committee.   She pointed out that the                                                               
addendum  to  the presentation  provides  the  share between  the                                                               
federal, state,  and municipalities,  as well as  some historical                                                               
information.  She said the committee would have DOR return to                                                                   
continue the rest of the presentation.                                                                                          
3:07:02 PM                                                                                                                    
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
HB122 Sponsor Statement 4.8.19.pdf HRES 4/15/2019 1:00:00 PM
HRES 4/17/2019 1:00:00 PM
HB 122
HB122 ver U 4.8.19.PDF HRES 4/15/2019 1:00:00 PM
HRES 4/17/2019 1:00:00 PM
HB 122
HB122 Sectional Analysis ver U 4.8.19.pdf HRES 4/15/2019 1:00:00 PM
HRES 4/17/2019 1:00:00 PM
HB 122
HB122 Fiscal Note -DNR-PKS 4.13.19.pdf HRES 4/15/2019 1:00:00 PM
HRES 4/17/2019 1:00:00 PM
HB 122
HB122 Supporting Document - Land survey 4.14.19.pdf HRES 4/15/2019 1:00:00 PM
HRES 4/17/2019 1:00:00 PM
HB 122
HB122 Supporting Document - Land patent 4.14.19.pdf HRES 4/15/2019 1:00:00 PM
HRES 4/17/2019 1:00:00 PM
HB 122
HB122 Supporting Document - Presentation by Rep. Hannan 4.14.19.pdf HRES 4/15/2019 1:00:00 PM
HRES 4/17/2019 1:00:00 PM
HB 122
HB122 Supporting Document - Friends of Admiralty Letter of Support 4.13.19.pdf HRES 4/15/2019 1:00:00 PM
HRES 4/17/2019 1:00:00 PM
HB 122
HB122 Supporting Document - Juneau Area State Parks CAB 4.13.19.pdf HRES 4/15/2019 1:00:00 PM
HRES 4/17/2019 1:00:00 PM
HB 122
HRES Oil and Gas Tax Presentation - DOR 4.15.2019.pdf HRES 4/15/2019 1:00:00 PM
Oil and Gas Tax