Legislature(2011 - 2012)SENATE FINANCE 532

04/03/2012 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 192 OIL AND GAS PRODUCTION TAX RATES TELECONFERENCED
Heard & Held
+= SCR 24 COMMISSION ON 100TH ANNIV. OF LEGISLATURE TELECONFERENCED
Heard & Held
+ HB 129 DECEASED VETERAN DEATH CERTIFICATE TELECONFERENCED
Heard & Held
+ HB 245 GAMING:SNOW CLASSIC/BROADCASTING/INTERNET TELECONFERENCED
Moved CSHB 245(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= SB 159 SUSITNA STATE FOREST TELECONFERENCED
Moved CSSB 159(RES) Out of Committee
+= SB 151 FETAL ALCOHOL SPEC. DISORDER AS MITIGATOR TELECONFERENCED
Moved CSSB 151(JUD) Out of Committee
+= SB 226 PURCHASE & LEASE OF NOME OFFICE BUILDING TELECONFERENCED
Moved CSSB 226(FIN) Out of Committee
+= SB 179 MISSING VULNERABLE ADULT RESPONSE PLAN TELECONFERENCED
Moved SB 179 Out of Committee
+= SB 210 CRIMES AGAINST CHILDREN TELECONFERENCED
Moved CSSB 210(FIN) Out of Committee
                 SENATE FINANCE COMMITTEE                                                                                       
                       April 3, 2012                                                                                            
                         9:05 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
9:05:45 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Hoffman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 9:05 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Lesil McGuire, Vice-Chair                                                                                               
Senator Johnny Ellis                                                                                                            
Senator Dennis Egan                                                                                                             
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Tim  Lamkin,  Staff,  Senator Gary  Stevens;  Senator  Linda                                                                    
Menard;  Christine Marasigan,  Staff,  Senator Kevin  Meyer;                                                                    
Katya    Wassillie,    Intern,    Senator    Betty    Davis;                                                                    
Representative  Max  Gruenberg;  Phillip  Mitchell,  Section                                                                    
Chief, Bureau of Vital Statistics,  Department of Health and                                                                    
Social  Services;   Marie  Darlin,  Alaska   Association  of                                                                    
Retired Persons;  Representative Mike Hawker;  Tony Reinsch,                                                                    
Senior Director,  Upstream & Gas,  PFC Energy;  Janak Mayer,                                                                    
Manager,  Upstream  &  Gas,  PFC  Energy;  Darwin  Peterson,                                                                    
Staff, Senator Bert Stedman; Senator Joe Paskvan.                                                                               
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Stephen  Haycox,  University  of  Alaska,  Anchorage;  Claus                                                                    
Naske,  Self,  Texas;   Terrence  Cole,  History  Professor,                                                                    
Fairbanks; Mary Ehrlander,  University of Alaska, Fairbanks;                                                                    
Byron Charles, Self, Ketchikan.                                                                                                 
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
                                                                                                                                
SCR 24    COMMISSION ON 100TH ANNIV. OF LEGISLATURE                                                                             
                                                                                                                                
          SCR  24  was  HEARD  and  HELD  in  committee  for                                                                    
          further consideration.                                                                                                
                                                                                                                                
CSSB 151(JUD)                                                                                                                   
          FETAL ALCOHOL SPEC. DISORDER AS MITIGATOR                                                                             
                                                                                                                                
          CSSB 151(JUD)  was REPORTED out of  committee with                                                                    
          a  "do   pass"  recommendation  and  with   a  new                                                                    
          indeterminate fiscal  note from the  Department of                                                                    
          Law  and previously  published zero  fiscal notes:                                                                    
          FN2 (CRT), FN3 (DOA), FN4 (DOC).                                                                                      
                                                                                                                                
CSSB 159(RES)                                                                                                                   
          SUSITNA STATE FOREST                                                                                                  
                                                                                                                                
          CSSB 159(RES)  was REPORTED out of  committee with                                                                    
          a "do  pass" recommendation and with  a previously                                                                    
          published indeterminate fiscal note:  FN1 (DNR).                                                                      
                                                                                                                                
SB 179    MISSING VULNERABLE ADULT RESPONSE PLAN                                                                                
                                                                                                                                
          SB 179  was REPORTED out  of committee with  a "do                                                                    
          pass"    recommendation   and    with   previously                                                                    
          published  zero  fiscal   notes:  FN1  (DPS),  FN2                                                                    
          (DMVA).                                                                                                               
                                                                                                                                
SB 192    OIL AND GAS PRODUCTION TAX                                                                                            
                                                                                                                                
          SB  192  was  HEARD  and  HELD  in  committee  for                                                                    
          further consideration.                                                                                                
                                                                                                                                
SB 210    CRIMES AGAINST CHILDREN                                                                                               
                                                                                                                                
          CSSB 210(FIN)  was REPORTED out of  committee with                                                                    
          a  "do   pass"  recommendation  and  with   a  new                                                                    
          indeterminate fiscal  note from the  Department of                                                                    
          Corrections;  previously  published  indeterminate                                                                    
          fiscal  notes: FN1  (DOA), FN2  (DOL), FN4  (DOA),                                                                    
          FN5 (CRT);  and  previously published  zero fiscal                                                                    
          notes: FN3(DPS), FN6 (DOA).                                                                                           
                                                                                                                                
SB 226    PURCHASE & LEASE OF NOME OFFICE BUILDING                                                                              
                                                                                                                                
          CSSB 226(FIN)  was REPORTED out of  committee with                                                                    
          a  "do pass"  recommendation and  with new  fiscal                                                                    
          impact    notes    from    the    Department    of                                                                    
          Administration and the Department of Revenue.                                                                         
                                                                                                                                
CSHB 129(FIN)                                                                                                                   
          DECEASED VETERAN DEATH CERTIFICATE                                                                                    
                                                                                                                                
          CSHB 129(FIN) was HEARD and HELD in committee for                                                                     
          further consideration.                                                                                                
                                                                                                                                
CSHB 245(FIN)                                                                                                                   
         GAMING:SNOW CLASSIC/BROADCASTING/INTERNET                                                                              
                                                                                                                                
          CSHB 245(FIN) was REPORTED out of committee with                                                                      
          a "do pass" recommendation and with a new zero                                                                        
          fiscal note from the Department of Revenue.                                                                           
                                                                                                                                
9:06:15 AM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman discussed the meeting's agenda.                                                                                
                                                                                                                                
SENATE CONCURRENT RESOLUTION NO. 24                                                                                           
                                                                                                                                
     Establishing   the   Alaska   Legislative   Celebration                                                                    
     Commission to organize events  to commemorate the 100th                                                                    
     anniversary of  the first convening of  the legislative                                                                    
     branch of government in Alaska.                                                                                            
                                                                                                                                
9:07:39 AM                                                                                                                    
                                                                                                                                
TIM LAMKIN,  STAFF, SENATOR GARY STEVENS,  introduced SCR 24                                                                    
and  stated that  it commemorated  the 100th  anniversary of                                                                    
the first  convening of  the territorial  legislative branch                                                                    
of government  in Alaska.  He furthered  that March  3, 2013                                                                    
marked the 100-year  anniversary and that the  intent of the                                                                    
legislation was  to recognize and potentially  follow up the                                                                    
anniversary  with  other  events  throughout  the  year.  He                                                                    
remarked that in the first  session of the legislature there                                                                    
were 13 committees  in the Senate alone;  the equivalents of                                                                    
the  Senate Finance  Committee were  the Finance  Contingent                                                                    
Expenses  and   Printing  Committee  and  the   Revenue  and                                                                    
Taxation  Committee. He  noted  that  the first  legislature                                                                    
passed  84  bills  during  the  60-day  session;  the  bills                                                                    
involved  issues such  as  the women's  right  to vote,  the                                                                    
registration  of lobbyists,  regulations  on physicians  and                                                                    
dentists, the  eight-hour work shift, the  compulsory school                                                                    
age, and punishment for pimps.                                                                                                  
                                                                                                                                
