Legislature(2005 - 2006)
06/07/2006 11:35 AM Joint PPT
| Audio | Topic |
|---|---|
| Start | |
| SB2001 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
CONFERENCE COMMITTEE ON SB 2001
June 7, 2006
11:35 a.m.
MEMBERS PRESENT
Senator Bert Stedman, Chair
Representative Ralph Samuels, Chair
Senator Charlie Huggins
Senator Hollis French
Representative Mike Kelly
Representative Beth Kerttula
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Gary Stevens
Senator Gretchen Guess
Senator Thomas Wagoner
Representative Paul Seaton
Representative Mark Neuman
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 2001(FIN)
"An Act relating to the production tax on oil and gas and to
conservation surcharges on oil; relating to criminal penalties
for violating conditions governing access to and use of
confidential information relating to the production tax;
amending the definition of 'gas' as that definition applies in
the Alaska Stranded Gas Development Act; making conforming
amendments; and providing for an effective date."
HEARD AND HELD
HOUSE CS FOR CS FOR SENATE BILL NO. 2001(FIN) am H
"An Act relating to the production tax on oil and gas and to
conservation surcharges on oil; relating to criminal penalties
for violating conditions governing access to and use of
confidential information relating to the production tax;
amending the definition of 'gas' as that definition applies in
the Alaska Stranded Gas Development Act; making conforming
amendments; and providing for an effective date.
HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB2001
SHORT TITLE: OIL AND GAS TAX
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
05/20/06 (S) READ THE FIRST TIME - REFERRALS
05/20/06 (S) FIN
05/20/06 (S) FIN AT 6:00 PM SENATE FINANCE 532
05/20/06 (S) Heard & Held
05/20/06 (S) MINUTE(FIN)
05/21/06 (S) FIN RPT CS 5DP 1NR 1AM NEW TITLE
05/21/06 (S) DP: GREEN, WILKEN, BUNDE, DYSON,
STEDMAN
05/21/06 (S) NR: HOFFMAN
05/21/06 (S) AM: OLSON
05/21/06 (S) FIN AT 1:00 PM SENATE FINANCE 532
05/21/06 (S) Moved CSSB 2001(FIN) Out of Committee
05/21/06 (S) MINUTE(FIN)
05/22/06 (S) FIN AT 2:00 PM SENATE FINANCE 532
05/22/06 (S) -- Meeting Canceled --
05/23/06 (S) TRANSMITTED TO (H)
05/23/06 (S) VERSION: CSSB 2001(FIN)
05/23/06 (H) FIN AT 1:30 PM HOUSE FINANCE 519
05/23/06 (H) <Pending Referral>
05/31/06 (H) READ THE FIRST TIME - REFERRALS
05/31/06 (H) FIN
05/31/06 (H) FIN AT 5:00 PM HOUSE FINANCE 519
05/31/06 (H) -- Meeting Canceled --
06/01/06 (H) FIN AT 9:00 AM HOUSE FINANCE 519
06/01/06 (H) Heard & Held
06/01/06 (H) MINUTE(FIN)
06/02/06 (H) FIN AT 10:00 AM HOUSE FINANCE 519
06/03/06 (H) FIN RPT HCS(FIN) 5DP 1NR 3AM
06/03/06 (H) DP: HAWKER, HOLM, FOSTER, MEYER,
CHENAULT;
06/03/06 (H) NR: STOLTZE;
06/03/06 (H) AM: KERTTULA, JOULE, KELLY
06/03/06 (H) FIN AT 8:00 AM HOUSE FINANCE 519
06/03/06 (H) -- Meeting Canceled --
06/04/06 (H) ADJOURN SINE DIE FLD Y6 N34
06/04/06 (H) TAKE UP RECON SAME DAY FLD Y12 N28
06/06/06 (H) CONFERENCE COMMITTEE APPOINTED
06/06/06 (H) SAMUELS (CHAIR), KELLY, KERTTULA
06/06/06 (H) VERSION: HCS CSSB 2001(FIN) AM H
06/06/06 (S) CONCUR MESSAGE READ
06/06/06 (S) CONFERENCE COMMITTEE APPOINTED
06/06/06 (S) STEDMAN (CHAIR), HUGGINS, FRENCH
06/07/06 (S) PPT AT 8:30 AM BUTROVICH 205
06/07/06 (S) NGD AT 9:00 AM SENATE FINANCE 532
06/07/06 (H) PPT AT 11:30 AM BUTROVICH 205
WITNESS REGISTER
Dan Dickinson, Consultant to the Administration
POSITION STATEMENT: Responded to questions related to SB 2001
ACTION NARRATIVE
CHAIR BERT STEDMAN called the Conference Committee on SB 2001
meeting to order at 11:35:44 AM. Present were Representatives
Beth Kerttula, Mike Kelly, and Ralph Samuels and Senators Hollis
French, Charlie Huggins and Chair Bert Stedman. Also present
were Senator Gary Stevens, Senator Gretchen Guess, Senator
Thomas Wagoner, Representative Mark Neuman, and Representative
Paul Seaton.
