Legislature(1997 - 1998)

04/29/1997 10:10 AM House RLS

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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           HOUSE RULES STANDING COMMITTEE                                      
                    April 29, 1997                                             
                      10:10 a.m.                                               
                                                                               
                                                                               
MEMBERS PRESENT                                                                
                                                                               
Representative Pete Kott, Chairman                                             
Representative Gail Phillips                                                   
Representative Irene Nicholia                                                  
Representative Al Vezey                                                        
Representative Brian Porter                                                    
Representative Bill Williams                                                   
Representative Kim Elton                                                       
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
All members present                                                            
                                                                               
OTHER HOUSE MEMBERS PRESENT                                                    
                                                                               
Representative Terry Martin                                                    
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
HOUSE BILL NO. 63                                                              
"An Act extending the motor fuel tax exemption for fuel sold for               
use in jet propulsion aircraft to fuel used in those aircraft for              
flights that continue from a foreign country; and providing for an             
effective date."                                                               
                                                                               
     - MOVED CSHB 63(2d RLS)OUT OF COMMITTEE                                   
                                                                               
PREVIOUS ACTION                                                                
                                                                               
BILL:  HB 63                                                                   
SHORT TITLE:  MOTOR FUEL TAX EXEMPTION                                         
SPONSOR(S): REPRESENTATIVES(S) THERRIAULT, Davies, Kelly, Brice,               
            Kubina                                                             
                                                                               
Jrn-Date    Jrn-Page           Action                                          
01/13/97        48     (H)  READ THE FIRST TIME - REFERRAL(S)                  

