Legislature(2013 - 2014)SENATE FINANCE 532

03/12/2013 01:30 PM FINANCE


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01:51:03 PM Start
01:52:29 PM SB21
02:48:36 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 21 OIL AND GAS PRODUCTION TAX TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 12, 2013                                                                                            
                         1:51 p.m.                                                                                              
                                                                                                                                
1:51:03 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer called the Senate Finance Committee meeting                                                                      
to order at 1:51 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Kevin Meyer, Co-Chair                                                                                                   
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Kevin Meyer, Co-Chair                                                                                                   
Senator Anna Fairclough, Vice-Chair                                                                                             
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Janak  Mayer, Manager,  Upstream,  PFC  Energy; Joe  Balash,                                                                    
Deputy  Commissioner,   Department  of   Natural  Resources;                                                                    
Michael  Pawlowski,   Advisor,  Petroleum   Fiscal  Systems,                                                                    
Department of  Revenue; Senator Cathy Giessel;  Senator Bert                                                                    
Stedman; Senator Bill Wielechowski;                                                                                             
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 21     OIL AND GAS PRODUCTION TAX                                                                                            
                                                                                                                                
          SB 21 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
SENATE BILL NO. 21                                                                                                            
                                                                                                                                
     "An  Act relating  to  appropriations  from taxes  paid                                                                    
     under the  Alaska Net Income  Tax Act; relating  to the                                                                    
     oil and gas  production tax rate; relating  to gas used                                                                    
     in the state; relating  to monthly installment payments                                                                    
     of the oil and gas  production tax; relating to oil and                                                                    
     gas  production  tax  credits for  certain  losses  and                                                                    
     expenditures; relating  to oil  and gas  production tax                                                                    
     credit  certificates; relating  to nontransferable  tax                                                                    
     credits based  on production; relating  to the  oil and                                                                    
     gas tax  credit fund; relating to  annual statements by                                                                    
     producers and explorers;  relating to the determination                                                                    
     of annual  oil and gas production  tax values including                                                                    
     adjustments  based on  a percentage  of gross  value at                                                                    
     the  point   of  production  from  certain   leases  or                                                                    
     properties;    making   conforming    amendments;   and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
1:52:29 PM                                                                                                                    
                                                                                                                                
JANAK MAYER, MANAGER, UPSTREAM,  PFC ENERGY, summarized that                                                                    
the   crucial   provisions   of   CSSB   21(FIN)   affecting                                                                    
government take  and economics were  a 30 percent  base rate                                                                    
with  the  $5  per  barrel allowance,  a  20  percent  Gross                                                                    
Revenue Exclusion  (GRE) for 10  years on new  production in                                                                    
new and legacy  fields and a monetizable  net operating loss                                                                    
credit. The  system was revenue "neutral"  with a government                                                                    
take of 62.5 percent across a  broad range of oil prices. He                                                                    
declared  that the  CS was  a "substantial  improvement over                                                                    
ACES  (Alaska  Clear  and  Equitable  Share)"  in  terms  of                                                                    
competitiveness with "peer" oil and gas producers.                                                                              
                                                                                                                                
Mr. Mayer  began a  PowerPoint presentation  titled: "Senate                                                                    
Finance  Committee  CSSB  21 Analysis"  (3/12/13)  (copy  on                                                                    
file), and  spoke to  Slide 2  titled "Base  Production." He                                                                    
pointed to the  graph on the upper left corner  of the slide                                                                    
and explained  that the 30  percent base rate  combined with                                                                    
the   $5  dollar   per  barrel   allowance  was   a  "capped                                                                    
progressive element" of the tax  system. The element "almost                                                                    
perfectly compensated the regressive  nature of the royalty"                                                                    
system and resulted  in a neutral system  of government take                                                                    
ranging  from   prices  of  $65/bbl.  (per   barrel)  up  to                                                                    
$160/bbl. barrel.  The neutrality corresponded to  the value                                                                    
of  production split  between the  state, producers  and the                                                                    
federal government  as illustrated in  the graph on  the top                                                                    
right of the slide.                                                                                                             
                                                                                                                                
