Legislature(2005 - 2006)CAPITOL 124
03/14/2006 12:30 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB488 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 488 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
March 14, 2006
12:36 p.m.
MEMBERS PRESENT
Representative Jay Ramras, Co-Chair
Representative Ralph Samuels, Co-Chair
Representative Jim Elkins
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Kurt Olson
Representative Paul Seaton
Representative Harry Crawford
Representative Mary Kapsner
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 488
"An Act repealing the oil production tax and gas production tax
and providing for a production tax on the net value of oil and
gas; relating to the relationship of the production tax to other
taxes; relating to the dates tax payments and surcharges are due
under AS 43.55; relating to interest on overpayments under AS
43.55; relating to the treatment of oil and gas production tax
in a producer's settlement with the royalty owner; relating to
flared gas, and to oil and gas used in the operation of a lease
or property, under AS 43.55; relating to the prevailing value of
oil or gas under AS 43.55; providing for tax credits against the
tax due under AS 43.55 for certain expenditures, losses, and
surcharges; relating to statements or other information required
to be filed with or furnished to the Department of Revenue, and
relating to the penalty for failure to file certain reports,
under AS 43.55; relating to the powers of the Department of
Revenue, and to the disclosure of certain information required
to be furnished to the Department of Revenue, under AS 43.55;
relating to criminal penalties for violating conditions
governing access to and use of confidential information relating
to the oil and gas production tax; relating to the deposit of
money collected by the Department of Revenue under AS 43.55;
relating to the calculation of the gross value at the point of
production of oil or gas; relating to the determination of the
net value of taxable oil and gas for purposes of a production
tax on the net value of oil and gas; relating to the definitions
of 'gas,' 'oil,' and certain other terms for purposes of AS
43.55; making conforming amendments; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 488
SHORT TITLE: OIL AND GAS PRODUCTION TAX
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
02/21/06 (H) READ THE FIRST TIME - REFERRALS
02/21/06 (H) RES, FIN
02/22/06 (H) RES AT 12:30 AM HOUSE FINANCE 519
02/22/06 (H) Heard & Held
02/22/06 (H) MINUTE(RES)
02/23/06 (H) RES AT 12:30 AM HOUSE FINANCE 519
02/23/06 (H) Heard & Held
02/23/06 (H) MINUTE(RES)
02/24/06 (H) RES AT 12:30 AM HOUSE FINANCE 519
02/24/06 (H) Heard & Held
02/24/06 (H) MINUTE(RES)
02/25/06 (H) RES AT 10:00 AM SENATE FINANCE 532
02/25/06 (H) Joint with Senate Resources
02/27/06 (H) RES AT 12:30 AM CAPITOL 124
02/27/06 (H) Heard & Held
02/27/06 (H) MINUTE(RES)
02/28/06 (H) RES AT 12:30 AM CAPITOL 124
02/28/06 (H) Heard & Held
02/28/06 (H) MINUTE(RES)
03/01/06 (H) RES AT 12:30 AM CAPITOL 124
03/01/06 (H) Heard & Held
03/01/06 (H) MINUTE(RES)
03/02/06 (H) RES AT 12:00 AM CAPITOL 124
03/02/06 (H) Heard & Held
03/02/06 (H) MINUTE(RES)
03/03/06 (H) RES AT 12:30 AM CAPITOL 124
03/03/06 (H) Heard & Held
03/03/06 (H) MINUTE(RES)
03/04/06 (H) RES AT 2:00 PM HOUSE FINANCE 519
03/04/06 (H) Heard & Held
03/04/06 (H) MINUTE(RES)
03/06/06 (H) FIN AT 12:30 AM HOUSE FINANCE 519
03/06/06 (H) Presentation by Legislative Consultant
03/06/06 (H) RES AT 12:30 AM HOUSE FINANCE 519
03/06/06 (H) Testimony by legislative consultant
03/07/06 (H) RES AT 12:30 AM CAPITOL 124
03/07/06 (H) Heard & Held
03/07/06 (H) MINUTE(RES)
03/08/06 (H) RES AT 12:30 AM CAPITOL 106
03/08/06 (H) -- Meeting Canceled --
03/09/06 (H) RES AT 12:30 AM CAPITOL 106
03/09/06 (H) -- Meeting Canceled --
03/10/06 (H) RES AT 12:30 AM CAPITOL 106
03/10/06 (H) Heard & Held
03/10/06 (H) MINUTE(RES)
03/11/06 (H) RES AT 10:00 AM CAPITOL 106
03/11/06 (H) -- Meeting Canceled --
03/13/06 (H) RES AT 10:00 AM CAPITOL 124
03/13/06 (H) Heard & Held
03/13/06 (H) MINUTE(RES)
03/14/06 (H) RES AT 12:30 AM CAPITOL 124
WITNESS REGISTER
No witnesses to record.
