Legislature(2011 - 2012)SENATE FINANCE 532
01/25/2011 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| Overview of Fall 2010 Revenue Forecast | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE FINANCE COMMITTEE
January 25, 2011
8:59 a.m.
8:59:52 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 8:59 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Johnny Ellis
Senator Dennis Egan
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
Senator Lesil McGuire, Vice-Chair
ALSO PRESENT
Doniece Gott, Senate Finance Committee Aide; Bryan Butcher,
Commissioner, Department of Revenue; Bruce Tangeman, Deputy
Commission, Department of Revenue; Jerry Burnett, Deputy
Commissioner, Division of Treasury, Department of Revenue;
Cherie Nienhuis, Petroleum Economist, Tax Division,
Department of Revenue; Lennie Dees, Audit Master, Tax
Division, Department of Revenue.
PRESENT VIA TELECONFERENCE
Frank Molli, Production Forecast Consultant, Department of
Revenue
SUMMARY
Committee Introductions
^Overview of Fall 2010 Revenue Forecast
9:00:00 AM
Co-Chair Stedman introduced the committee members and
discussed changes and decorum issues. He introduced his
staff. Each committee member introduced their staff.
9:05:11 AM
DONIECE GOTT, SENATE FINANCE COMMITTEE AIDE, introduced her
staff.
9:08:02 AM
Co-Chair Stedman encouraged committee members to ask
questions during finance committee meetings. He reminded
the committee that the committee decorum rules remained
unchanged. He discouraged newspapers, eating in the Senate
Finance Committee room and communicating by cell phone
during Senate Finance Committee meetings.
9:11:49 AM
BRYAN BUTCHER, COMMISSIONER, DEPARTMENT OF REVENUE,
introduced himself.
BRUCE TANGEMAN, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE,
introduced himself.
Co-Chair Stedman asked about the memoriam in the "Fall 2010
Revenue Sources Book" (copy on file).
JERRY BURNETT, DEPUTY COMMISSIONER, DIVISION OF TREASURY,
DEPARTMENT OF REVENUE, commented on the memoriam for George
Rogers who passed away last October at the age of 93. Mr.
Rogers helped create the revenue system for the territory
of Alaska and was instrumental in the implementation of an
income tax, sales tax and business license tax.
Co-Chair Stedman added that George Rogers was one of the
founding fathers of the financial system in Alaska.
9:16:02 AM
Commissioner Butcher detailed the PowerPoint presentation:
"Overview of Fall 2010 Revenue Forecast" (copy on file).
Commissioner Butcher discussed Slide 2, "Outline for
Presentation":
• Fall 2010 Revenue Forecast for FY 2011 and 2012
• Revenue Classification Changes
• Total Revenue
• Unrestricted Revenue
• Non-Oil Revenue
• 10-year plan Revenue/Spending Scenario
• How Production Tax Is Calculated
• FY 2010, 2011, 2012 - "Income statement" format
• Components of Production Tax Forecast
• Oil Production Forecast
• Oil Price Forecast
• Lease Expenditures Forecast/Oil Company Spending
• Tax Credits
Commissioner Butcher detailed Slide 4, "Revenue
Classification Changes":
• In response to Legislative Finance & OMB request, we
worked with these agencies to implement new categories
of revenue.
• In the past, 2 categories of revenue
• Unrestricted Revenue
• Restricted Revenue
• Now, 4 categories of revenue
• Unrestricted General Fund Revenue
• Designated General Fund Revenue
• Other Restricted Revenue
Formerly grouped as "restricted"
• Federal Revenue
• Only a couple minor changes made to unrestricted
revenue
• LPV Gambling Tax shown as unrestricted revenue
• Dividends from component units (state
corporations) shown as unrestricted revenue
• These changes ensure consistency between our
revenue forecast, and budget protocol
9:19:43 AM
Commissioner Butcher addressed Slide 5, "FY 11 and FY 12
Total Revenue." He explained that the breakdown exhibited
oil revenue projected for the current and next fiscal year.