Mr.   Mayer  turned   to  Slide   3  titled:   "18/bbl.  New                                                                    
Development  with  GRE,  Standalone." He  related  that  the                                                                    
system  had a  neutral government  take of  approximately 60                                                                    
percent at prices over $80/bbl.                                                                                                 
                                                                                                                                
Mr.   Mayer  addressed   Slide   4   titled:  "25/bbl.   New                                                                    
Development  with GRE,  Standalone."  He  noted the  similar                                                                    
level of  government take as  illustrated in the  graphs. He                                                                    
qualified  that the  "combination  of higher  costs for  new                                                                    
development and  the regressive nature" of  the tax resulted                                                                    
in a 62  percent government take at $80/bbl.  lowering to 61                                                                    
percent at $100/bbl. of oil.                                                                                                    
                                                                                                                                
Mr.   Mayer  discussed   Slide   5   titled:  "18/bbl.   New                                                                    
Development with  GRE, Incremental to Incumbent."  The slide                                                                    
looked at  the after  tax effect  economics for  an existing                                                                    
producer. He  explained that the data  examined the finished                                                                    
economics of base  production cash flow of  a large producer                                                                    
layered  on the  new  field development  and subtracted  one                                                                    
from  the other  to determine  the after  tax effect  for an                                                                    
existing   producer.  The   results  were   slightly  higher                                                                    
government take of  62.5 percent across a wide  range of oil                                                                    
prices,  which included  the GRE  (gross revenue  exclusion)                                                                    
for new production.                                                                                                             
                                                                                                                                
Mr.   Mayer  addressed   Slide   6   titled:  "25/bbl.   New                                                                    
Development with  GRE, Incremental  to Incumbent"  and noted                                                                    
the very similar  results as the previous  slide. He thought                                                                    
that overall the  bill realized the committee's  desire of a                                                                    
revenue  neutral  system  at a  competitive  level  of  62.5                                                                    
percent  government  take  for existing  production  and  60                                                                    
percent  for  new production.  He  continued  with a  global                                                                    
comparison of the tax structure.                                                                                                
                                                                                                                                
Mr.  Mayer  spoke  to  Slide   7  titled:  "Government  Take                                                                    
Competitiveness-$80/bbl."  The graph  compared the  proposed                                                                    
tax system  to other world  tax regimes at $80/bbl.  of oil.                                                                    
He  pointed  out that  under  ACES,  Alaska was  the  second                                                                    
highest  tax   regime  in  the  Organization   for  Economic                                                                    
Cooperation   and   Development    (OECD).   The   committee                                                                    
substitute (CS)  ranked the state  toward the center  of the                                                                    
OECD countries.                                                                                                                 
                                                                                                                                
Mr.  Mayer  moved  to  Slide   9  titled:  "Government  Take                                                                    
Competitiveness  -$120/bbl." He  observed that  at $120/bbl.                                                                    
under ACES  for new development,  Alaska was the  highest in                                                                    
the OECD. The  CS kept Alaska in "the heart  of the pack" at                                                                    
existing production  and was even  more competitive  for new                                                                    
production.                                                                                                                     
                                                                                                                                
Co-Chair  Meyer  asked  for   an  explanation  of  Slide  8:                                                                    
"Government Take Competitiveness - $100/bbl."                                                                                   
                                                                                                                                
1:59:24 PM                                                                                                                    
Co-Chair Meyer  felt that some of  the regimes characterized                                                                    
with  blue   lines  were  countries  that   Alaska  was  not                                                                    
competing  with but  that the  countries  denoted in  yellow                                                                    
were similar.  He observed that  the ACES system was  at the                                                                    
top  of  the  list  at  $100/bbl.  of  oil.  The  CS  placed                                                                    
government take  in the  middle at  63 percent  for existing                                                                    
production  and   for  new   development  Alaska   was  very                                                                    
competitive. He pointed  out that under the  CS; an existing                                                                    
producer in Alaska was more competitive than North Dakota.                                                                      
                                                                                                                                