01/13/97 48 (H) TRANSPORTATION, FINANCE

01/22/97 126 (H) COSPONSOR(S): DAVIES 02/12/97 (H) TRA AT 1:00 PM CAPITOL 17 02/12/97 (H) MINUTE(TRA) 02/12/97 325 (H) COSPONSOR(S): KELLY 02/17/97 (H) TRA AT 1:00 PM CAPITOL 17 02/17/97 (H) MINUTE(TRA) 02/18/97 388 (H) COSPONSOR(S): BRICE 02/24/97 (H) TRA AT 1:00 PM CAPITOL 17 02/24/97 (H) MINUTE(TRA) 02/26/97 (H) MINUTE(TRA) 02/27/97 504 (H) TRA RPT CS(TRA) NT 4DP 2NR 02/27/97 504 (H) DP: ELTON, KOOKESH, SANDERS, WILLIAMS 02/27/97 504 (H) NR: COWDERY, MASEK 02/27/97 504 (H) FISCAL NOTE (REV) 03/11/97 (H) FIN AT 1:30 PM HOUSE FINANCE 519 03/12/97 (H) FIN AT 1:30 PM HOUSE FINANCE 519 03/12/97 (H) MINUTE(FIN) 03/20/97 (H) FIN AT 1:30 PM HOUSE FINANCE 519 04/02/97 (H) FIN AT 1:30 PM HOUSE FINANCE 519 04/02/97 (H) MINUTE(FIN) 04/04/97 986 (H) FIN RPT CS(FIN) NT 4DP 3NR 1AM 04/04/97 986 (H) DP: THERRIAULT, DAVIES, FOSTER, KELLY 04/04/97 986 (H) NR: HANLEY, MARTIN, DAVIS; AM: KOHRING 04/04/97 986 (H) FISCAL NOTE (REV) 04/22/97 (H) RLS AT 5:00 PM CAPITOL 120 04/22/97 (H) MINUTE(RLS) 04/23/97 1287 (H) RLS RPT CS(RLS) NT 2DP 4NR 04/23/97 1287 (H) DP: PHILLIPS, PORTER 04/23/97 1287 (H) NR: KOTT, WILLIAMS, NICHOLIA, ELTON 04/23/97 1287 (H) FISCAL NOTE (REV) 4/4/97 04/28/97 (H) RLS AT 5:00 PM CAPITOL 120 04/28/97 (H) MINUTE(RLS) 04/29/97 (H) RLS AT 10:00 AM CAPITOL 120 WITNESS REGISTER JACK CHENOWETH, Attorney Legislative Legal and Research Services Legislative Affairs Agency 130 Seward Street, Suite 409 Juneau, Alaska 99801-2105 Telephone: (907) 465-2450 POSITION STATEMENT: Answered questions on CSHB 63(2d RLS). REPRESENTATIVE GENE THERRIAULT Alaska State Legislature Capitol Building, Room 511 Juneau, Alaska 99801 Telephone: (907) 465-3884 POSITION STATEMENT: Sponsor of HB 63. BOB BARTHOLOMEW, Deputy Director Income and Excise Audit Division Department of Revenue P.O. Box 110420 Juneau, Alaska 99811-0420 Telephone: (907) 465-2375 POSITION STATEMENT: Answered questions on CSHB 63(2d RLS). ACTION NARRATIVE TAPE 97-14, SIDE A Number 001 CHAIRMAN PETE KOTT called the House Rules Standing Committee to order at 10:10 a.m. Members present at the call to order were Representatives Elton, Williams, Porter, Nicholia and Kott. Representative Phillips arrived at 10:11 a.m., and Representative Vezey arrived at 10:31 a.m. HB 63 - MOTOR FUEL TAX EXEMPTION Number 0035 CHAIRMAN KOTT announced the committee would address HB 63, "An Act extending the motor fuel tax exemption for fuel sold for use in jet propulsion aircraft to fuel used in those aircraft for flights that continue from a foreign country; and providing for an effective date." He noted the committee would address Version R, which is the version the committee members had before them the previous day. He indicated there is a new committee substitute (CS) and asked Mr. Chenoweth to explain the contents of the amendment offered the previous day, which has been rolled into Version X, dated 4/29/97. Number 0082 JACK CHENOWETH, Attorney, Legislative Legal and Research Services Legislative Affairs Agency, came before the committee to explain Version X. He said the current draft deals with the exemption from the motor fuel tax in several ways. The first is on page 4, lines 29 and 30. There is presently an exemption for motor fuel that is at least 10 percent alcohol by volume. The amendment on page 4, lines 29 and 30, would delete that exemption and makes that "gasohol" fully taxable. MR. CHENOWETH informed the committee members a second point is that currently in law there is special handling for bunker fuel. It was enacted in Chapter 42, SLA 1994. He noted his recollection is that it provides for a full application of the motor fuel tax until the state takes in $205,000 in a fiscal year, at which point the tax either drops to nothing or drops down to a penny. He noted he couldn't remember which one it was. He said that will be gone and the special handling of it will also be gone. In place of it, a complete exemption from taxation of bunker fuel would be provided. He informed the committee members that the elimination of the special handling is on page 5, line 20. The full exemption of bunker fuel is on page 5, lines 12 through 19. MR. CHENOWETH explained also included in the bill is a proposal to exempt from taxation motor fuel used in jet propulsion aircrafts that start out in a foreign country, refuels in Alaska and then continues on. There is currently an exemption that goes the other way for airplanes that take off from Seattle, refuels in Anchorage and continues on to the Far East. If an aircraft comes from Japan, China or the Far East, lands in Anchorage and goes on, there is no exemption and that fuel is subject to taxation. He referred to page 4, lines 19 through 23, and said, "It exempts from taxation sales of motor fuel that are in conjunction with flights that originate elsewhere in a foreign country, land and refuel in Alaska and continue on. What the exemption then has is a contingency and that begins with the words, 'unless exemption of the motor fuel from taxation is disallowed because of the refiner's failure to comply with the provisions of a voluntary agreement under [AS] 43.40.092 in conjunction with expansion of refinery capacity.'" Mr. Chenoweth referred the committee to page 2, Section 2, and said that is the disallowance referred to. He informed the committee if a refiner operating in Alaska makes a determination that the refiner wants to expand its capacity and voluntarily commits by agreement to do the things that are laid out on the bottom of page 2, in subsections (A) and (B), and at the top page 3, subsection (C), and then fails to perform in accordance with that voluntary