Other non-oil revenue sources were also listed. Investment
revenue was shown with a sub-total of unrestricted general
funds estimated to be available at approximately $5.4
billion for FY 11 and $5.7 billion for FY 12. The estimate
for the designated general fund revenue was $281 million
for FY 11 and $282 million for FY 12. He continued with
other restricted revenue which was broken down by oil
revenue, other sources, and investment revenue. He finished
with federal revenue including $3.1 million in federal
receipts in FY 11 and total state revenue of approximately
$3 billion for FY 11 and $3.3 for FY 12. He added that the
estimates would be more accurate for FY 11, as
FY 12 did not begin until July 1st, 2011.
Commissioner Butcher discussed Slide 6, "FY 11 and FY 12
General Fund Unrestricted Revenue." He commented that the
slide was broken down by royalty, net of the permanent fund
and school fund followed by the production tax which
contributed nearly half of Alaska's unrestricted revenue.
He added the corporate income tax and property tax at half
a billion dollars. The subtotal for all revenue was $4.67
billion for the current fiscal year and estimated to be a
little over $5 billion for FY 12. Non-oil revenue equaled
$697 million for FY 11 and $682 million for FY 12.
9:22:34 AM
Commissioner Butcher mentioned Slide 7, "FY 11 and FY 12
Unrestricted Non-Oil Revenue Detail." He noted that the
slide detailed the top five non-oil revenue types,
including corporate income tax, mining, insurance premium,
tobacco, motor fuel, and other taxes. Investments and
charges for services, fines, forfeitures, licenses,
permits, and other miscellaneous led to an estimated total
of $698 million for FY 11 and $683 million for FY 12.
Commissioner Butcher discussed Slide 9, "10-Year Revenue
and Spending." The estimates were created with the help of
the Office of Management and Budget (OMB). The estimate
assumed the 2010 revenue forecast and takes in a 3 percent
escalation from FY 12 out, providing an estimated surplus
or shortfall for FY 11 through FY 20. He explained that the
projection estimated future oil prices and production.
Co-Chair Stedman asked about the budget reserve balances
projecting to $27.6 billion in 2020 and about the
contributions of Medicare and the unfunded liability, which
were forecasted to exceed $1 billion per year in 2020.
Commissioner Butcher suggested that Co-Chair Stedman ask
OMB.
9:26:05 AM
Co-Chair Stedman asked whether the projection was a reserve
balance of approximately $27 billion. Commissioner Butcher
concurred.
Co-Chair Hoffman asked how capital expenditures were
displayed in the projected surplus. Commissioner Butcher
did not have the details from OMB.
9:27:11 AM
Commissioner Butcher provided details for Slide 11, "FY 10
Production Tax Calculation." The top line exhibited the
per-barrel price of $74.90 for FY 10 with the number of
barrels totaling 643,517, factoring to the value of $48.2
million per day. He detailed further calculations on the
slide leading to $203,816,365 in total transportation
costs. He noted the production tax value of $10,128,100.
Commissioner Butcher mentioned that the income statement
format was developed in collaboration with the Senate
Finance Committee. The format presented an example of how
production tax was calculated in a simple and easy-to-
understand table. Co-Chair Stedman appreciated the high
level synopsis and the ease of the production tax process,
which would be expanded to include the midstream issues.
Commissioner Butcher agreed about the straightforward
nature of the system.
9:31:11 AM
Commissioner Butcher explained Slide 12, "FY 11 Production
tax Projected." He stated that the table provided an
estimate only for FY 11. He noted the total tax before
credits of $3 billion and an estimated $400 million in
credits applied against the taxes totaling to $2.6 billion.
He repeated that the calculations provided best estimates.
Co-Chair Stedman asked about the similarities seen on the
lease expenditures. He asked whether the numbers provided
presented a coincidence. Commissioner Butcher offered to
provide the information in the near future.