Co-Chair Meyer  stated that it  appeared that  the committee                                                                    
had met  its goal  of being  competitive in  global markets,                                                                    
especially for  new oil. He inquired  whether his deductions                                                                    
were  correct.  Mr. Mayer  replied  in  the affirmative  and                                                                    
turned  to Slide  11: "Government  Take Competitiveness"  to                                                                    
illustrate his  point. He offered that  the graph summarized                                                                    
the  competitiveness  from  a limited  peer  perspective  of                                                                    
global producers.  The slide depicted  the peer  tax regimes                                                                    
across  a  range  of  prices for  comparison.  The  red  bar                                                                    
portrayed $80/bbl., the yellow  bar portrayed $100/bbl., the                                                                    
blue bar  portrayed $120/bbl., and  the green  bar portrayed                                                                    
$140/bbl. He  related that  the set  of bars  that signified                                                                    
ACES marked  by red arrows,  depicted a steep slope  for new                                                                    
development   and   base  production   which   characterized                                                                    
progressivity; exclusive  to Alaska.  He pointed to  the two                                                                    
sets of  bars marked by  blue arrows. The bars  depicted the                                                                    
CS provisions  for base production  and new  development and                                                                    
were  level, which  represented the  neutral feature  of the                                                                    
tax system of 62 percent  to 60 percent government take. The                                                                    
figures placed Alaska in the  competitively placed middle of                                                                    
the peer group.                                                                                                                 
                                                                                                                                
Co-Chair  Meyer  appreciated the  analysis  and  a job  well                                                                    
done.                                                                                                                           
                                                                                                                                
Co-Chair  Meyer  noted that  the  various  tax credits  were                                                                    
confusing and  inquired whether there  was a simpler  way to                                                                    
offer credits.  Mr. Mayer responded  that the  credit system                                                                    
under  ACES  was  complicated  and noted  that  the  CS  was                                                                    
simpler, which excluded capital  credits. Options existed to                                                                    
streamline the proposed provisions  in the CS. He elaborated                                                                    
that  the net  operating loss  (NOL) credit  was monetizable                                                                    
under the new CS under  certain conditions. The NOL was only                                                                    
montizable  if   the  producer  had  capital   spending  the                                                                    
following year sufficient to monetize  the full value or the                                                                    
balance was carried forward. He  believed monetizing the NOL                                                                    
credit was  sensible as  long as  the state's  liability was                                                                    
"manageable." The  system was designed for  fairness to both                                                                    
an existing producer  and a new producer.  The tax liability                                                                    
should be "as  similar as possible" to both.  He stated that                                                                    
the  monetizable  NOL  tax   credit  achieved  fairness.  An                                                                    
existing  producer  bore the  full  30  percent of  the  tax                                                                    
liability but  a new  producer would  not have  a production                                                                    
tax liability.  The monetizable  NOL credits  created equity                                                                    
amongst the tax liability.  The existing producer's spending                                                                    
could take its tax liability  below zero and for the portion                                                                    
of the  negative liability can  obtain a  refundable credit.                                                                    
He pointed out that if  NOL credits were monetizable without                                                                    
the restrictions the system could be further simplified.                                                                        
                                                                                                                                
Mr. Mayer  remarked that the  exploration credit was  due to                                                                    
expire  in 2016,  but was  extended to  2022 in  the CS.  He                                                                    
mentioned  two  issues  with  the  exploration  credit.  The                                                                    
levels of  government support for  spending were  very high.                                                                    
The exploration credit could be  added to a tax liability or                                                                    
the NOL credit  bringing the level of  government support to                                                                    
over  70  percent.  An  existing  producer  under  ACES  can                                                                    
achieve over  100 percent support for  exploration spending.                                                                    
He reported  that the  CS limited  the amount  of government                                                                    
support to 30  or 40 percent for  exploration and eliminated                                                                    
"stacking credits."  He qualified that an  existing producer                                                                    
can  still   stack  deductions   against  an   existing  tax                                                                    
liability with  the exploration credit and  still achieve 70                                                                    
percent  government  support.  He suggested  addressing  the                                                                    
exploration  credit  to level  the  playing  field with  new                                                                    
producers.  He understood  that most  producers use  the NOL                                                                    
credit for  exploration. He  recommended elimination  of the                                                                    
exploration credit. He  detailed that if the  CS base credit                                                                    
was 30  percent and a  fully monetizable NOL was  30 percent                                                                    
the  same level  of  government support  as the  exploration                                                                    
credit would  be available.  He offered  that the  state did                                                                    
not need  a separate level  of credits. The same  result was                                                                    
available  through the  NOL credit  "with less  complexity."                                                                    
The  scenario also  achieved equity  between  the small  and                                                                    
large  producer. Government  support was  set at  30 percent                                                                    
regardless of an existing tax liability.                                                                                        
                                                                                                                                