9:09:39 AM                                                                                                                    
                                                                                                                                
STEPHEN  HAYCOX,   UNIVERSITY  OF  ALASKA,   ANCHORAGE  (via                                                                    
teleconference), testified in support  of SCR 24. He related                                                                    
the importance of establishing  a commission and recognizing                                                                    
the  anniversary. He  observed that  the first  convening of                                                                    
the  legislature gave  Alaskans their  first opportunity  to                                                                    
express the collective will of  the constituency. He offered                                                                    
that on  March 3,  the legislature could  devote a  half day                                                                    
session to recognizing the  anniversary or something similar                                                                    
in  order  to  direct  the public's  attention  towards  its                                                                    
significance.  He observed  that there  were limitations  on                                                                    
the first  convening legislature  and that Congress  had not                                                                    
been  ready  to  turn  over  some  critical  issues  to  the                                                                    
territory of Alaska.                                                                                                            
                                                                                                                                
9:11:51 AM                                                                                                                    
                                                                                                                                
CLAUS  NASKE, SELF,  TEXAS  (via teleconference),  expressed                                                                    
support of  SCR 24 and  believed that it was  appropriate to                                                                    
establish   a   commission   to   celebrate   the   100-year                                                                    
anniversary of the first  convening legislature. He observed                                                                    
that it  was important to  note that the  federal government                                                                    
had  still retained  a significant  amount  of control  over                                                                    
Alaska's  resources.  He furthered  that  there  had been  a                                                                    
clause inserted  into the Second Organic  Act that expressly                                                                    
forbade the  Alaska Legislature to alter,  amend, modify, or                                                                    
repeal  fish  and game  related  measures;  it also  forbade                                                                    
interference with  the primary soil disposal.  He added that                                                                    
Congress had  retained the exclusive rights  to legislate on                                                                    
matters  such   as  gambling,  the   sale  of   liquor,  the                                                                    
incorporation of towns,  and taxation. He noted  that it had                                                                    
been  a  sore   point  for  many  years   that  the  federal                                                                    
government had  maintained the exclusive rights  and that it                                                                    
had  not  been  until  Alaska achieved  statehood  that  the                                                                    
legislature   was   able   to   fully   represent   Alaska's                                                                    
population. He  concluded that the legislation  did not need                                                                    
to be  costly, but that  it was worthy and  appropriate that                                                                    
the commission be established.                                                                                                  
                                                                                                                                
Co-Chair Hoffman  noted that Senator McGuire  had joined the                                                                    
committee shortly after the meeting had started.                                                                                
                                                                                                                                
9:14:36 AM                                                                                                                    
                                                                                                                                
TERRENCE   COLE,    HISTORY   PROFESSOR,    FAIRBANKS   (via                                                                    
teleconference), expressed his support  of SCR 24 and shared                                                                    
that the  anniversary was a  momentous occasion.  He related                                                                    
that the Second Organic Act,  which had passed Congress, was                                                                    
the bill  that created the  Alaska Legislature; the  act was                                                                    
the  fundamental congressional  law that  had set  Alaska on                                                                    
the road  to eventual statehood.  He furthered that  the act                                                                    
had  been  passed  despite strong  objections  by  President                                                                    
Taft. He  explained that the  president did not  want Alaska                                                                    
to have a  legislature, but had instead wanted  the state to                                                                    
be governed  by a  non-elected commission. He  observed that                                                                    
at the  time, the most  important restriction on  Alaska had                                                                    
been the  lack of  control over  natural resources  and that                                                                    
the first convening legislature had  been referred to as the                                                                    
most  feeble legislature  in the  history  of democracy.  He                                                                    
noted  that the  reason  there were  no  counties in  Alaska                                                                    
today  was  because they  were  expressly  forbidden by  the                                                                    
Second  Organic  Act. He  observed  that  the act  had  been                                                                    
passed  despite the  president's objections  largely because                                                                    
of  the  delegate  Judge   James  Wickersham's  efforts.  He                                                                    
reiterated  the importance  of  establishing the  commission                                                                    
and stated that it involved modest costs.                                                                                       
                                                                                                                                
9:17:51 AM                                                                                                                    
                                                                                                                                
MARY  EHRLANDER,   UNIVERSITY  OF  ALASKA,   FAIRBANKS  (via                                                                    
teleconference), testified  in support of SCR  24 and stated                                                                    
that  the legislation  was appropriate.  She reiterated  the                                                                    
support of prior testifiers and  opined that the struggle to                                                                    
achieve representative  government in  Alaska should  not be                                                                    
taken for granted. She furthered  that it was worthy to note                                                                    
the difference  it made to  have an elected, rather  than an                                                                    
appointed governing  body. She shared that  women's suffrage                                                                    
was  the first  act  passed by  the  Alaska legislature  and                                                                    
related   that  the   first   legislature  illustrated   the                                                                    
importance of federalism, state  and local control, regional                                                                    
differences  within  the  country,  and  the  importance  of                                                                    
keeping  governance   close  to   the  people.   She  firmly                                                                    
supported the establishment of the  commission and urged the                                                                    
committee's support.                                                                                                            
                                                                                                                                
9:19:54 AM                                                                                                                    
                                                                                                                                
BYRON CHARLES,  SELF, KETCHIKAN (via  teleconference), spoke                                                                    
to  SCR 24  and related  that  the federal  law had  applied                                                                    
before Alaska's  statehood. He inquired  whether legislators                                                                    
believed  that  the original  intent  was  provided for  the                                                                    
people of the  state prior to statehood and if  "they" had a                                                                    
knowledge and  understanding of the  workings of  an equally                                                                    
shared  processing  system  on a  government  to  government                                                                    
level.                                                                                                                          
                                                                                                                                
9:21:18 AM                                                                                                                    
                                                                                                                                
Co-Chair Hoffman discussed the fiscal note in the packet.                                                                       
                                                                                                                                
SCR  24  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
9:21:37 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:23:04 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
CS FOR SENATE BILL NO. 159(RES)                                                                                               
                                                                                                                                
     "An Act  establishing the Susitna State  Forest; urging                                                                    
     the Governor  to acquire forest land  that is currently                                                                    
     in the  Tongass National  Forest; and providing  for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
9:23:27 AM                                                                                                                    
                                                                                                                                
SENATOR LINDA  MENARD, explained  that the  bill established                                                                    
the Susitna Forest as a  state forest. She detailed that the                                                                    
Susitna Forest  would be the  fourth state forest  in Alaska                                                                    
and  that years  of work  had  gone into  its creation.  She                                                                    
furthered that  the forest was  763,200 acres in  the Mat-Su                                                                    
borough and that it would greatly benefit the area.                                                                             
                                                                                                                                
Co-Chair Stedman discussed the fiscal note in the packet.                                                                       
                                                                                                                                
Co-Chair  Hoffman  MOVED  to report  CSSB  159(RES)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSSB  159(RES) was  REPORTED  out of  committee  with a  "do                                                                    
pass"  recommendation   and  with  a   previously  published                                                                    
indeterminate fiscal note: FN1 (DNR).                                                                                           
                                                                                                                                
CS FOR SENATE BILL NO. 151(JUD)                                                                                               
                                                                                                                                
     "An  Act  relating to  mitigation  at  sentencing in  a                                                                    
     criminal case  for a  defendant found  by the  court to                                                                    
     have  been   affected  by  a  fetal   alcohol  spectrum                                                                    
     disorder."                                                                                                                 
                                                                                                                                