Co-Chair Hoffman asked about the pipeline's shutdown and
how the projections would be affected. He asked about
listed expenditures that portrayed the cost of the new
piping.
Commissioner Butcher responded that the shutdown costs were
not listed as the numbers were compiled months ago. He
estimated that the shutdown cost the state $100 million.
9:34:34 AM
CHERIE NIENHUIS, PETROLEUM ECONOMIST, TAX DIVISION,
DEPARTMENT OF REVENUE, commented that the leak would not be
deducted from taxes. The production tax statutes did have
exemptions for deductable lease expenditures, which would
likely fit into the exemptions. The exemptions were
described in 43.55.165 (e), which stated that the losses
were not eligible for a deduction against the production
tax when a shutdown was due to an unplanned event.
Co-Chair Stedman wondered whether the repair was available
for the capital credit. He did not believe so. Ms. Nienhuis
agreed and stated that the expenditure was considered an
unplanned disruption leading it to fit within the
exemption.
Co-Chair Hoffman argued that the second section exhibited
downstream transportation costs. He wondered whether the
costs related to capital expenditures. Ms. Nienhuis
responded that the downstream deduction was the result of a
tariff and therefore not eligible for upstream deduction.
Commissioner Butcher discussed Slide 13, "FY 12 Production
Tax Projected." He noted the income statement approach to
the best estimates for the FY 12 production tax. He
mentioned that the credits applied after taxes of
approximately $400 million, which would rise to $450
million in FY 12.
Co-Chair Stedman asked for a breakdown of the credit
estimate.
9:38:15 AM
Commissioner Butcher discussed Slide 14, "Components of
Production Tax Calculation":
· Production
· Price
· Lease Expenditures
· Tax Credits
9:38:52 AM
Commissioner Butcher discussed Slide 16, "Three Categories
of Forecasted Production":
1) Currently under Development- New projects that are
currently funded or awaiting project sanction in
near future.
2) Currently Producing- Includes base production and
enhanced recovery production from investment in rate
enhancing activities (perforations, stimulations,
well workovers, gas and water injection support).
Commissioner Butcher discussed Slide 17, "Three Categories
of Forecasted Production":
Currently Under Evaluation- Includes technically
viable projects in the stage where engineering, cost,
risk and reward are being actively evaluated.
Unfunded but are considered to have a high chance of
being brought to fruition.
Co-Chair Stedman expressed confidence in the commissioner.
Senator Egan asked where the Liberty field would fall in
the graph.
9:41:13 AM
Co-Chair Stedman offered to receive the information later.
Commissioner Butcher discussed Slide 18, "Factors That
Affect Production Forecasting":
1. GEOLOGY
• Rock type and formation characteristics
• Depth, thickness, pressure
• Oil & gas characteristics (oil gravity,
viscosity, water content, etc.)
2. DEVELOPMENT PLAN
• Well density and development rate
• Well bore size and completion technique
• Artificial lift and enhanced oil recovery
• Facilities & surface operations
3. COMMERCIAL
• Project economics
• Oil price and market conditions
• Government Policy: access, regulation, taxation
4. PRODUCTION PROFILE
• History, stage of depletion
• Use production profile to extrapolate trends
5. TIMING!
Commissioner Butcher detailed Slide 19, "North Slope
Production Decline":
FY 1988: production peak = 2.01 million barrels per
day (bpd).
FY 2010: production = 644,000 bpd, a 68 percent
decline since peak.
FY 1988 to date: production decline rate ~ 5 percent
per year, on average.
Over the last 10 years, production decline rate ` 4.2
percent per year, on average.
We expect the decline rate to flatten out to 3.2
percent per year, on average, through FY 2030.
Co-Chair Stedman requested an estimate of production curves
for an average oil field.