2:12:31 PM                                                                                                                    
                                                                                                                                
He discerned  that the scenario  also created  a "completely                                                                    
level  playing  field  between  small  producers  and  large                                                                    
producers."  He questioned  the  need for  a small  producer                                                                    
credit under  the circumstances.  A much simpler  tax system                                                                    
could  be  achieved  under the  scenarios  of  reducing  the                                                                    
number of credits and leveling the playing field.                                                                               
                                                                                                                                
Senator  Olson asked  what the  potential impacts  were with                                                                    
NOL  credits coupled  with the  GRE and  new production.  He                                                                    
inquired whether  the state was creating  a future financial                                                                    
problem with  credits. Mr. Mayer responded  that the biggest                                                                    
liability  to the  state was  with the  capital credit.  The                                                                    
capital credit  could be stacked  with the NOL  available to                                                                    
both  incumbent or  new  producer rather  than  only to  new                                                                    
producers.  Removing  the   capital  credit  eliminated  the                                                                    
largest   portion  of   the   liability.   He  opined   that                                                                    
maintaining  a   fully  refundable  NOL  credit   created  a                                                                    
liability   for  the   state   but   was  "manageable"   and                                                                    
"justified" in attempting to balance  the tax system between                                                                    
new and incumbent producers.                                                                                                    
                                                                                                                                
Senator Bishop  queried whether it  was possible  for Alaska                                                                    
to  become  too  competitive  by "starting  a  race  to  the                                                                    
bottom." Mr. Mayer  responded that the Lower  48 states were                                                                    
not a  "perfect" comparison but  that a  strong counterforce                                                                    
was the  dependency on oil  and gas production  for revenue.                                                                    
He judged  that in  general, "very  few countries  wanted to                                                                    
aggressively pursue a  race to the bottom  because the costs                                                                    
were too great."                                                                                                                
                                                                                                                                
Co-Chair Meyer inquired  whether eliminating the exploration                                                                    
and  small  producer  tax credits  would  help  the  state's                                                                    
position  regarding  government  take. Mr.  Mayer  responded                                                                    
that  his comments  were related  to achieving  the greatest                                                                    
possible  simplicity and  balance between  new and  existing                                                                    
producers  within the  tax structure.  He acknowledged  that                                                                    
the  result had  a fiscal  impact  to the  state. The  state                                                                    
would realize a "relative  net positive" through elimination                                                                    
of the small producer credit.  The financial benefits to the                                                                    
state were  minimal through  elimination of  the exploration                                                                    
credit because  of the NOL  credit, but  would substantially                                                                    
simplify and balance the tax system.                                                                                            
                                                                                                                                
2:19:43 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:21:18 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Meyer  noted some  committee concern  regarding the                                                                    
GRE and how it dealt with new oil in legacy fields.                                                                             
Vice-Chair Fairclough  offered that the discussion  had been                                                                    
whether  the  GRE should  have  a  time  limit or  not.  She                                                                    
relayed  that there  were  arguments on  both  sides of  the                                                                    
issue.                                                                                                                          
                                                                                                                                