9:25:20 AM                                                                                                                    
                                                                                                                                
CHRISTINE  MARASIGAN, STAFF,  SENATOR  KEVIN MEYER,  related                                                                    
that Senator  Meyer was attending a  State Affairs Committee                                                                    
meeting and that  he sent his regrets for  being absent. She                                                                    
explained  that  SB  151  provided  Fetal  Alcohol  Spectrum                                                                    
Disorder as  a mitigating factor during  sentencing and that                                                                    
it  allowed judges  to have  more  flexibility when  dealing                                                                    
with offenders who had a brain dysfunction.                                                                                     
                                                                                                                                
Co-Chair Stedman discussed the fiscal notes in the packet.                                                                      
                                                                                                                                
Co-Chair  Hoffman  MOVED  to report  CSSB  151(JUD)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSSB  151(JUD) was  REPORTED  out of  committee  with a  "do                                                                    
pass"  recommendation and  with a  new indeterminate  fiscal                                                                    
note  from the  Department of  Law and  previously published                                                                    
zero fiscal notes: FN2 (CRT), FN3 (DOA), FN4 (DOC).                                                                             
                                                                                                                                
SENATE BILL NO. 226                                                                                                           
                                                                                                                                
     "An Act relating to the  purchase by the Alaska Housing                                                                    
     Finance  Corporation of  an  office  building in  Nome;                                                                    
     approving  the issuance  of bonds  for the  purchase of                                                                    
     the   office  building;   providing   notice  of,   and                                                                    
     authorizing  the  commissioner   of  administration  to                                                                    
     enter into, a lease-purchase  agreement with the Alaska                                                                    
     Housing  Finance Corporation  for the  office building;                                                                    
     and providing for an effective date."                                                                                      
                                                                                                                                
9:26:59 AM                                                                                                                    
                                                                                                                                
Senator  Olson  explained  that SB  226  was  introduced  to                                                                    
address the  need for  a new state  office building  in Nome                                                                    
and shared  that the current  building had  major structural                                                                    
problems. He  stated that the  project had lost  momentum in                                                                    
recent   years  and   that   the   Alaska  Housing   Finance                                                                    
Corporation had been used as  an alternative funding source.                                                                    
He commented that the legislation  would replace the current                                                                    
building that contained asbestos.                                                                                               
                                                                                                                                
Co-Chair Stedman discussed the fiscal notes in the packet.                                                                      
                                                                                                                                
Co-Chair  Hoffman  MOVED  to report  CSSB  226(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSSB  226(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation  and with new fiscal  impact notes from                                                                    
the  Department  of  Administration and  the  Department  of                                                                    
Revenue.                                                                                                                        
                                                                                                                                
SENATE BILL NO. 179                                                                                                           
                                                                                                                                
     "An Act relating to missing vulnerable adult prompt                                                                        
     response and notification plans."                                                                                          
                                                                                                                                
9:29:09 AM                                                                                                                    
                                                                                                                                
KATYA  WASSILLIE,  INTERN,  SENATOR BETTY  DAVIS,  explained                                                                    
that  SB  179  would  create an  alert  system  for  missing                                                                    
vulnerable  adults called  the  "silver  alert" system  that                                                                    
would be  similar to the  amber alert system.  She furthered                                                                    
that  the Department  of Military  and Veterans  Affairs and                                                                    
Department of Public  Safety would work together  to raise a                                                                    
response   to  missing   adults  by   utilizing  radio   and                                                                    
television stations throughout the state.                                                                                       
                                                                                                                                
Co-Chair Stedman discussed the fiscal notes in the packet.                                                                      
                                                                                                                                
Co-Chair Hoffman  MOVED to  report SB  179 out  of committee                                                                    
with individual recommendations  and the accompanying fiscal                                                                    
notes. There being NO OBJECTION, it was so ordered.                                                                             
                                                                                                                                
SB  179 was  REPORTED  out  of committee  with  a "do  pass"                                                                    
recommendation  and with  previously  published zero  fiscal                                                                    
notes: FN1 (DPS), FN2 (DMVA).                                                                                                   
                                                                                                                                
SENATE BILL NO. 210                                                                                                           
                                                                                                                                
     "An   Act   relating   to  crimes   against   children;                                                                    
     establishing a new aggravating  factor at sentencing in                                                                    
     certain crimes  against children; relating  to criminal                                                                    
     nonsupport;  adding  to  the  list  of  crimes  against                                                                    
     children that bar the Department  of Public Safety from                                                                    
     issuing to  a person a  license to drive a  school bus;                                                                    
     adding an  exception to a  provision that  requires the                                                                    
     Department  of  Health  and  Social  Services  to  make                                                                    
     timely,  reasonable efforts  to provide  family support                                                                    
     services to  prevent out-of-home placement of  a child;                                                                    
     and providing for an effective date."                                                                                      
                                                                                                                                
9:30:31 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman  MOVED  to ADOPT  the  proposed  committee                                                                    
substitute  for  SB  210,  Work  Draft  27-LS1362\T  (Wayne,                                                                    
4/2/12).                                                                                                                        
                                                                                                                                
Co-Chair Stedman OBJECTED for the purpose of discussion.                                                                        
                                                                                                                                
Senator  McGuire explained  the changes  in the  legislation                                                                    
and stated  that Page  3, lines  16 and  18 were  altered to                                                                    
clarify that subsections A and B  would apply to a person of                                                                    
any age.                                                                                                                        
                                                                                                                                
Co-Chair  Stedman  REMOVED  his OBJECTION.  There  being  NO                                                                    
FURTHER OBJECTION, Work Draft 27-LS1362\T was ADOPTED.                                                                          
                                                                                                                                
9:31:50 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman discussed the fiscal notes in the packets.                                                                     
                                                                                                                                
Co-Chair  Hoffman  MOVED  to report  CSSB  210(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSSB  210(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass"  recommendation and  with a  new indeterminate  fiscal                                                                    
note   from  the   Department  of   Corrections;  previously                                                                    
published indeterminate fiscal notes:  FN1 (DOA), FN2 (DOL),                                                                    
FN4 (DOA), FN5 (CRT); and   previously published zero fiscal                                                                    
notes: FN3(DPS), FN6 (DOA).                                                                                                     
                                                                                                                                
CS FOR HOUSE BILL NO. 129(FIN)                                                                                                
                                                                                                                                
     "An Act relating to providing a death certificate for                                                                      
     a deceased veteran without charge."                                                                                        
                                                                                                                                
9:33:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MAX  GRUENBERG, introduced HB 129  and stated                                                                    
that the bill  provided four certified copies  of a deceased                                                                    
veteran's death  certificate without cost to  the requestor.                                                                    
He explained  that the legislation  would enable  the estate                                                                    
of a deceased  veteran to obtain benefits;  the term benefit                                                                    
was not limited to  governmental benefits, but could involve                                                                    
benefits such as life insurance.  He noted that the bill was                                                                    
modeled on  an Arizona law  and that it would  help Alaska's                                                                    
veterans. On  page 3 of the  bill, a veteran was  defined as                                                                    
an individual who  was on active duty at the  time of his or                                                                    
her  death, or  someone  who had  received  an honorable  or                                                                    
general discharge from  a branch of the  armed services; the                                                                    
individual must  have also  been an  Alaska resident  at the                                                                    
time of their death. He  added that service branches such as                                                                    
the   National  Guard,   the  Alaska   Scouts,  the   Alaska                                                                    
Territorial  Guard,  and  the   Alaska  Naval  Militia  were                                                                    
included in the legislation.                                                                                                    
                                                                                                                                
Co-Chair Stedman discussed the fiscal note in the packet.                                                                       
                                                                                                                                