9:44:09 AM
Co-Chair Hoffman asked when flattening of the decline rate
was predicted. He asked whether the flattening began in
2012. Commissioner Butcher responded in the affirmative.
Commissioner Butcher discussed Slide 20, "ANS Production
History and Forecast." He pointed out the slow decline over
the latter half of the 1990s. He noted the expectations for
the flattening out over the next decade.
Mr. Tangeman added that the graph provided an excellent
example of the flattening out that would occur when a newer
field came online.
Commissioner Butcher commented on Slide 21, "Forecasted ANS
Production FY 2010-2020." He stated that the department's
numbers were accurate regarding the currently producing
(shaded) section; the under-development and under-
evaluation sections were purely speculation.
Co-Chair Hoffman asked whether the projections were under
the current tax structure. Commissioner Butcher concurred.
9:47:09 AM
Commissioner Butcher commented on Slide 22, "Conclusion on
Production":
• Production forecasting requires consideration of
each project's geology, development plans,
commerciality, production profiles, decline curves
and timing.
• Department uses extensive well and field specific
data acquired from producers, AOGCC, and DNR
• New field development is very important in
mitigating decline rates.
Senator Thomas wondered whether the addition of the Liberty
field was calculated in the predicted reduction in the
decline rate. He asked for more information about the
specific oil fields. Commissioner Butcher agreed. He
deferred to the department's production forecast
consultant.
9:48:39 AM
FRANK MOLLI, PRODUCTION FORECAST CONSULTANT, DEPARTMENT OF
REVENUE, responded that the 2015 aggregate would add
production of 100,000 barrels of oil.
Co-Chair Stedman asked about new oil fields and their
impact. He also asked about the classification of the
Liberty field.
Mr. Molli responded that Liberty was classified as "under
development" and was anticipated to come on production in
2012. The Nikiachuk field was anticipated to come on
production in 2011. Alpine West would begin production in
2014. Production was anticipated from the National
Petroleum Reserve-Alaska (NPR-A) in 2015. Taken together in
aggregate, the fields would add additional production of
over 100,000 barrels of oil per day.
Co-Chair Stedman asked Mr. Molli how long he had been
employed as a production-forecast consultant for the state.
Mr. Molli responded that the current year was his second
year of providing the fall forecast for Alaska.
Commissioner Butcher added that pages 98 and 99 of the
Revenue Resources Book provided a history of the past
decade for the various fields including production and
department forecasts.
Senator Thomas asked whether British Petroleum (BP) had
"pulled the plug" on the Liberty field. Mr. Molli
understood that the process had only been delayed.
9:51:32 AM
Commissioner Butcher introduced Slide 23, "Fall 2010 Oil
Price Forecast."
Commissioner Butcher discussed Slide 24, "Price Forecast
Methodology":
• FY 2011- 2015: Average of participant forecasts from
Price Forecasting Session, and other sources
• 27 Participants from DOR, DNR, DOL, OMB, University,
Legislative Finance and outside participants
• Presentations: supply, demand, geopolitics, financial
markets, outside expert forecasts, etc.
• Forecasting Session outcome blended equally with
NYMEX, EIA, and analysts to derive price forecast.
• Beyond FY 2015: Constant real price, 2.75% inflation
Commissioner Butcher noted that the forecast was compiled
using information from multiple sources. The average was
then calculated for FY 11 through FY 15.
Co-Chair Stedman wanted the projections to include the high
and the low trends to aid the committee in understanding
the risk associated with the individual price or volume
forecast.
9:54:04 AM
Co-Chair Stedman asked about the department's vacant
economist position. Commissioner Butcher responded that the
chief economist and assistant economist positions were
vacant. He stressed that the department endeavored to fill
the positions. He stated that the department posted the
jobs multiple times and had not yet succeeded in hiring the
right people.
Co-Chair Stedman expressed concern and interest on behalf
of the Senate Finance Committee. Commissioner Butcher
understood and agreed.
Commissioner Butcher commented on Slide 25, "Price
Forecasts as of October 2010."