JOE  BALASH,  DEPUTY  COMMISSIONER,  DEPARTMENT  OF  NATURAL                                                                    
RESOURCES,  explained that  the administration  had intended                                                                    
to  apply  the   GRE  to  new  oil   reserves  brought  into                                                                    
production.  He  reported  that  Alaska  had  a  "tremendous                                                                    
resource  base"  and  that estimates  required  drilling  to                                                                    
confirm reserve  quantities and move  the oil  resource into                                                                    
the known  "reserve" category.  The goal  was to  incite new                                                                    
reserves  development. The  Department of  Natural Resources                                                                    
(DNR)  identified new  units and  "new participating  areas"                                                                    
within  legacy  fields. He  stated  that  the challenge  and                                                                    
priority was  identifying new oil within  the legacy fields.                                                                    
He  detailed that  DNR's system  of managing  units included                                                                    
"participating   areas."  "A   participating   area  was   a                                                                    
reservoir  within a  unit that  contributed to  production."                                                                    
Oil wells  within a unit  might not  be drilling all  of the                                                                    
oil  in individual  reservoirs that  comprise the  unit. The                                                                    
department  identified new  participating  areas within  the                                                                    
legacy fields  as new oil and  extended the GRE to  oil from                                                                    
new  participating  areas.  He  furthered  that  the  Senate                                                                    
Resources  Committee applied  the GRE  to oil  in previously                                                                    
identified  participating  areas  that was  now  recoverable                                                                    
through  new  technology.  The  Senate  Resources  committee                                                                    
qualified  oil  recovered  from the  expanded  participating                                                                    
area for  the GRE.  He understood that  the finance  CS went                                                                    
even   further    and   extended   sections    of   existing                                                                    
participating  areas that  contained a  geographic or  other                                                                    
impediment to production. The  section would become eligible                                                                    
for the  GRE if it had  not been producing but  now would be                                                                    
and was  approved by DNR. The  intent was to target  new oil                                                                    
reserves  from  previously   unrecoverable  oil  in  dormant                                                                    
sections   of   existing   participating  areas   with   new                                                                    
technology   by  extending   the  participating   areas  and                                                                    
applying the GRE.                                                                                                               
                                                                                                                                
2:29:14 PM                                                                                                                    
                                                                                                                                
Senator   Dunleavy  recalled   that   according  to   public                                                                    
testimony there were  large amounts of "known"  oil that was                                                                    
being "sat on." He inquired  whether this assertion was true                                                                    
and whether  the more  accessible known  oil could  be taxed                                                                    
under the lower rate proposed  in the CS. Mr. Balash replied                                                                    
that  DNR was  unaware  of  any large  pockets  of oil  that                                                                    
remained  undeveloped  that   were  profitable  to  develop;                                                                    
however,  the   department  was   aware  of   small  pockets                                                                    
("bubbles") of  oil within  legacy fields  and participating                                                                    
areas  that  could  be   developed  with  new  sophisticated                                                                    
technology.  He added  that viscous  and heavy  oil deposits                                                                    
were large, but were not economic enough to be developed.                                                                       
                                                                                                                                
Senator Bishop  continued that he  had written  the comments                                                                    
down  that Senator  Dunleavy was  referring  to and  offered                                                                    
that the testifier  cited a 600 million  barrel field within                                                                    
BP's  properties.  He inquired  how  many  barrels a  "small                                                                    
bubble" quantified.  Mr. Balash replied that  a small bubble                                                                    
amounted to approximately 300,000 barrels.                                                                                      
                                                                                                                                
Senator  Olson reiterated  his  inquiry  regarding what  the                                                                    
potential impact on  state revenue was from  the NOL credits                                                                    
and  the GRE  on  shale oil  exploration  and production  by                                                                    
Great Bear.  Mr. Balash replied  that DOR pondered  the same                                                                    
question  when  it  was  considering   how  to  address  the                                                                    
production tax system. He stated  that the department wanted                                                                    
to  avoid a  situation where  a company  was profitable  and                                                                    
state   revenues  were   "in   the   red."  Tax   incentives                                                                    
potentially turned  into subsidies  that cost the  state. He                                                                    
maintained that the  underlying principle of the  GRE was to                                                                    
create incentives  for new oil  production. The  state would                                                                    
accept less now for new  production in the future that would                                                                    
create value to the state. The  way the NOL was structured a                                                                    
producer could  not continue to  produce and lose  money. He                                                                    
added that Great  Bear drilled for core samples  but did not                                                                    
conduct a  flow test. Without  a flow test it  was difficult                                                                    
to  determine   the  economics  of  shale   production.  The                                                                    
department believed  shale production  was not  predicted in                                                                    
the near future  and was not factored  into DNR's production                                                                    
forecast.                                                                                                                       
                                                                                                                                