9:35:19 AM                                                                                                                    
                                                                                                                                
PHILLIP   MITCHELL,   SECTION   CHIEF,   BUREAU   OF   VITAL                                                                    
STATISTICS,  DEPARTMENT  OF   HEALTH  AND  SOCIAL  SERVICES,                                                                    
relayed  that his  intent  was to  explain  the fiscal  note                                                                    
attached to HB  129 and that administration  had no position                                                                    
on  the bill.  He related  that on  average, five  copies of                                                                    
certificates  were requested  for each  death; approximately                                                                    
30  percent of  the  death certificates  per  year were  for                                                                    
veterans.  Assuming  that  three  to four  copies  would  be                                                                    
issued per  person and free  of charge, the  expected impact                                                                    
was  3,000   to  4,000  copies  per   year.  The  department                                                                    
currently charged $25 for the  first certificate and $20 for                                                                    
each  additional copy.  The  department  estimated that  the                                                                    
bill would reduce the fees collected  by the bureau by up to                                                                    
$75,000  the first  year and  to $100,000  by year  five. He                                                                    
stated that  3 percent of  the bureau's budget was  based on                                                                    
general funds and that the  remainder of the budget was fee-                                                                    
based and  was built in.  The fiscal note was  submitted for                                                                    
the purpose  of covering the  cost of the  decreased program                                                                    
receipts. He related that the  fiscal note was a fund change                                                                    
and that it  did have a zero net cost.  He furthered that in                                                                    
order to  maintain current service and  staffing levels, the                                                                    
lost receipts would need to be replaced with general funds.                                                                     
                                                                                                                                
9:37:14 AM                                                                                                                    
                                                                                                                                
MARIE  DARLIN,   ALASKA  ASSOCIATION  OF   RETIRED  PERSONS,                                                                    
testified in  support of the  legislation. She  related that                                                                    
Alaska had the highest per  capita number of veterans in the                                                                    
United  States  and  that  the   bill  was  another  way  to                                                                    
recognize a veteran's service.                                                                                                  
                                                                                                                                
9:38:37 AM                                                                                                                    
                                                                                                                                
Senator Olson  queried whether the legislation  included the                                                                    
Alaska  Naval   Militia  as  recipients  of   the  benefits.                                                                    
Representative Gruenberg  responded that the group  was well                                                                    
established in  statute. He furthered  that the  militia was                                                                    
mainly  active during  Alaska's  territorial  days and  that                                                                    
they were mostly very elderly individuals.                                                                                      
                                                                                                                                
Senator  Olson  referenced  a  rogue  militia  situation  in                                                                    
Fairbanks  and expressed  concerns regarding  how a  militia                                                                    
was defined under the legislation.                                                                                              
                                                                                                                                
Representative Gruenberg  responded that the  Alaska Scouts,                                                                    
the Alaska  Territorial Guard, and the  Alaska Naval Militia                                                                    
were specifically  set forth in  statute and that  they were                                                                    
nothing like  the "patriot militia."  He concluded  that the                                                                    
groups that were  included in the bill  were all statutorily                                                                    
recognized and  that the legislation was  crafted to include                                                                    
all legitimate veterans.                                                                                                        
                                                                                                                                
CSHB 129(FIN)  was HEARD and  HELD in committee  for further                                                                    
consideration.                                                                                                                  
                                                                                                                                
CS FOR HOUSE BILL NO. 245(FIN)                                                                                                  
                                                                                                                                
     "An Act  establishing a snow  classic as  an authorized                                                                    
     form of charitable  gaming; and relating to  the use of                                                                    
     broadcasting and  the Internet to promote  a raffle and                                                                    
     lottery."                                                                                                                  
                                                                                                                                
9:41:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MIKE HAWKER,  introduced HB  245 and  stated                                                                    
that it was the companion  bill to legislation that had been                                                                    
previously heard in the committee.  He communicated that the                                                                    
bill  added   another  segment  to  the   charitable  gaming                                                                    
statutes.  The legislation  would  enable  the Four  Valleys                                                                    
Community  Schools  Inc. to  conduct  a  "Snow Classic,"  in                                                                    
which a contestant would guess  or predict the date and time                                                                    
when the  snow would reach  a certain level on  Mt. Alyeska.                                                                    
He  explained that  Four Valleys  Community School  was huge                                                                    
non-profit  organization   that  was  very  active   in  the                                                                    
community  of Girdwood  and that  legislation added  a means                                                                    
for  the  organization  to  continue   to  fund  itself.  He                                                                    
explained that a House Finance  Committee amendment had been                                                                    
made  to Sections  4, 5  and  7 that  clarified the  state's                                                                    
existing gaming statutes  and specified that the  use of the                                                                    
internet   to   promote   a  raffle   was   not   considered                                                                    
broadcasting. He  observed that  there was  some convolution                                                                    
in  the  existing  statutes   regarding  the  definition  of                                                                    
broadcasting. He added that use  the of the internet was not                                                                    
viewed  as broadcasting  and that  it was  only allowed  for                                                                    
informational materials  to be  presented; the  internet did                                                                    
not allow, in  any form, the ability of a  person to acquire                                                                    
a raffle ticket or participate in a gaming event.                                                                               
                                                                                                                                
9:43:32 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman discussed the fiscal note in the packet.                                                                       
                                                                                                                                
Representative  Hawker remarked  that  although people  were                                                                    
prepared to  testify on  the bill, they  had elected  not to                                                                    
out of respect for the committee's time.                                                                                        
                                                                                                                                
Co-Chair  Hoffman  MOVED  to report  CSHB  245(FIN)  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSHB  245(FIN) was  REPORTED  out of  committee  with a  "do                                                                    
pass" recommendation  and with a  new zero fiscal  note from                                                                    
the Department of Revenue.                                                                                                      
                                                                                                                                
9:44:32 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:52:59 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
SENATE BILL NO. 192                                                                                                           
                                                                                                                                
     "An Act relating to the oil and gas production tax;                                                                        
     and providing for an effective date."                                                                                      
                                                                                                                                
                                                                                                                                
Co-Chair  Stedman  stated  that   there  would  be  a  short                                                                    
presentation  by PFC  Energy and  that  the committee  would                                                                    
adopt a committee  substitute (CS) for SB  192. He furthered                                                                    
that  PFC   Energy  would  be   brought  back   for  further                                                                    
discussion regarding a component  that had not been included                                                                    
in  the  CS. He  noted  that  the  committee would  also  be                                                                    
discussing  how it  would balance  the schedule  between the                                                                    
Finance  Committee, PFC  Energy,  and the  industry so  that                                                                    
there  was  ample  time  to   analyze  the  information.  He                                                                    
observed  that  there  were  differences   in  some  of  the                                                                    
modeling, cost assumptions, as well as other aspects.                                                                           
                                                                                                                                
Co-Chair  Stedman  asked  for a  brief  description  of  PFC                                                                    
Energy.  He pointed  out that  PFC Energy  was hired  by the                                                                    
Legislative Budget  and Audit Committee,  a joint  House and                                                                    
Senate committee that handled consultants.                                                                                      
                                                                                                                                
9:54:56 AM                                                                                                                    
                                                                                                                                
TONY REINSCH,  SENIOR DIRECTOR, UPSTREAM &  GAS, PFC ENERGY,                                                                    
explained  that PFC  Energy  was an  above  ground risk  and                                                                    
analytical  consultant  to  the   oil  and  gas  sector.  He                                                                    
detailed   that  PFC   Energy   advised  international   oil                                                                    
companies,   governments,  regulators,   and  national   oil                                                                    
companies on issues of policy finance economics.                                                                                
                                                                                                                                
9:55:23 AM                                                                                                                    
                                                                                                                                
JANAK MAYER,  MANAGER, UPSTREAM &  GAS, PFC ENERGY,  began a                                                                    
PowerPoint  presentation titled  "Discussion Slides:  Alaska                                                                    
Senate  Finance  Committee"  (copy on  file)  and  explained                                                                    
slide 2 titled "Difficulties in Existing Fiscal Structure":                                                                     
                                                                                                                                
   · The incorporation of progressivity into the Profit-                                                                        
     Based Production Tax (Net) in ACES creates three                                                                           
     significant problems                                                                                                       
                                                                                                                                
        · Large-scale gas production at low gas prices                                                                          
         could in the future significantly reduce                                                                               
         production tax revenue from existing oil                                                                               
          production                                                                                                            
                                                                                                                                