SB2001-OIL AND GAS TAX
CHAIR BERT STEDMAN announced CSSB 2001(FIN), and HCS CSSB
2001(FIN) AM H to be up for consideration.
11:36:58 AM
CHAIR STEDMAN asked for a motion to adopt Senate Version F.
SENATOR HUGGINS moved to adopt CSSB 2001(FIN), Version F.
REPRESENTATIVE SAMUELS objected.
CHAIR STEDMAN asked for a roll call vote and the motion failed.
Representatives Kerttula, Kelly, and Samuels voted nay; Senator
Huggins, Chair Stedman voted yea and Senator French voted nay.
11:37:57 AM
REPRESENTATIVE SAMUELS moved to adopt HCS CSSB 2001(FIN) AM H,
Version X.A.
CHAIR STEDMAN objected. He asked for a roll call vote and the
motion failed. Representatives Kerttula, Kelly, and Samuels
voted yea; Senator French voted yea and Senator Huggins and
Chair Stedman voted nay.
11:38:50 AM
CHAIR STEDMAN announced the intention to request powers of
limited free conference and questioned whether a motion was
necessary.
REPRESENTATIVE KERTTULA affirmed that a motion was in order and
that the respective bodies must grant a request for those
powers.
At ease from 11:39:35 AM to 11:41:05 AM.
CHAIR STEDMAN informed members he would highlight the ten
differences between the Senate and House versions after which
the members would discuss the next step.
Item 1 - Tax Rate
General Tax Rate:
Senate: 22.5% - .011(e) page 3
House: 23.5% - .011(e) page 3
Cook Inlet Tax Rate:
Senate: 3/4 revenue exclusion for Cook Inlet oil -
.160(a) page 19
House: ELF tax ceiling on Cook Inlet oil - .011(j)
page 3
Item 2 - Credit Usage Floor
Senate: n/a
House: .024 credits cannot be used to reduce PPT tax to
below 4% of gross for ANS region - .024(c) page 10
Item 3 - Gas Revenue Exclusion (GRE)
Senate: ANS gas 2/3 included (1/3 exclusion); Cook Inlet
gas 1/3 included; new gas 1/2 included - .160(a) pages
19-20
House: n/a
Item 4 - Progressivity Surcharge
Senate: over $35/bbl (net value/boe) x .001 x net value
with new boe rules - .011(g) & (h) page 4
House: over $35/bbl (net value/boe) x .0025 x net value
with new boe rules - .011(g) & (h) page 4
Item 5 - Transition
Senate: 5 year lookback capex 2 for 1 recoupment - .024(j)
pages 11-12
House: 5 year lookback capex 2 for 1 recoupment (CORRECTED)
- .024(j) page 13
Item 6 - Base Allowance
Senate: $12 M credit ($1M per month) (equates to $53.3M
deduction) NOT based on production -.170(a) page 26
House: $12M credit ($1M per month) (equates to $60M
deduction) based on production -.170(c) page 29
Item 7 - New Area Development Credit
Senate: n/a
House: $6M credit ($500,000 per month) for areas NOT ANS,
NOT Cook Inlet - .170(a) page 28
Sunset of New Area Development Credit:
Senate: n/a
House: 10 year rolling - .170(b) page 28
Item 8 - Transition Payment
Senate: 10 month payment on old system; true-up in 11th
month; - Section 37(f)(g) pages 33-34
House: 10 month payment on old system; true-up in 10th
month (clarification) - Section 36(g)(h) pages 36-37
Item 9 - Credit For Annual Loss
Senate: yes, at 22.5% - .024(b) page 8
House: yes, at 23.5% - .024(b) page 10
Item 10 - Oil Spill
Senate: any oil spill cleanup costs not deductible
(exception for gravel pad) - .160(d)(17) page 24
House: any oil spill cleanup costs not deductible (improved
pad language) - .160(d)(17) page 25
11:47:59 AM
CHAIR STEDMAN explained the procedure for applying for powers of
limited free conference.