agreement, then motor fuel refined as jet fuel at that refinery can no longer be claimed for exemption. He said, "One of things that the refiner may voluntarily commit to do, and the failure of which to do would cost him the exemption, and those are 'use the refiners' -- and I'm on page 2, line 25, 'use the refiner's best efforts to advertise for, recruit, and employ in the construction activities associated with expanding refinery capacity resident workers who have experience in the specific fields in which they are hired to work.'" Mr. Chenoweth explained the second is a requirement to contract with Alaska licensed firms to prepare materials used in construction activities. The third is to enter into contracts with Alaska-licensed vendors, contractors, and suppliers for supplies and services used on conjunction with the expanded refinery capacity. Mr. Chenoweth noted the provisions are the same provisions the committee saw the previous year relating to the Northstar lease, but are slightly reworded. He stated the definitions of "resident worker, Alaska licensed contractor and Alaska firms," are on the bottom of page 3 and on the top of page 4. MR. CHENOWETH said, "The point of this exercise is this: The exemption for motor fuel used in jet aircraft that come from another country, are refueled in this state and continue on would be exempt unless the refiner, deciding to expand in capacity, makes a voluntary commitment to use these or adhere to these three provisions and then fails to do so. At that point, the exemption could be lost." Number 0428 REPRESENTATIVE BRIAN PORTER said the legislation does not affect the taxation rate on fuel used for a plane that started in Seattle, comes to Alaska and then goes on to Japan. MR. CHENOWETH said that is already exempt. Number 0445 REPRESENTATIVE KIM ELTON informed the committee he is puzzled by the use of the word "voluntarily" on page 2, line 21 and on page 4, line 21. He said "voluntarily" seems to be a strange word if you enter into an agreement, you have to have that agreement before you get the exemption. MR. CHENOWETH said that is incorrect. He explained if the proposed legislation passes, those dealers and users who are subject to the tax and buy their jet fuel from an Alaskan refiner can claim the exemption on that fuel. It is only if the refiner decides to expand and says, "I think it's a good idea, for whatever reason, to hire locally and to use Alaska contractors and so forth - so on, so I am going to write a letter to the commissioner of Revenue and commit to doing that..." If the refiner sends the letter and then doesn't carry through on it, the exemption is lost. Number 0514 REPRESENTATIVE ELTON said the exemption would be lost if the refiner doesn't send that letter. The commissioner has no role in determining what the contents of that letter are, and the commissioner can remove the fuel tax exemption of in fact he/she doesn't agree with the contents of the letter or if he/she makes a determination that the refiner didn't live up to the contents of the letter. Number 0553 MR. CHENOWETH said that is not what the bill says. He said it relies upon the refiner to come forward and say, "It's good for business - it's good for my business in Alaska for me to enter into this voluntary agreement and to do this." Number 0570 REPRESENTATIVE ELTON said if a refiner decides to expand in capacity, they would send the letter to the commissioner. He asked if the commissioner is required to accept the letter regardless of the contents of that letter. MR. CHENOWETH explained the letter would have to stipulate an agreement to do the things that are outlined in AS 43.40.092 (A), (B) and (C). He said he would assume that if one of those points is not met, then the commissioner would not be under any obligation. If the refiner agrees to all of the points, then the letter would stand. Number 0617 REPRESENTATIVE ELTON said assume that happens and the commissioner determines at a later date that the refiner did not adhere to the provisions of paragraph (A), then the fuel tax exemption allowed to that refiner for that product would go away. MR. CHENOWETH indicated that is correct. REPRESENTATIVE ELTON said that doesn't sound very voluntary to him. MR. CHENOWETH said suppose the refiner just expands capacity and doesn't write the letter. REPRESENTATIVE ELTON said that doesn't sound very voluntary to him either because they wouldn't be given the exemption. MR. CHENOWETH pointed out they have the exemption. He explained that the exemption does not turn upon the sending of the letter. The exemption turns upon the sending of the letter coupled with the failure to perform as agreed to. Number 0657 REPRESENTATIVE ELTON said if they expand capacity and don't send the letter, the expectation would be that the commissioner would revoke the exemption. MR. CHENOWETH explained if a letter isn't sent, the commissioner is without the ability to revoke the exemption. REPRESENTATIVE ELTON said if the refiner does decide not to send the letter, there is nothing in statute that allows the revocation of the exemption that's granted in the provisions of the bill. MR. CHENOWETH stated that is correct. Number 0747 REPRESENTATIVE PORTER pointed out it doesn't prohibit a future legislature from taking whatever action it so chooses to take. Number 0762 REPRESENTATIVE TERRY MARTIN referred to a new provision being added that pertains to Alaska hire and said there is a case already in court. He asked if the bill would basically be mute if the same provision was in another local hire bill. He asked what the situation is if the legislature tried to force a