ACTION NARRATIVE
CO-CHAIR RALPH SAMUELS called the House Resources Standing
Committee meeting to order at 12:36:10 PM. Representatives
Ramras, Elkins, LeDoux, Seaton, Olson, Samuels and Gatto were
present at the call to order. Representatives Kapsner and
Crawford arrived as the meeting was in progress.
HB 488-OIL AND GAS PRODUCTION TAX
CO-CHAIR SAMUELS announced that the only order of business would
be HOUSE BILL NO. 488, "An Act repealing the oil production tax
and gas production tax and providing for a production tax on the
net value of oil and gas; relating to the relationship of the
production tax to other taxes; relating to the dates tax
payments and surcharges are due under AS 43.55; relating to
interest on overpayments under AS 43.55; relating to the
treatment of oil and gas production tax in a producer's
settlement with the royalty owner; relating to flared gas, and
to oil and gas used in the operation of a lease or property,
under AS 43.55; relating to the prevailing value of oil or gas
under AS 43.55; providing for tax credits against the tax due
under AS 43.55 for certain expenditures, losses, and surcharges;
relating to statements or other information required to be filed
with or furnished to the Department of Revenue, and relating to
the penalty for failure to file certain reports, under AS 43.55;
relating to the powers of the Department of Revenue, and to the
disclosure of certain information required to be furnished to
the Department of Revenue, under AS 43.55; relating to criminal
penalties for violating conditions governing access to and use
of confidential information relating to the oil and gas
production tax; relating to the deposit of money collected by
the Department of Revenue under AS 43.55; relating to the
calculation of the gross value at the point of production of oil
or gas; relating to the determination of the net value of
taxable oil and gas for purposes of a production tax on the net
value of oil and gas; relating to the definitions of 'gas,'
'oil,' and certain other terms for purposes of AS 43.55; making
conforming amendments; and providing for an effective date."
CO-CHAIR SAMUELS said the committee substitute (CS) is not
ready, but he has provided a list of changes that are included
in a forthcoming CS.
12:37:19 PM
CO-CHAIR SAMUELS said he will allow the administration and the
industry to comment on the CS.
12:39:06 PM
CO-CHAIR SAMUELS stated that this is the beginning of a long
process, and he has no illusions that what comes out of the
House Resources Standing Committee will be the final product.
He said he tried to build a committee consensus for the CS.
12:40:43 PM
CO-CHAIR SAMUELS said the first change to HB 488 is making the
tax rate progressive. He said the rate would go up by 0.3
percent per dollar increase after $50 per barrel. It is a good
balance to make sure there is no impact on the economy, while
taking advantage of high oil prices, he stated. Secondly, the
CS has reduced the transitional money. It will allow the
deduction of 75 percent of 2005 expenditures; 50 percent of 2004
expenditures; and 25 percent of 2003 expenditures. He said the
original legislation spread that cost recovery over six years,
and the CS extends the payback period to seven years. He said
that at the request of the chair of the House Rules Standing
Committee, the inflation indexing mechanism [on the $40 per
barrel price of Alaska North Slope oil] is not going to be in
regulation but will be in the CS. He added that he does not
have the one that will be used, but the $40 price will be
adjusted with inflation.