11:48:38 AM
REPRESENTATIVE KELLY pointed out that some items could be
negotiated without additional powers.
CHAIR STEDMAN stated his preference to deal with all 10 items
with limited free powers.
REPRESENTATIVE KELLY responded the House members would like the
opportunity to talk before going into limited free powers.
REPRESENTATIVE SAMUELS asked to hear from Mr. Dickinson to
clarify the meaning of "(corrected)" in Item 5 and
"(clarification)" in Item 8.
11:50:32 AM
DAN DICKINSON, consultant to the administration, explained that
the difference between the Item 5 versions resulted from a
change in two fractions. It is generally agreed that the intent
is the same in both versions.
He expressed the opinion that Item 8 is much the same. It's just
the question of whether the final true-up of the prior 10-months
occurs at the end of that period or with the next payment. The
Senate version uses months and the House version uses days. The
intent is to make it specific when that would occur.
REPRESENTATIVE SAMUELS asked about Item 10.
MR. DICKINSON recalled that the phrase "gravel pad" was used in
the Senate version and the phrase "pad, platform or other
structure" was used in the House version. Although not as
mechanical as the other two, the notion is that gravel pad is
too restrictive. The phrase they were trying to capture is
"costs above routine costs associated with an oil spill" and the
discussion was that the phrase would clarify the thought.
REPRESENTATIVE KERTTULA asked whether contingency plans were
included in the Senate version.
MR. DICKINSON said he thought that was added in the Governor's
reintroduced bill.
11:54:32 AM
SENATOR FRENCH said he could see how a gravel pad on the North
Slope would be equivalent to a platform in Cook Inlet, but he
was unsure how the term "structure" might work in. On the North
Slope all structures are on gravel pads so it wouldn't be
possible to have a spill on a structure that wasn't contained to
a pad. He asked for an example of where the notion of a
structure would come into play.
MR. DICKINSON responded that is an area to look at. He asked if
it would be appropriate to suggest other slight changes.
CHAIR STEDMAN responded he'd address that request and
Representative Kerttula's point later this afternoon.
MR. DICKINSON said he'd also ask the drafter to be available
this afternoon.
REPRESENTATIVE SAMUELS asked Mr. Dickinson to be prepared to
explain the development credit on Item 7 and what the House
Finance Committee did on Cook Inlet.
REPRESENTATIVE KELLY added it would be helpful if he reviewed
the change on the floor as well.
MR. DICKENSON agreed.
CHAIR STEDMAN expressed the view that the floor issue, the
surtax, and the tax itself would be the more detail-oriented
issues.
MR. DICKINSON asked for lead-time if there would be additional
requests for data.
CHAIR STEDMAN mentioned the charts from Econ One and those that
Mr. Dickinson had prepared.
REPRESENTATIVE SAMUELS asked if he wanted a motion.
CHAIR STEDMAN said he didn't believe a motion was necessary. It
was sufficient to have members sign the letters requesting
powers of limited free conference.
REPRESENTATIVE KERTTULA asked if the letter was to request
limited powers on all ten items.
CHAIR STEDMAN acknowledged the letter highlights the differences
on all ten items.
At ease from 12:00:01 PM to 12:12:24 PM
CHAIR STEDMAN announced that the committee would address three
items before the break. He asked Mr. Dickinson to explain the
difference between the Senate and House versions on Item 3 - Gas
Revenue Exclusion (GRE).
MR. DICKINSON said the Senate version had three different GREs.
In Cook Inlet 2/3 of the gas would be excluded and 1/3 would be
included. When revenues are measured a certain portion would be
removed, but all costs would still be present. The effect of
that is that in situations of high cost, a loss could be shown
even though there wouldn't be a loss if all revenues were
considered. For the North Slope the numbers would be reversed so
1/3 of the gas would be excluded and 2/3 would be included. For
anyplace else in the state, 1/2 of the gas would be excluded and
1/2 would be included.