Commissioner Butcher detailed Slide 26, "Fall 2010 DOR Oil
Price Forecast." The department was reviewing the
relationship between West Texas Intermediate (WTI) and
Alaska North Slope (ANS). He explained that the estimates
provided would be reviewed and adjusted.
9:57:18 AM
Commissioner Butcher discussed Slide 27, "Fall 2010 Lease
Expenditure Forecast (Oil Company Spending)."
Commissioner Butcher discussed Slide 28, "Lease
Expenditures (Costs)":
• FY 2007 - FY 2010 lease expenditures based on
unaudited company reported expenditure estimates
submitted on production tax monthly forms and annual
returns
• FY 2011 - FY 2012 lease expenditure forecasts were
compiled from company submitted information
• Under ACES, DOR requests expenditure forecast
estimates and other documentation from oil companies
• Longer term spending - particularly capital investment
- is highly uncertain
Co-Chair Stedman asked for further information about lease
expenditures. Ms. Nienhuis responded that the department
requested that the operators across the North Slope be
limited to those shared with other witnesses.
Co-Chair Stedman asked whether the committee should work
with the provided data. Ms. Nienhuis answered that the data
was currently adequate for the department.
Co-Chair Stedman stated that the committee would review the
past capital and operating expenditures with as much detail
as possible.
10:00:19 AM
Commissioner Butcher responded that the provisions passed
under Alaska Clear and Equitable Share (ACES) had
significantly improved understanding of oil company costs
and investment.
Commissioner Butcher discussed Slide 29, "Lease
Expenditures (Costs)." He commented on the graph, which
compared the previous four fiscal years of operating
expenditures (OPEX) and capital expenditures (CAPEX),
including DOR estimates of the current fiscal year and FY
12.
Co-Chair Stedman requested elaboration of the standard
deduction through the end of calendar year 2009.
Commissioner Butcher noted that the increase was a result
of the elimination of the standard deduction.
Co-Chair Stedman requested information presenting the
expenditures on a cash-flow basis. Commissioner Butcher
concurred.
10:03:21 AM
Commissioner Butcher continued with Slide 30, "Lease
Expenditures per Barrel."
Co-Chair Stedman asked whether the CAPEX and OPEX numbers
addressed the royalty issue. He requested removal of the
distortions. He asked about the capital expenditures and
the forecast of an increase of approximately $4 million.
Commissioner Butcher responded that the department had not
had an opportunity to audit the most recent years; the
information was currently unavailable.
Ms. Nienhuis added that the department had limited
information about the level of detail requested, although
she did possess expenditures by unit.
Co-Chair Stedman asked about the $0.30 exclusion per barrel
added during the original Petroleum Production Tax (PPT) to
insulate the state from normal maintenance on an older oil
basin. Industry argued that there were no capital
investments, yet a bill to the treasury of $2.9 billion for
capital expenditures existed.
Commissioner Butcher offered to provide the requested
information. He pointed out that the industry information
had been difficult to separate from existing expenditures.
Co-Chair Stedman asked about the increase in costs in
addressing the corroded pipes along with the labor issues
dealing with Point Thompson. He expressed interest in the
Prudhoe, Kuparuk, and Alpine fields as well.
Ms. Nienhuis offered to provide expenditures by unit.
10:06:22 AM
Co-Chair Stedman discussed the $0.30 exclusion per barrel.
He stated that $60 million was very different from $2.9
billion. He requested clarification regarding industry
capital investments.
Commissioner Butcher offered to provide a detailed
breakdown of the requested information. Co-Chair Stedman
requested consideration for the increase in cost regarding
the issue of corroded pipes in addition to information
regarding the Prudhoe, Kuparuk, and Alpine fields.
10:09:01 AM
Commissioner Butcher continued with Slide 31, "Tax
Credits."
Department of Revenue continued with Slide 32, "Production
Tax Credits":
• Qualified Capital Expenditure Credit - 20% credit
for qualified capital expenditures (40% for well
lease expenditures outside North Slope).