company to do something that has been ruled unconstitutional. Number 0956 MR. CHENOWETH explained he thinks Representative Martin's reference pertains to the Northstar litigation. He said when the Northstar litigation was commenced, his understanding was there were four arguments put forward by the people who were challenging the lease. One went to an equal protection-based challenge to the resident hire requirements in the Northstar legislation of last year. He said as he understands, that one challenge has been dropped and has been set aside. It is not before the judge for resolution. Mr. Chenoweth said the judge has to deal with other challenges. He said there won't be a decision from the superior court on the resident or local hire in the context of the Northstar issue. He stated equal protection-based challenges are challenges that are made to action by government. It is true somebody could say that this is removed from government, this is the refiner making a voluntary decision to engage in resident hire. There is no governement coercion or government involvement. Mr. Chenoweth said, "It is possible that down the road somebody could say look, the reason that a - that might trip up a refiner on a local hire - on enforcing the local hire or adhearing to the local hire requirement of this is in order to maintain the tax exemption, the refiner doesn't have to do it, but having committed himself by agreement, the refiner must go through with this. And therefore, there is a tradeoff here involving state action, mainly the protection of the tax exemption. Therefore, the state is involved, therefore, there is a basis to assert that this has -- that a valid equal protection-based argument could be brought against this provision. It's a complicated argument. There aren't too many direct cases that are helpful on this, but I think that I would be uncomfortable in saying that this thing would be free and clear of any equal protection-based challenge." Number 0949 REPRESENTATIVE MARTIN said, "The one prediction that you mentioned had to do with the permanent fund - was it? A person had to be a year qualified. Is that the one they dropped out of their case of the four provisions - the Northstar? What provision did they drop?" MR. CHENOWETH responded, "The Northstar challenge goes forward on the Article VIII claim and -- I didn't bring the file. I don't know what the other two are, but they do not involve questions of residence as I recall. They are apart from resident. And I don't know -- we did not put into this, we did not build into this a tie-in that you option." MR. CHENOWETH read from page 3, line 14, "the term 'resident worker' means an individual who (C) possesses a resident fishing, trapping, or hunting license, or receives a permanent fund dividend; and'." He said if you have one of those licenses or receive a dividend, you would meet that qualification. He noted it is not necessary that you qualify for the dividend. Number 1021 REPRESENTATIVE MARTIN said, "I'm glad that the permanent fund is out because that one really worried me there. A lot of people stay in this state and about 60,000 don't sign up for permanent fund dividends and are eligible. That was my major question -- this local hire bit. I personally think we go overboard on local hire. If we can get anybody to work, I think we should, but as long as we keep saying 'Alaskans only,' all you have to do is be here one day to be an Alaskan and get your drivers' license and unions do it all the time. They hire out of hall from 302 in Seattle, come up - get their drivers' license and get their plate on that car then your okay." Number 1066 REPRESENTATIVE PORTER moved to adopt CSHB 63, Version X, dated 4/29/97. There being no objection, CSHB 63, Version X was adopted. CHAIRMAN KOTT asked Mr. Chenoweth to make a comparison between Version X and the previous Version T that wasn't adopted by the House Rules Committee. Number 1129 MR. CHENOWETH explained the significant change is in the way the exemption was treated. He referred to Version T and said it could be argued that the exemption could be lost for failure of a refiner to make a commitment or make an agreement to carry through on the three things. He said with Version X, he tried to make it clear that the agreement is truly voluntary. He said, "In other words, the motor fuel produced by a refiner has the exemption from the time the bill becomes law, and it's only under the unique circumstances of a commitment made by the refiner, voluntarily made by the refiner, and not carried through on that the exemption of motor fuel out of that refinery would be lost." He said that seemed to be less clear in Version T. He noted "resident worker" was also substituted for "resident" in both the substantive provisions and in the definition. He said, "I think we tried to rewrite the statement of the exemption so it was a little bit clearer, so that the exemption adhered unless it was lost by failure to comply with this voluntary agreement and things of that sort." Number 1220 REPRESENTATIVE ELTON referred to wording on page 3, line 16, "has a home in the state;". He said he is interested in what the definition of "a home" would be. He asked if it is barracks on a construction site, a campground or if you have a spouse, it is where your spouse is. Number 1239 MR. CHENOWETH said he doesn't know if it means any more than the definition of a resident that is generally used in Title I. As he recalls from the Northstar provisions was to make clear that a person had some formal tie into the state, a formal commitment or allegiance. He said this is a cumulative thing. You could have