The House version did away with GRE and in Cook Inlet it had a
test similar to that found in Item 1 where there's an ELF tax
ceiling. For Cook Inlet gas, the tax would be calculated
normally and that would be compared to a base period from March
31, 2005 to April 1, 2006. The comparison would be to the tax
that would have been paid under the prevailing value during that
period. In the ELF that would be calculated for each lease or
property in that month. Essentially the tax per mcf would hit a
cap based on what it was in the prior year. The tax would go up
if there was more volume, but there would be a cap at a dollar
per mcf amount.
MR DICKINSON continued to explain the consequence of the second
ceiling with the following example:
You calculated your PPT tax and you owed $10 million
and then you calculated what you would have paid under
the ceiling and you owed $5 million. Because you were
paying $5 million less, the House bill would have
required that you lose the ability to use credits -
for example the .170 credit. Under .170 every company
gets a credit of $12 million to apply to lower taxes.
If, under the House version, you are getting a $5
million reduction as a consequence of this ELF
ceiling, you would lose the ability to apply all of
that .170 credit. You would, however, retain the
ability to use the .024 credits, which are the
investments. What the House language ... says is that
because of this ceiling, if you pay less, your ability
to use credits will be less but it doesn't go away
completely. Instead, if you also make investments,
those credits can be applied.
Basically, instead of a gas revenue exclusion in Cook Inlet,
there is this ceiling and the intent was to recognize the
maturity of the Cook Inlet Basin and also to recognize that many
of the severance taxes are passed on to consumers so the
producers aren't paying. Those are two mechanisms for
approaching gas in Cook Inlet, he said.
The counterpart to the 1/2 revenue exclusion for other areas is
Item 7. The Senate version called for a GRE to allow for an
explorer to have some tax relief. Instead of a GRE, the House
version says there will be an additional $6 million credit that
can be applied for places other than the North Slope or Cook
Inlet, but it has all the other restrictions that the Section
.170 credits have. It can't be transferred and if it isn't used
in a year it can't be carried forward. It says that if in a year
you have a tax obligation in those places this credit allows
reduction of that obligation by $6 million.
At ease from 12:18:48 PM to 12:18:59 PM
MR. DICKINSON continued to explain that the final part of the
GRE is an exclusion on the North Slope and there is nothing
comparable to that in the House version.
SENATOR FRENCH asked for amplification that a portion of North
Slope gas wouldn't be carved out for taxation.
MR. DICKINSON responded that's correct.
REPRESENTATIVE KELLY asked him to briefly review the House floor
amendment.
At ease from 12:20:16 PM to 12:23:52 PM
CHAIR STEDMAN noted a typo in the letter requesting powers of
limited free conference and verified that the first item on both
the Senate and House versions should read .011(e).
MR. DICKINSON reviewed the House floor amendment by using an
example under the PPT in Cook Inlet with a gas-only producer. If
$10 million of tax liability is generated, just $5 million is
owed as a result of the tests that are done. Prior to the House
floor amendment, no credits could be claimed if the total of all
other credits came to $4 million. The floor amendment says the
investment credits associated or detailed in Section .024 would
continue to be applied even if there had been a large reduction
in taxes as a consequence of the ELF based test.
CHAIR STEDMAN asked for a motion.
REPRESENTATIVE SAMUELS moved to adopt the House language on Item
3 - Gas Revenue Exclusion effectively eliminating GRE language.
CHAIR STEDMAN announced that without objection the House version
on Item 3 was adopted.
REPRESENTATIVE KELLY moved to adopt the House version on Item 5.
CHAIR STEDMAN objected for discussion purposes. He asked Mr.
Dickinson to respond to the issue related to a technical
correction.
MR. DICKINSON said the simple explanation is that it's a
technical fix. The bill originally had an allowance or deduction
that was changed to a credit and somehow one of the factions
wasn't multiplied correctly. The intent in both bodies was that
if a producer had been investing at $1 million per year and then
increased the investment after the bill passed, then all the
transitional investment expenditures could be recaptured.
CHAIR STEDMAN removed his objection and announced that the House
version on Item 5 was adopted.
CHAIR STEDMAN recessed the meeting to the call of the Chair at
12:29:03 PM.
CHAIR STEDMAN reconvened the meeting at 7:41:26 PM and announced
that he would recess the meeting until 9:00 am Thursday, June 8,
2006.
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