             · Resolving this problem within the framework                                                                      
               of ACES requires significant complexity                                                                          
                                                                                                                                
                                                                                                                                
             · Approach to decoupling in CSSB 192 requires                                                                      
               ability to split costs between oil and gas                                                                       
               production, creating high degree of                                                                              
               administrative burden, and limiting capacity                                                                     
               of state to effectively audit                                                                                    
                                                                                                                                
        · Combination of high credits with high tax rates                                                                       
          can produce excessive levels of support for                                                                           
          certain spending, and weak incentives for cost                                                                        
          control                                                                                                               
                                                                                                                                
             · Effective After-Tax rate of Government                                                                           
               support for exploration can be over 100% at                                                                      
               high price levels                                                                                                
                                                                                                                                
        · Options for incentivizing new production are                                                                          
          limited, and relatively complex                                                                                       
                                                                                                                                
             · Proposed incentives within existing                                                                              
               framework focus on either allowances to                                                                          
               reduce Production Tax Value, or revenue                                                                          
               exclusions (tax holiday)                                                                                         
                                                                                                                                
9:58:25 AM                                                                                                                    
                                                                                                                                
Mr. Mayer discussed slide 3 titled "Summary of Progressive                                                                      
Severance Tax (Gross) Structure":                                                                                               
                                                                                                                                
                                                                                                                                
        · A Progressive Severance Tax (Gross) option would                                                                      
          instead remove progressivity from the Profit-                                                                         
          Based Production Tax (Net), instead levying this                                                                      
          tax at the flat, base rate of 25%                                                                                     
                                                                                                                                
        · To retain an element of progressivity, a new                                                                          
          Progressive Severance Tax (Gross) would then be                                                                       
          added to the system. The tax would:                                                                                   
                                                                                                                                
             · Be non-deductible for Profit-Based                                                                               
               Production Tax purposes                                                                                          
             · Be levied on gross production (net of                                                                            
               royalties)                                                                                                       
                                                                                                                                
             · Be levied solely on oil                                                                                          
                                                                                                                                
             · The tax would use a progressivity structure                                                                      
               not dissimilar to that under the current                                                                         
               system, with progressivity coefficients that                                                                     
              apply at different thresholds.                                                                                    
                                                                                                                                
        · The proposed Progressive Severance Tax would use                                                                      
          the following parameters:                                                                                             
                                                                                                                                
             · No severance tax below $65 Gross Value at                                                                        
               Point of Production (GVPP)                                                                                       
                                                                                                                                
             · Progressivity of .25% commencing at a                                                                            
               threshold of $65 GVPP                                                                                            
                                                                                                                                
             · At $125 GVPP, a tax rate of 15% is reached.                                                                      
               At this point, progressivity is reduced to                                                                       
               0.05%                                                                                                            
                                                                                                                                
             · Progressivity is capped at 20%                                                                                   
                                                                                                                                
10:00:00 AM                                                                                                                   
                                                                                                                                
Mr. Mayer spoke to slide 4 titled "Benefits of Progressive                                                                      
Severance Tax (Gross) Structure":                                                                                               
                                                                                                                                
        · By removing progressivity from the Profit-Based                                                                       
          Production Tax (Net), and having the progressive                                                                      
         element of the structure be a Progressive                                                                              
          Severance Tax (Gross), two things become much                                                                         
          easier to achieve                                                                                                     
                                                                                                                                
             · The issue of gas production reducing                                                                             
               production tax revenue ceases to be a                                                                            
               problem without progressivity in the Profit-                                                                     
               Based Production Tax                                                                                             
                                                                                                                                
                  · Complex provisions to split costs                                                                           
                    between oil and gas production under                                                                        
                    CSSB 192 are thus no longer required                                                                        
                                                                                                                                
             · Much of the issue of excessive spending                                                                          
              support ceases to be a problem                                                                                    
                                                                                                                                
                  · Even with 40% exploration credit,                                                                           
                    effective after-tax Government support                                                                      
                    for exploration flat at 65%                                                                                 
                                                                                                                                
             · Significant incentives can be provided to                                                                        
               new production, by eliminating or reducing                                                                       
               the Progressive Severance Tax (Gross) for                                                                        
               new production                                                                                                   
                                                                                                                                
        · A wide range of levels of government take can be                                                                      
          achieved using this structure, depending on the                                                                       
          parameters applied                                                                                                    
                                                                                                                                
10:02:19 AM                                                                                                                   
                                                                                                                                
Mr.  Mayer  turned  to  slide  5  titled  "FY  2013  Revenue                                                                    
Comparison."  He  stated that  the  slide  showed a  revenue                                                                    
comparison of how the severance  tax option compared to some                                                                    
of  the other  alternatives.  He related  that  the red  and                                                                    
yellow  lines  depicted ACES  and  CSSB  192 as  being  very                                                                    
similar in  terms of  revenue, but there  was a  very slight                                                                    
reduction  from  ACES  in  CSSB  192.  He  stated  that  the                                                                    
severance tax option was represented  by the light blue line                                                                    
and  that it  diverged from  ACES and  CSSB 192  from around                                                                    
$100 to $110  per barrel; furthermore, from  $130 per barrel                                                                    
and  upwards,  the scenario  flattened  and  evened out  the                                                                    
split between the government and  producers at around the 72                                                                    
percent or 73 percent government  take level. He pointed out                                                                    
that  the  slide  compared  the   severance  option  to  the                                                                    
placement of a  40 or 50 percent cap  on progressivity under                                                                    
the  current   system.  The  50   percent  cap   option  was                                                                    
represented by the  darker blue line and the  40 percent cap                                                                    
option was  reflected by  the green  line. He  observed that                                                                    
the chart  was based  on FY 13  Department of  Revenue (DOR)                                                                    
numbers  for  production  and  costs;  on  that  basis,  the                                                                    
severance tax option's split of  revenue from production tax                                                                    
and the  split between cash  to companies versus  revenue to                                                                    
the  state  were  in  between  the 40  and  50  percent  cap                                                                    
options.                                                                                                                        
                                                                                                                                
10:04:14 AM                                                                                                                   
                                                                                                                                
Mr.  Mayer  looked  at  slide  6  titled  "FY  2013  Revenue                                                                    
Comparison." He  pointed out  that in  terms of  total state                                                                    
and government  take, the severance  tax option  was between                                                                    
the 40 and 50 percent cap options.                                                                                              
                                                                                                                                
Mr.  Mayer  highlighted  slide 7  titled  "FY  2013  Revenue                                                                    
Comparison." He  stated that  the comparative  revenue table                                                                    
showed that at  around the $100 per barrel  price level, the                                                                    
total revenue  under the severance tax  option was projected                                                                    
be  slightly above  that of  the Senate  Resources Committee                                                                    
version of CSSB  192; at prices above $100  per barrel (i.e.                                                                    
a $150  to $200  per barrel)  there was  a balancing  of the                                                                    
government  take  "between  the   two."  He  referenced  the                                                                    
government take figures on the  lower right table and stated                                                                    
that the  severance tax  option's government  take flattened                                                                    
out at about  73 percent from the $150 per  barrel range and                                                                    
above.                                                                                                                          
                                                                                                                                
Co-Chair  Stedman  pointed out  that  there  were a  lot  of                                                                    
numerics in  the tables and  that although it may  take some                                                                    
time,  it  would  be  helpful  if  the  committee  had  some                                                                    
comparison  material. Mr.  Mayer replied  that the  table in                                                                    
question was  done consistent with DOR  methodology and that                                                                    
it did  not include  tax credits  that were  claimed against                                                                    
current production. He noted that  the state was expected to                                                                    
expend $400 million in FY 13.                                                                                                   
                                                                                                                                