a home in the barracks in this state, but you also have to maintain a residence, you have to have one of the licenses or a permanent fund dividend and you may be required to state, under oath, that you are not claiming residence or taking advantage of some benefits from outside the state. He said he isn't sure he would want to get hung up on whether a home means anything more than some sort of place that you consider your place to which you'd always return when you finish temporary duty away somewhere. Number 1302 REPRESENTATIVE MARTIN indicated concern about the residency requirement. He said, "We have a lot of people up here because the husband is doing a job with the federal government, with the military, FCC, FAA, and the wife also needs work because she wants to work. And so therefore, they may still be carrying their out-of-state voter these people would be disqualified. MR. CHENOWETH referred to the debate over Northstar last year and said he was left with the impression that the effort to tighten up the definition of "resident" was to try and draw as clear of a line as possible as to who could generally claim to be an Alaskan by showing this evidence of being associated with the state. He referred to page 3, lines 21 through 23, "(D) may be required to state under oath that the individual is not claiming residency outside of the state or obtaining benefits under a claim of residency outside of the state;". He said if somebody suspects that you're here still operating under a California divers license, they could ask you to sign that oath that you're not claiming residency outside of the state. He said it would be very interesting to see whether a person in his/her own mind would say, "I have all of these ties to Alaska and yet I've maintained my California drivers' license or I've maintained a California voting residence," and where they would come out on that. In a sense, we've put the burden both in the Northstar effort and in the current legislation on the individual. Number 1452 REPRESENTATIVE MARTIN said, "What would happen if every state made anybody from anywhere across the line -- Texas and Louisiana, every day crossing the line -- Oregon and Washington people cross the line back and forth. What about if they had an oath swearing allegiance to the state they work rather than what state they live? Article -- what is it -- Amendment Number XIV end of Civil War that all people will be treated equally. But if your Alaskan, no, it's a little different." MR. CHENOWETH said he doesn't know the answer to that question. He said, "We have enough of that going on where people will claim a residence in state and work in another, and that comes up in tax questions all the time as to whether and to what extent you're required to pay a state income tax in the place where you work or only in the place that you live. I'm no expert on residence. All I'm saying is that in the context of trying to decide a resident for purposes of North Star and resident worker for purposes of this draft, we tried to build into this thing some clearer ways to try to pin down whether a person was or was not a bonafide resident without relying entirely upon the gray definition in Title 1 of this Act." Number 1514 REPRESENTATIVE MARTIN asked, "Would it be best to make -- instead of just for specific jobs, could we settle with all and any contract in Alaska from state monies or any benefits of taxation (indisc.) employ these residency laws?" MR. CHENOWETH said, "In this bill on motor fuel taxes? No." REPRESENTATIVE MARTIN said this bill is just one and questioned why it isn't done for all contracts and all taxes in Alaska. MR. CHENOWETH stated that is a policy call. REPRESENTATIVE PORTER said he doesn't know if that's a fair question to ask. Number 1538 REPRESENTATIVE IRENE NICHOLIA asked why exempt bunker fuel (indisc.). Number 1555 REPRESENTATIVE GENE THERRIAULT, sponsor of HB 63, referred Representative Nicholia to page 5, line 20, and said Chapter 42, SLA 1994, was an attempt by the legislature, in 1994, to foster more of an industry in the refueling of ships. He said there is sort of a provisional tax break for the sale of bunker fuel in the state of Alaska which didn't work. Bunker fuel is a very low quality fuel. Currently, most cruise ships, tugboats, freighters, et cetera, fill up out of state because they can purchase the fuel tax-free. He said the tax that was generated and reported to the Department of Revenue over the last fiscal year was between $5,000 and $6,000. He said the larger percentage of the product was actually being used by some of the refiners in their own ships to move their own product. He said, "We just felt like, you know, this was perhaps a tax where we were driving business out of the state or the only people that we were able to tax were people that produced the product for their own consumption and it was questionable whether that made sense. And so that's why the bunker fuel language was put in there." Number 1649 REPRESENTATIVE THERRIAULT referred to the possible constitutional problems with the previous committee substitute and said there was much more of an ability to constitutionally challenge it because in order to get the tax exemption, you would be required to expand your refinery and you would absolutely be required to do the local hire provisions. He referred to the Constitution of the United States and said when you have the outright requirement to do those things, that's where you clearly cross that constitutional line. He said, "The problem with the way the language was in the previous CS is that Mapco, Tesoro, or whoever, could agree to do