CO-CHAIR SAMUELS said the CS will also extend SB 185, from the
23rd Legislature, which expires in 2007. It will be extended
for the explorers on the North Slope, he noted. He said the
explorer will have to choose between a 40 percent and a 20
percent tax credit dependent on other parameters. He said there
was concern about abandonment costs being used for tax credits,
and the CS will contain specific language that those costs will
not be eligible for tax credits. The CS will set private
royalty oil severance tax at 5 percent, and there is a very
small amount of land where it is at 1 percent, he said. He
worked with those holders and the industry in trying to come up
with a fair number.
12:43:01 PM
CO-CHAIR SAMUELS said that the Alaska Oil and Gas Association
approached the committee suggesting several technical changes.
He noted that the ones that were policy calls were not included.
It would be better to take those changes to the next committee
for adequate consideration, he said. He noted that there had
been concern about getting credits for contingency surcharges.
There is currently a $0.05 per barrel charge, and $0.02 of that
is deposited into the response mitigation account, which is
maxed out at $50 million. So the $0.02 charge has been
suspended. The CS will change the $0.02 charge to $0.01, so if
the account goes below $50 million, the $0.01 charge will kick
in, he explained. The remaining $0.03 in current statute goes
into the prevention mitigation account, and the CS raises that
to $0.04. The total surcharge is still $0.05 per barrel, he
stated. He said the CS will change the effective date of HB 488
to April 1, 2006, instead of July 1, 2006. This will result in
an almost immediate effective date and conforms to a fiscal
quarter.
12:45:37 PM
CO-CHAIR SAMUELS said that the $73 million allowance was
actually $14.6 million directly off the tax bill, and the CS
lowers it to $10 million and switches it to a credit. The first
$10 million spent in the state is a direct dollar for dollar
credit. It is a zero sum game "for the little guys." It was
cut down by a third and made a credit instead of an allowance,
he reiterated. From the request of the explorers, the CS allows
the state to buy up to $10 million per year per company for
credits at 100 percent of face value.
CO-CHAIR SAMUELS addressed the credits that were sellable. He
said, "If there was room under the cap for ExxonMobil
Corporation, ConocoPhillips Alaska, Inc., or BP to be able to
buy the credit, they said that the going rate was between $0.90
and $0.95. And what we wanted to make sure that we did is, that
the small company recouped 100 percent of their value." He said
the state "is on the hook" for the entire value, so it is a moot
point for the state. The CS caps it at $10 million, he said.
The state can have a buy back for it as long as the company
proves it was moving forward with reinvestment at the same level
in Alaska, "and they'd save a little bit of money around the
margins." He said he was concerned that it was open-ended, so
it was capped at $10 million. The CS puts a 5 percent penalty
for underpayment of taxes on the monthly payments below 90
percent of actual, and he said that is currently in law.
Interest will be charged on any underpayment below 100 percent.
12:48:09 PM
CO-CHAIR SAMUELS said the CS will be distributed to committee
members as soon as possible. There is one large issue that was
not addressed and that was heavy oil. The committee is aware of
the problem, but he personally felt that having two tax schemes
for two types of oil was problematic but could be addressed in
separate legislation. He said he realizes it is a big problem
for the big players and some of the small ones. He said he
didn't find a way to incorporate it into this bill.
CO-CHAIR SAMUELS said he believes a bill will pass this session,
and the committee tried to focus the debate. The committee
focused on progressivity [and other key issues]. He spoke of
all those involved and the admirable job everyone did. He said
he would like to shift the debate to the money coming into the
state with regard to the future. "What are we going to do if
prices go down? Now is the time to start debating what are we
going to do at low oil prices when we're $2 billion in the hole
at $20 [per barrel], and what are we going to do at higher oil
prices when you get more money than you really know what to do
with?"
12:51:22 PM
CO-CHAIR SAMUELS repeated the schedule of hearings.
REPRESENTATIVE SEATON requested clarification regarding
exploration enhancements in that a company either gets the 40
percent or the 20 percent credit, not both.
CO-CHAIR SAMUELS said the company can choose between the two
credits.
12:52:11 PM
[HB 488 was held over]
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 12:52 PM.
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