10:05:59 AM                                                                                                                   
                                                                                                                                
Mr.  Mayer  looked  at  slide  8  titled  "FY  2013  Revenue                                                                    
Comparison  -  Adjusted  for  Credits  Not  Claimed  Against                                                                    
Current Production."  He stated  the slide's  table examined                                                                    
the production tax in terms of  total state take in order to                                                                    
include the $400 million tax credit expenditure.                                                                                
                                                                                                                                
Senator  McGuire noted  that when  the decoupling  issue was                                                                    
discussed, the  state projected about $80  million in losses                                                                    
per  year.  She  inquired  if   the  projected  losses  were                                                                    
reflected  in the  cost chart  as  a savings  that would  be                                                                    
returned to the state. Mr.  Mayer replied that the projected                                                                    
losses were not  included in the figures and  that the chart                                                                    
was based  solely on FY  13 revenue numbers. He  stated that                                                                    
the projected losses  would come to the state  as savings in                                                                    
the event of significant gas production.                                                                                        
                                                                                                                                
Senator McGuire  commented that the  point was  important to                                                                    
note.                                                                                                                           
                                                                                                                                
10:07:12 AM                                                                                                                   
                                                                                                                                
Mr.  Mayer  discussed  slide  9  titled  "Impact  of  Rising                                                                    
Operating  Costs."  He  shared  that  the  slide  showed  an                                                                    
important impact that came  from shifting progressivity from                                                                    
the net to the gross; the  impact was a question of what the                                                                    
shift looked  like in  different cost  environments compared                                                                    
to the existing system. He  noted that DOR projected that in                                                                    
FY 13, the cost per barrel  of oil produced would be $11.70.                                                                    
He  observed  that  the chart  compared  the  difference  in                                                                    
revenue under  ACES and the  severance tax  option; anything                                                                    
above  the  zero line  represented  an  increase in  revenue                                                                    
compared  to  ACES, while  anything  below  the line  was  a                                                                    
decrease in  revenue. The slide  showed that at the  $70 per                                                                    
barrel price  level and at  $12 per barrel  operating costs,                                                                    
the revenue between  ACES and the severance  tax option were                                                                    
identical; the  two options also generated  the same revenue                                                                    
at the  $60 per barrel  level and  the same cost  per barrel                                                                    
level. He  stated that revenue  increased below the  $60 per                                                                    
barrel level in  all of the instances because  of the impact                                                                    
of the  higher floor that was  in CSSB 192. He  related that                                                                    
in  the $12  per  barrel cost  scenario,  the severance  tax                                                                    
option had reduced revenue at  the $100 per barrel tax level                                                                    
when  compared to  ACES; in  comparison,  it had  relatively                                                                    
similar revenue  compared to  CSSB 192 at  the $100  to $130                                                                    
per barrel level, but had  significant reductions in revenue                                                                    
past $130 per barrel as  the split between producers and the                                                                    
state was capped.                                                                                                               
                                                                                                                                
10:09:05 AM                                                                                                                   
                                                                                                                                
Mr.  Mayer stated  that when  looking at  what would  happen                                                                    
under  significantly higher  operating cost  assumptions, it                                                                    
was important  to understand that the  progressive severance                                                                    
option saw an  increased take at price levels in  the $70 to                                                                    
$140 per barrel  range. He explained that at  $12 per barrel                                                                    
operating costs and  at a $100 per  barrel price, production                                                                    
tax rates  under ACES  were probably  around 35  percent. He                                                                    
furthered that if the operating  costs were at a higher rate                                                                    
of $24 per barrel, the tax  rate under ACES could drop to 28                                                                    
percent; the  drop in the rate  was a result of  a reduction                                                                    
in the production  tax value (PTV) after the  costs had been                                                                    
deducted. He  related that  in some of  the higher  cost per                                                                    
barrel cases,  the progressivity  that was  put in  place on                                                                    
the gross (through the progressive  severance option) may be                                                                    
higher than  the progressivity  experienced under  ACES when                                                                    
production costs  were particularly high; this  was a result                                                                    
of the  progressive option being  calibrated to the  $12 per                                                                    
barrel level.                                                                                                                   
                                                                                                                                
Mr. Mayer  reiterated that a  $12 per barrel  operating cost                                                                    
was the  current average on  the North Slope. He  noted that                                                                    
from  a producer  perspective, the  progressivity at  higher                                                                    
cost levels may be viewed  as problem; however, on the other                                                                    
hand it was important to  consider the current system's lack                                                                    
of cost  control incentive.  He furthered  that particularly                                                                    
at high  marginal tax rates  and when there was  the ability                                                                    
to deduct  costs from  progressivity, the  effective support                                                                    
from the  state for  new capital and  operating expenditures                                                                    
could  be very  high; in  that sense,  it was  a significant                                                                    
incentive for controlling costs  in the future. He concluded                                                                    
that part  of the  discussion going  forward would  be about                                                                    
the two  sides of the progressive  option's progressivity at                                                                    
higher operating costs.                                                                                                         
                                                                                                                                
10:11:55 AM                                                                                                                   
                                                                                                                                
Mr.  Mayer  discussed slide  10  titled  "Data on  Operating                                                                    
Costs."  He stated  that the  top right  chart depicted  the                                                                    
historical average  costs for Prudhoe Bay,  Kuparuk, and the                                                                    
North Slope; in  recent years, operating costs  in the areas                                                                    
were between $10 and $12 per  barrel. He noted that in 2010,                                                                    
Prudhoe Bay had a slightly  higher operating cost of $12 per                                                                    
barrel compared to  Kuparuk's cost of around  $10 per barrel                                                                    
and that  the North  Slope average  was a  bit over  $10 per                                                                    
barrel.  He pointed  out that  based on  FY 13  numbers, the                                                                    
North  Slope average  was projected  to rise  to $11.70  per                                                                    
barrel. He  directed the committee's attention  to the chart                                                                    
on the upper left portion of  the slide that showed a longer                                                                    
time  period.  He  related that  ConocoPhillips  was  unique                                                                    
because it  reported Alaska  separately as  a region  in its                                                                    
financial reporting. ConocoPhillip's  10-K reports [required                                                                    
annual   report  to   the  U.S.   Securities  and   Exchange                                                                    
Commission]  showed an  operating cost  of about  $12.50 per                                                                    
barrel in 2011  and costs below the $10 per  barrel mark for                                                                    
prior  years. He  spoke to  the  chart in  the lower  middle                                                                    
portion of the  slide. He related that the  DOR forecast for                                                                    
average operating costs on the  North Slope predicted a cost                                                                    
around the $12  per barrel mark until around  2017, at which                                                                    
point  the costs  were expected  to continue  to rise  every                                                                    
year.                                                                                                                           
                                                                                                                                
Mr. Mayer explained that the  levels of averages on slide 10                                                                    
could disguise  some of the  granularity that  existed (e.g.                                                                    
BP's  costs may  reflect something  different than  what was                                                                    
shown for  ConocoPhillips). He opined that  although Prudhoe                                                                    
Bay  and  Kuparuk's costs  were  probably  similar for  both                                                                    
companies,  BP's other  assets might  have higher  operating                                                                    
costs. He  added that new  producers could have  higher cost                                                                    
assets that  would involve higher operating  costs (i.e. $16                                                                    
to  $18 per  barrel). He  pointed out  that new  production,                                                                    
which would have  a higher cost structure,  could have lower                                                                    
rates of  progressivity applied to  it. He offered  that the                                                                    
committee  may  also   want  to  have  the   lower  rate  of                                                                    
progressivity apply  to higher  cost projects that  had been                                                                    
brought on line in the recent past.                                                                                             
                                                                                                                                
10:14:46 AM                                                                                                                   
                                                                                                                                
Mr. Mayer spoke to slide 11 titled "Impact of Inflation":                                                                       
                                                                                                                                
        · Under ACES, thresholds and coefficients for                                                                           
          progressivity are specified in nominal terms,                                                                         
          without indexation                                                                                                    
                                                                                                                                