all of those things and then some disgruntled contractor in Seattle could sue because Mapco, in order to get the tax exemption, was doing these things -- could sue and could have the law thrown out on constitutional grounds, even though Mapco or Tesoro, or whoever, agreed to hire Alaskan firms, hire Alaskan workers, hire - use Alaska vendors. The tax could go away and part of our tax policy would be directed by some out-of-state firm who chose to sue on the language in the law and I don't think that that's something that we wanted to have happen. Certainly, it's much cleaner to not have the language in the bill. And if the refiners in the state of Alaska start building a track record where the benefit of those jobs - the benefit of the construction - the benefit of the jobs of people who are actually employed at the refinery are not accruing to the state of Alaska and the citizens of Alaska. A future legislature could consider some way of making sure that the citizens of Alaska do benefit either through, you know, imposing some new tax regime or something else of that nature." Representative Therriault noted the refineries located in his district or right outside his district have a fairly good record for hiring residents for operations and expansions. He said he has a letters from the United Association of Journeymen and the plumbers and pipefitters in Fairbanks that says that Mapco, in particular, has done a very good job hiring out the union halls when they do work at their refinery. He also noted there was testimony before the House Finance Committee from Alaskan venders who have done business with the refineries. Representative Therriault said, "I felt that if we were going to have something, we'd at least make it as constitutionally defendable as possible and not allow an out-of-state firm basically to control or direct our taxation policy in the state." Number 1813 REPRESENTATIVE NICHOLIA asked if the bill wouldn't be constitutional by including the wording "voluntary." REPRESENTATIVE THERRIAULT said because it is voluntary, it is not an absolute requirement by the state of Alaska. It moves it more into a gray area. He said whether the courts would look at that and say that "In order to have good PR (public relations), the company went this voluntary route." He said whether that is enough to trigger constitutional invalidation is questionable. Representative Therriault stated he believes that the refineries, on their own accord, do employ local union hands and contractors. He said he believes the previous committee substitute would have crossed the line. Number 1872 REPRESENTATIVE THERRIAULT said, "I've had some conversations with a representative from the Administration and I believe, and he should probably speak for himself, the cleanest way of course is to go with the original Rules bill that passed out. Absent that, I think the CS today is the way to go." Number 1889 REPRESENTATIVE VEZEY said as he understands the bill, the idea is that we are going to try and remove a tax on an Alaskan export which is Alaskan produced and is a value-added product. In the future, if for any reason, the legislature doesn't like people that are doing the work or doesn't like the business, they can come back and tax it out of business. He said if a bill is passed that is to have some sort of standard that had to be audited, there will be a fiscal note for additional auditors to make sure people are complying. Number 1940 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division, Department of Revenue, came before the committee. He said he would echo Representative Vezey's comments. He stated, "We've gotten so far from the original intent of the bill and I'm not here, and no one from the Administration is opposed to local hire, resident hire, Alaska businesses. But when you read through what we're trying to do with the CS and try to tell the Department of Revenue to go implement this, it's not very clear. It's not a simple task and you're going to pull resources away. So we're not opposed to the idea, but I think the approach of having a clear bill that takes the actions that we're trying to do with tax policy and then if something isn't working out and, Representative Porter referenced earlier, we'll come back and change the policy (indisc.) to a (indisc.) command and they don't meet what's acceptable to the legislature, you take action. And trying to do that through this bill -- I mean the law of unintended consequences is going to be amazing. We don't know what's going to happen with this and who is going to challenge it. How does it affect an out of state refiner in Washington State. We are a net importer of jet fuel and even though we're trying to get instate refiners to epand so we have Alaska workers, we import a lot of fuel. And exactly how does imported fuel be affected and how does -- if they expand in Washington or California, are we not going to be able to buy that fuel or get it for the same price? You know, so we've got air carriers that we have to worry about. So I'm not saying that the bill does that. I don't know. We've read it. Is it limited to just instate refiners? It doesn't say that anywhere, but it might be." Mr. Bartholomew said he thinks the legislation opens up a huge hornets nest. If Version X becomes law, the department will work with Legislative Legal Services to make sure it is understood what is to be done. He said he belives the original version achieved the primary objectives of helping an instate buiness deal with motor fuel taxes. Mr. Bartholomew said there may be a better way to have Alaska hire than trying to create legal challenges or