• Carried-Forward Annual Loss Credit -25% credit for
carried-forward annual loss.
• Small Producer / New Area Development Credit - Up to
$12 million / year for small producers and up to $6
million / year for production outside North Slope
and Cook Inlet.
• Alternative Credit for Exploration - 30% or 40% of
eligible exploration expenditures if certain
criteria are met.
• Cook Inlet Jack-Up Rig Credit - 80% to 100% credit
for first three exploration wells drilled using
jack-up rig in Cook Inlet.
• Chapter 3 of Fall 2010 Revenue Sources Book provides
detailed information about these and other tax
credits
Co-Chair Stedman appreciated the department's report on tax
credits. He stated that the committee would spend
substantial time on the tax-credit issue.
Commissioner Butcher discussed Slide 33, "Production tax
Credits Reported." He stated that the graph displayed
calendar years 2008 and 2009 and the credits claimed by
companies used against tax liability, as well as credits
refunded to companies with no offsetting tax liability.
10:12:08 AM
LENNIE DEES, AUDIT MASTER, TAX DIVISION, DEPARTMENT OF
REVENUE, introduced himself and explained that his staff
received the credit applications from the various explorers
and producers. His team maintained a database of the credit
activity and provided the assessment of the producer's tax
filings. He commented on Slide 32 and the various credits,
including the qualified capital expenditure credit. He
discussed the small producer/new area development credit.
Mr. Dees discussed the alternative credit for exploration,
which granted 30 to 40 percent credit for expenditures
incurred while drilling exploration wells. He mentioned
that the credits provided information about new exploration
in the state.
10:16:05 AM
Mr. Dees discussed the new Cook Inlet jack-up rig credit.
He pointed out the chapter about tax credits in the Revenue
Sources Book.
Mr. Dees explained that he was able to provide past and
current information about the tax credits, but projections
were not his area of expertise.
Co-Chair Stedman asked the impact of the FY 12 budget and
the qualified capital expenditure credit, AS 43.55.023 (a).
Mr. Dees explained that the credit was taken off the top of
the tax liability. The credit included 20 percent of the
qualified capital expenditures incurred each year. He
clarified that normal capital activities were included,
such as drilling, facility upgrades, and equipment
purchases. He added that the purpose of the expenditure
determined whether the deduction was allowable.
10:19:44 AM
Co-Chair Stedman asked for additional information regarding
the qualified capital expenditure credit. Commissioner
Butcher pointed out that Page 23 of the Revenue Sources
Book included a breakdown of the tax credits in each of the
categories.
Co-Chair Stedman asked about the credit expectation against
the treasury for the qualified capital expenditure credit
as well as the other credits.
Mr. Dees responded that the phase of development determined
the application of capital credits against tax liability.
Development or exploration stages were applied for in the
form of transferable tax credit certificates. He
recommended looking at the tax payers accomplishing the
exploration.
10:22:03 AM
Co-Chair Stedman pointed out that there was an interest in
the forecast of $450 million for FY 12 and $400 million for
FY 11. He asked about the breakdown of the forecasted
amount and whether the amount included the qualified
capital expenditure credit.
Ms. Nienhuis stated that the new producers were
encountering a more profitable margin, allowing them to
take tax credits off tax liability. She added that the
future would provide more information. She explained that
the forecast of $450 million for FY 12 exhibited tax
credits taken against tax liability. She noted that
calendar year 2010 showed approximately $400 million to
$420 million taken against tax liability.
Co-Chair Stedman assumed that the majority of the $450
million was the result of the qualified capital expenditure
credit. Ms. Nienhuis concurred.
10:24:22 AM
Co-Chair Hoffman pointed out that the qualified capital
expenditure credit included 40 percent for well-related
expenses outside of the North Slope. He asked for a
breakdown by fiscal year for 2008 through 2010 of what
amount was applied to the 20 percent versus the 40 percent.
Mr. Dees answered that the 40 percent went into effect July
1, 2010. He explained the process of receiving applications
for the new credits.