             · As a result, when economics over the long-                                                                       
               term rather than just 2013 are examined, we                                                                      
               see the effects of 'bracket creep' or                                                                            
               'stealth tax'                                                                                                    
                                                                                                                                
             · In   real   terms,    as   prices   increase,                                                                    
               thresholds  for  progressivity decrease,  and                                                                    
               the    higher    take   that    comes    with                                                                    
               progressivity  occurs  at   lower  and  lower                                                                    
               price levels                                                                                                     
                                                                                                                                
        · Similarly,     unless    progressive     severance                                                                    
          thresholds are indexed to inflation, progressive                                                                      
          severance will apply at steadily lower thresholds                                                                     
          over time                                                                                                             
                                                                                                                                
             · Indexing thresholds will also go some way to                                                                     
               addressing the cost sensitivity issue                                                                            
                                                                                                                                
Mr. Mayer  noted that it  was particularly important  to put                                                                    
in place  indexation for inflation  in reference to  the two                                                                    
prior  slide's information  regarding  the  impact of  costs                                                                    
when progressivity was  levied on the gross  rather than the                                                                    
net.  As long  as  the real  costs did  not  also rise,  the                                                                    
indexing would result in progressivity  rising along with it                                                                    
if costs  rose in nominal  terms. He added that  cost rising                                                                    
in real terms  was another question related to  the issue of                                                                    
incentives for cost control.                                                                                                    
                                                                                                                                
10:16:19 AM                                                                                                                   
                                                                                                                                
Mr.  Mayer discussed  slide 12  titled  "Incentives for  New                                                                    
Production":                                                                                                                    
                                                                                                                                
        · Significant incentives can be provided to new                                                                         
          production, by eliminating or reducing the                                                                            
          Progressive   Severance   Tax   (Gross)   on   any                                                                    
          combination of:                                                                                                       
                                                                                                                                
             · Production from new areas                                                                                        
                                                                                                                                
             · Production from new plans of development                                                                         
               (determined through the regulatory process                                                                       
               to be for "new production")                                                                                      
                                                                                                                                
             · Production above a fixed decline rate                                                                            
                                                                                                                                
        · One possibility for a reduced rate of Progressive                                                                     
          Severance Tax is:                                                                                                     
                                                                                                                                
             · No severance tax below $65 Gross Value at                                                                        
               Point of Production (GVPP)                                                                                       
                                                                                                                                
             · Progressivity of .05% commencing at a                                                                            
               threshold of $65 GVPP                                                                                            
                                                                                                                                
             · Progressivity capped at 5%                                                                                       
                                                                                                                                
Mr.  Mayer stated  that based  on some  of the  numbers, the                                                                    
slide's example  of a possible  way to  reduce progressivity                                                                    
would result  in a significant improvement  in the economics                                                                    
for some projects  and would have levels  of government take                                                                    
around  the mid-60  percentage range  instead of  the mid-70                                                                    
percentage range.                                                                                                               
                                                                                                                                
10:17:23 AM                                                                                                                   
                                                                                                                                
Mr.  Mayer  highlighted  another  consideration  related  to                                                                    
incentivizing new  production. He explained  that production                                                                    
from new areas was straight  forward; however, the impact of                                                                    
new areas would be minimal because  in the near term most of                                                                    
the  new  production  would come  from  existing  areas.  He                                                                    
stated  it was  important to  think about  how incentivizing                                                                    
production above a fixed decline rate would work.                                                                               
                                                                                                                                
Mr.  Mayer spoke  to  slide 13  titled  "Production Above  a                                                                    
Decline-Fixed  v Annual  Calculation." He  pointed out  that                                                                    
the slide's two charts  used DOR revenue production forecast                                                                    
data and that  data was looked at in two  different ways. He                                                                    
noted  that  the slide  was  an  exercise  and that  it  was                                                                    
important to  pretend that the production  was reflective of                                                                    
one  producer rather  than  multiple  producers. The  charts                                                                    
depicted what  the production from  a single  producer would                                                                    
look like if production above  a decline rate was determined                                                                    
in two  different ways. The  left chart assumed there  was a                                                                    
determined  rolling average  decline; the  option would  use                                                                    
the  recent  average  decline  to  determine  how  much  new                                                                    
production there  was in the  current year when  compared to                                                                    
the  prior  year.  He  stated  that  based  on  the  slide's                                                                    
production  curve, the  rolling average  method resulted  in                                                                    
very little  production being classified as  new production.                                                                    
He  stated  that there  two  reasons  for  the lack  of  new                                                                    
development   classification  under   the  rolling   average                                                                    
option:  (1)   only  the  previous  year   was  examined  to                                                                    
determine a production level above  the decline rate and (2)                                                                    
in any  years in  which incremental new  production existed,                                                                    
the rolling  average went from  a decline to an  incline and                                                                    
as  a  result, it  became  difficult  to produce  additional                                                                    
production above the high threshold.                                                                                            
                                                                                                                                
10:19:46 AM                                                                                                                   
                                                                                                                                
Mr. Mayer  continued to speak  to slide 13 and  offered that                                                                    
the chart on the right  depicted the scenario with a simpler                                                                    
and more  "effective" method by  selecting a  specific point                                                                    
in  time  and projecting  what  production  would look  like                                                                    
going forward  based on the  decline rate; there would  be a                                                                    
significant "wedge" of new production  if anything above the                                                                    
decline  rate would  be incentivized  with a  lower taxation                                                                    
rate. If the goal was  to incentivize production above the 6                                                                    
percent decline, the strategy  provided was useful and would                                                                    
allow companies  to work towards a  lower tax rate in  a way                                                                    
that a year-by-year process would not allow.                                                                                    
                                                                                                                                
10:21:15 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:24:33 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
10:25:01 AM                                                                                                                   
                                                                                                                                
Co-Chair  Hoffman  MOVED  to ADOPT  the  proposed  committee                                                                    
substitute  for SB  192,  Work  Draft 27-LS1305\T  (Bullock,                                                                    
4/2/12).                                                                                                                        
                                                                                                                                
Co-Chair Stedman OBJECTED for the purpose of discussion.                                                                        
                                                                                                                                
10:25:29 AM                                                                                                                   
                                                                                                                                
DARWIN PETERSON,  STAFF, SENATOR BERT STEDMAN,  reviewed the                                                                    
changes  in the  new  CS for  SB 192.  He  relayed that  all                                                                    
sections (Sections  1, 5, 7,  8, 10, 11, and  12) pertaining                                                                    
to  oil and  gas tax  decoupling had  been removed  from the                                                                    
bill because  the process of  removing progressivity  from a                                                                    
profits based  production tax and  applying it to  the gross                                                                    
value was  a de  facto decoupling. The  increased production                                                                    
allowance  (Section 13)  was removed,  which had  proposed a                                                                    
$10  per barrel  reduction in  PTV  for each  barrel of  oil                                                                    
delivered  to  the  Trans-Alaska Pipeline  System  that  was                                                                    
above the base volume as  determined from the prior calendar                                                                    
year.                                                                                                                           
                                                                                                                                
10:26:20 AM                                                                                                                   
                                                                                                                                
Mr.  Peterson walked  through the  bill sections.  Section 1                                                                    
amended the production tax so  that progressivity on oil was                                                                    
calculated on  the gross value  at the point  of production.                                                                    
The section  maintained the 25  percent base tax on  the PTV                                                                    
of  oil and  gas that  was  currently included  in the  ACES                                                                    
statute. He relayed that Section  2 was identical to Section                                                                    
6 from  the previous bill  version. The section  repealed AS                                                                    
43.55.011(f) and set a new minimum  tax of 10 percent of the                                                                    
gross  value  at the  point  of  production for  areas  with                                                                    
historical production of  1 billion barrels of  oil to date;                                                                    
the provision  would apply only  to the Kuparuk  and Prudhoe                                                                    
legacy fields.                                                                                                                  
                                                                                                                                