administrative and legislative confusion over it will be achieved. Number 2060 REPRESENTATIVE THERRIAULT said the language that has been alluded to came from the Northstar contract. He said, "The big difference is that are though we were dealing with one company and we couldn't require them to enter into that agreement before we passed the enabling legislation and if they didn't follow through, there was consequences. What we're dealing with here are there are a number of different refiners in the state of Alaska. Some have started and committed to expansions. Some may expand. Others have no plans to expand and so that's where you start coming up with complications in trying to take the language from last year, in that issue dealing with one company that you could come into an agreement with, and apply that to this multifaceted -- and the refining industry in the state of Alaska. Number 2101 REPRESENTATIVE MARTIN asked Mr. Bartholomew if Mapco and Tesoro file as out-of-state companies. Number 2112 MR. BARTHOLOMEW explained that basically all businesses have to file tax returns in Alaska. They are businesses that have solely Alaska offices and there are businesses that have out-of-state offices. He said he can't say who is in what category. He noted those two businesses have both offices in Alaska and in other states. They may even have their headquarters in another state. REPRESENTATIVE MARTIN asked if they would be applicable. He said maybe they would be prohibited from participating in the new law. MR. BARTHOLOMEW said he doesn't see where anyone would be prohibited. He said it's hard to say exactly what's going to happen. The (indisc.) refiners will get a tax exemption under the bill. If they expand and agree to do something else, things will start changing. Mr. Bartholomew said, "If somebody challenges whether you do or don't enter into an agreement, I don't think we know what's going to happen and I don't think it matters whether you are a Alaska headquartered operation or headquartered elsewhere. There is a lot of gray." Number 2172 REPRESENTATIVE BILL WILLIAMS made a motion to move CSHB 63(2d RLS), Version X, dated 4/29/97, out of committee with individual recommendations and the accompanying fiscal notes. Number 2185 REPRESENTATIVE VEZEY objected. He said he doesn't believe that the current version of the bill is the best version that has been before the committee. Number 2209 CHAIRMAN KOTT called for a brief at-ease at 10:50 a.m. He called the meeting back to order at 10:52 a.m. Number 2214 REPRESENTATIVE PORTER informed the committee that he intends to support the motion. He said there has been a couple of questions raised that he believes can be resolved by the time the bill goes to the Senate. He stated his personal philosophy is that we should make every effort to inspire local hire and the use of resident businesses to the extent that this is another attempt, let's try it. He stated, "If it is that a couple of these questions come down falling on a situation where we would have a greater chance of failure than success with this particular language, and that's developed when we get over to the other body, then I wouldn't totally opposed to losing it, but right now this sounds reasonably good. I don't know the effect on outside refineries and I think that question should be answered before they finally get it fixed over there." He indicated he intends to support the legislation. Number 2254 REPRESENTATIVE ELTON informed the committee that he is going to support Version X, but will do it with the notion that the committee is suggesting that this is the best approach that they can take to use Alaska vendors, workers, contractors and businesses. He said he can't help but note that it is like adding a bunch of chrome to a car. He referred to the question about out-of-state ref the refiners won't want to use Alaska contractors to do work in the Bay area. If they don't want to do that, they just won't send their letter and they won't have a problem. Number 2309 REPRESENTATIVE THERRIAULT said the potential problem is the title. He said, "I know in the previous CS, the title was brought in (indisc.) concern that because it was dealing with taxes (indisc.) somehow be amended onto the bill in the House floor which I certainly, as the prime sponsor of the bill, would make a commitment that that would not happen. I have commitments from the Senate President and the prime sponsor of the tobacco tax bill on the Senate side that that would not be amended in here. So if you do want further committees to massaging the language, we may restrict what they can do by having a very tight title. So you may want to consider going back to the broad title with my assurance that if tobacco tax is put on here, I will pull my own bill (indisc.) so that that won't happen, but it still does give a leeway for the committee process to work." Number 2365 CHAIRMAN KOTT said there is a motion before the committee to move CSHB 63(2d RLS), Version X, from committee with individual recommendations and the accompanying fiscal note. He said there is an objection. A roll call vote was taken. Representatives Nicholia, Elton, Porter, Williams and Kott voted in favor of moving the bill. Representatives Vezey and Phillips voted against moving the bill. Representative Phillips then changed her vote from "no" to "yes." Therefore, CSHB 63(2d RLS), version 0-LS0262\X, Chenoweth, dated 4/29/97, moved out of the House Rules Standing Committee by a vote of 6-1. ADJOURNMENT CHAIRMAN KOTT adjourned the House Rules Standing Committee meeting at 10:58 a.m.

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