Co-Chair Hoffman asked about a breakdown for the
anticipated split between the two percentages. Mr. Dees
stated that he did not have the requested breakdown. He
noted that the majority of credits occurred in Cook Inlet.
He believed that very little of the 40 percent credit
option would be seen in the numbers presented.
10:26:17 AM
Senator Olson asked about the production tax credit and how
the state benefited from the program. He asked how the
success of the program was gauged. He addressed Slide 33
and the calendar year production tax credits. He opined
that the percentage seen in the data showing credits
refunded to companies with no offsetting tax liability had
grown in 2009. Mr. Dees responded that many factors led to
the circumstances. He pointed out that with the original
ACES legislation, reinvestments of the credit were required
in the 24 month period. Currently, companies could apply
for the tax credit and then apply for the cash.
Senator Olson surmised that ACES should remain unchanged.
Mr. Butcher replied that the ACES period of time for audits
was extended to six years, so DOR was still adjusting to
the changes.
10:30:54 AM
Co-Chair Stedman commented on the forecast of $2.9 billion
in capital expenditures and $450 million in credits.
Co-Chair Stedman requested help balancing the expectations
of capital expenditures and credits against the treasury.
Mr. Butcher clarified that the request was for the
department's estimates on tax credits for FY 12 compared to
estimates on revenue.
Co-Chair Stedman stated that the estimates shown on Page 36
of the Revenue Sources Book showed credits used against tax
liability at $450 million and credits for potential
purchase at $400 million totaling $850 million in credits.
He requested help understanding the credits against the
treasury. He wondered about banking of credits that could
affect the treasury in the future. Commissioner Butcher
offered to provide a breakdown of the credit estimates.
Mr. Dees added that the banking of credits did not make
sense to the explorer.
Co-Chair Stedman expressed confusion about the implied
North Slope data in the Revenue Sources Book. Mr. Tangeman
stated that the forecasted number of $400 million was an
industry forecast.
Co-Chair Stedman understood that the $400 million was a
forecast from the industry to the department regarding
expected applications. Mr. Dees responded that credits
could be used against the tax liability or credits for
which companies applied for transferable tax credit
certificates. The $400 million figure represented the best
estimate of those companies that were holding tax credit
certificates and would apply for the cash during FY 12. The
estimate included carryovers from FY 11 and new credits
from FY 12.
10:37:55 AM
Co-Chair Stedman pointed out the impact of credits that
might not appear because they were collected or sold and in
turn, stimulated the industry. He understood that the
impact of the credit policy was approximately $850 million
for FY 12. Mr. Dees agreed.
Co-Chair Stedman reiterated the importance of looking
beyond the tax process in the specific departments. He
asked why the treasury was impacted by $850 million in
credits if the slope was experiencing declining
expenditures. Mr. Dees responded that some companies
applied for credits in the previous year, yet had not
turned them to cash. He informed the committee that the
state did have a late balance of transferable tax credit
certificates. The increase seen from 2010 to 2011 reflected
the fact that companies were now able to get their cash
payouts more quickly.
Co-Chair Stedman suggested providing the information in
fiscal years rather than calendar years. Commissioner
Butcher offered to provide a credit presentation for a
future meeting.
10:42:36 AM
Co-Chair Hoffman suggested that the information be broken
down for calendar years 2010, 2011, and 2012. Commissioner
Butcher concurred.
Co-Chair Stedman offered to work with the department on the
presentation.
Mr. Butcher thanked the committee, and stressed the
importance of understanding the topic.
ADJOURNMENT
The meeting was adjourned at 10:44 AM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| FinalDORSenFinPresentation_20110125.pdf |
SFIN 1/25/2011 9:00:00 AM |
|
| 2011 02 08 DOR Resps to SenFin Ques 01 25.pdf |
SFIN 1/25/2011 9:00:00 AM |
DOR Revenue Forecast Response 021011 |