Mr. Peterson explained that Section  3 repealed the existing                                                                    
progressivity  based  on  the   PTV  (AS  43.55.011(g))  and                                                                    
replaced  it with  a new  progressive severance  tax on  the                                                                    
gross  value.   He  elaborated  that  on   a  monthly  basis                                                                    
progressivity on  oil produced  in a  legacy field  would be                                                                    
calculated  as follows:  no severance  tax  below $65  gross                                                                    
value  at the  point  of production,  progressivity of  0.25                                                                    
percent  commencing  at $65  gross  value  at the  point  of                                                                    
production at $125 gross value a  tax rate of 15 percent was                                                                    
reached progressivity would be  reduced to 0.05 percent, and                                                                    
progressivity would  be capped  at 20 percent.  He furthered                                                                    
that the concept had been  introduced by PFC Energy on March                                                                    
30, 2012 and  had been referred to as  "Severance Tax Option                                                                    
Number 1."                                                                                                                      
                                                                                                                                
10:27:51 AM                                                                                                                   
                                                                                                                                
Mr.  Peterson  turned  to  Section  3,  page  3  that  would                                                                    
establish a  reduced rate for the  progressive severance tax                                                                    
on  oil produced  outside  of the  legacy  fields. The  rate                                                                    
would be calculated  as follows: no severance  tax below $65                                                                    
gross  value at  the point  of production,  progressivity of                                                                    
0.05  percent   would  commence   at  a  $65   gross  value,                                                                    
progressivity would  be capped at  5 percent, and  the lower                                                                    
tax  on   fields  outside  Prudhoe  and   Kuparuk  was  only                                                                    
applicable for the first seven  years of production (page 3,                                                                    
line 2).                                                                                                                        
                                                                                                                                
Mr.  Peterson  relayed  that  Section  4  was  a  conforming                                                                    
amendment to  statute that dealt  with the payment  of taxes                                                                    
by  a producer;  the  section included  the new  progressive                                                                    
severance  tax and  the 10  percent minimum  tax. Section  5                                                                    
(page 6) was  a conforming amendment that  instructed DOR to                                                                    
adopt   regulations  to   calculate   the  new   progressive                                                                    
severance  tax based  on the  gross  value at  the point  of                                                                    
production.                                                                                                                     
                                                                                                                                
10:29:06 AM                                                                                                                   
                                                                                                                                
Mr. Peterson shared that Section  6 was identical to Section                                                                    
12 from  the previous bill  version. The section  amended AS                                                                    
43.55.160  by  adding  three  subsections  to  describe  the                                                                    
allocation of  lease expenditures  to oil or  gas production                                                                    
or exploration  in different areas  of the state.  Section 7                                                                    
was  same as  Section 14  of the  previous bill  version and                                                                    
would  amend   AS  43.55.165(h),  which  dealt   with  lease                                                                    
expenditures.  The Section  required DOR  to allocate  lease                                                                    
expenditures  between oil  and gas  production based  on the                                                                    
gross value at the point of production.                                                                                         
                                                                                                                                
Mr. Peterson explained that Section  8 (page 8) was the same                                                                    
as Section 15  of the previous bill version; it  added a new                                                                    
subsection  to  AS  43.55.170,  which  was  the  section  of                                                                    
statute that  dealt with adjustments to  lease expenditures.                                                                    
The  section would  require DOR  to  adopt regulations  that                                                                    
provided  for reasonable  methods of  allocating adjustments                                                                    
to  lease   expenditures,  payments,  and   credits  between                                                                    
different categories of oil and gas production.                                                                                 
                                                                                                                                
10:30:06 AM                                                                                                                   
                                                                                                                                
Mr.  Peterson  communicated  that  Section  9  included  the                                                                    
Petroleum  Information Management  System.  The only  change                                                                    
was the  placement of  the system under  the purview  of DOR                                                                    
instead  of AOGCC.  Section 10  repealed AS  43.55.160(a)(2)                                                                    
that dealt with the  monthly progressivity calculation based                                                                    
on the  production tax  value. He  expounded that  under the                                                                    
new CS  the section was irrelevant  given that progressivity                                                                    
would  be  taxed  on  the   gross  value  at  the  point  of                                                                    
production.                                                                                                                     
                                                                                                                                
Mr. Peterson  discussed that Section  11 was  uncodified law                                                                    
that required DOR  to develop a work plan  for the Petroleum                                                                    
Information  Management System;  the  section required  that                                                                    
the  system  be  operational  before  January  1,  2014.  He                                                                    
concluded  with Section  12  that  established an  effective                                                                    
date of January 1, 2013.                                                                                                        
                                                                                                                                
Co-Chair  Stedman  REMOVED  his OBJECTION.  There  being  NO                                                                    
FURTHER OBJECTION, Work Draft 27-LS1305\T was ADOPTED.                                                                          
                                                                                                                                
10:31:36 AM                                                                                                                   
                                                                                                                                
Co-Chair Stedman noted that  the incremental production from                                                                    
Prudhoe  Bay and  Kuparuk was  not included  in the  CS; his                                                                    
office was working with PFC  Energy and would meet with them                                                                    
to  work out  details related  to the  item. He  had concern                                                                    
about using  the 2013  decline curve  versus the  curve from                                                                    
2011 or  2012; he  believed the committee  needed to  take a                                                                    
look at  the item. He shared  that his intent was  to "get a                                                                    
CS on  the table"  in order  for the  industry offer  a more                                                                    
fine-tuned opinion on the bill.                                                                                                 
                                                                                                                                
SB  192  was  HEARD  and   HELD  in  committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Stedman discussed the following meeting's agenda.                                                                      
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
10:35:10 AM                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:35 AM.                                                                                          
                                                                                                                                

Document Name Date/Time Subjects
Explanation of Changes for HB 129 Version A to Version D.pdf SFIN 4/3/2012 9:00:00 AM
HB 129
Letter of support from AARP.pdf SFIN 4/3/2012 9:00:00 AM
HB 129
HB 129 Sponsor Statement v.2.pdf SFIN 4/3/2012 9:00:00 AM
HB 129
HB 129 - Death Certificate Example v.2.pdf SFIN 4/3/2012 9:00:00 AM
HB 129
HB 245 Background Info.pdf SFIN 4/3/2012 9:00:00 AM
HB 245
HB 245 Sectional Analysis.pdf SFIN 4/3/2012 9:00:00 AM
HB 245
HB 245 Sponsor Statement.pdf SFIN 4/3/2012 9:00:00 AM
HB 245
HB 245 Support Letters.pdf SFIN 4/3/2012 9:00:00 AM
HB 245
SCR24_2ndOrganicAct_1912.PDF SFIN 4/3/2012 9:00:00 AM
SCR 24
SCR24_Alaskas_1stHouseRepresentatives_1913.jpg SFIN 4/3/2012 9:00:00 AM
SCR 24
SCR24_Alaskas_1stSenate_1913.jpg SFIN 4/3/2012 9:00:00 AM
SCR 24
SCR24_HomeRule_forAK.pdf SFIN 4/3/2012 9:00:00 AM
SCR 24
SCR24_SessionLaws_Summary_1913.pdf SFIN 4/3/2012 9:00:00 AM
SCR 24
SCR24_Sponsor_Statement_29March12.pdf SFIN 4/3/2012 9:00:00 AM
SCR 24
SB 192 April 3 Alaska Senate Finance .pdf SFIN 4/3/2012 9:00:00 AM
SB 192
SB 210 work draft Version T.pdf SFIN 4/3/2012 9:00:00 AM
SB 210
CSSB 192 (FIN) ver T.pdf SFIN 4/3/2012 9:00:00 AM
SB 192
Sb 226 - CSSB 226 - v.B.PDF SFIN 4/3/2012 9:00:00 AM
SB 226