Mr.  Balash  segued  into a  response  to  Co-Chair  Meyer's                                                                    
question  regarding  an  unlimited GRE  shifting  legacy  or                                                                    
currently  producing  oil  to new  oil.  He  explained  that                                                                    
legacy  fields were  capable of  producing oil  for multiple                                                                    
decades depending on production costs  and the price of oil.                                                                    
Existing production  would remain under base  production and                                                                    
was  not eligible  for  the  GRE. Over  time  more and  more                                                                    
barrels would become GRE eligible  barrels in the production                                                                    
model.  He  stressed that  GRE  barrels  would not  displace                                                                    
legacy barrels until existing oil production ceased.                                                                            
                                                                                                                                
                                                                                                                                
Vice-Chair Fairclough communicated  that the explanation was                                                                    
precisely the  question. Considering the next  generation of                                                                    
Alaskans, most of the oil would  be taxed under the GRE. She                                                                    
inquired whether  the state should  continue the  GRE beyond                                                                    
an initial recovery period for  industry. Mr. Balash replied                                                                    
that the issue  regarding the timing of the  GRE was related                                                                    
to the level  of the GRE. He stated  that the administration                                                                    
set  the  GRE  at  20  percent without  a  time  limit.  The                                                                    
resources version set the GRE  at 30 percent. At that amount                                                                    
of  reduction  to  the  gross  value  a  time  limit  seemed                                                                    
justifiable.  The administration  was "comfortable"  with no                                                                    
time limit  on a  20 percent GRE.  The department  did agree                                                                    
with  the  finance CS  provision  which  established a  time                                                                    
limit for  the GRE on a  well by well basis.  The department                                                                    
could  provide  the  committee  with  production  rates  and                                                                    
recovery factors for wells over a ten year period.                                                                              
                                                                                                                                
2:39:52 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Fairclough  recalled  a scenario  from  previous                                                                    
testimony where the state created  a threshold limit under a                                                                    
previous   tax   regime    that   resulted   in   unintended                                                                    
consequences  for the  state. She  asked for  clarification.                                                                    
Mr. Balash replied  that the issue arose  when ELF (Economic                                                                    
Limit Factor)  was in effect.  He delineated that ELF  was a                                                                    
multiplier  against a  15 percent  gross tax  rate and  used                                                                    
productivity   and  field   size  in   order  to   determine                                                                    
profitability. The  system offered "marginal"  incentives to                                                                    
produce a specific  number of barrels in a well  in order to                                                                    
optimize the  ELF factor.  He offered  that the  Kuparik oil                                                                    
field  was  developed under  the  system  and produced  more                                                                    
wells than  necessary to "efficiently" recover  the oil. The                                                                    
producers were "efficiently" recovering  the oil in a manner                                                                    
that favored their tax liability.                                                                                               
                                                                                                                                
MICHAEL  PAWLOWSKI,   ADVISOR,  PETROLEUM   FISCAL  SYSTEMS,                                                                    
DEPARTMENT  OF  REVENUE,  stated  that  the  department  was                                                                    
working on  some cash-flow comparisons  in order  to examine                                                                    
the impact  of the  GRE versus  monetizable credits  and the                                                                    
effect  on state  revenues over  time. He  addressed Senator                                                                    
Olson's question  regarding the  "up front"  monetization of                                                                    
loss carry forwards versus carry  forwards only applied to a                                                                    
tax liability.  He voiced that  the practical impact  to the                                                                    
state  would  be  lost revenue  either  upfront  revenue  or                                                                    
future revenue. The  issue was timing; when  the state could                                                                    
afford the lost  revenue. He reminded the  committee that in                                                                    
all  versions  of  SB  21  the  carry  forward's  value  was                                                                    
increased  and  compounded,  which   reduced  taxes  in  the                                                                    
future. The  balance was between  upfront payments  and more                                                                    
tax revenue in the future compared to the GRE.                                                                                  
                                                                                                                                
Vice-Chair Fairclough recalled  testimony from industry that                                                                    
the major  producers had  stated that the  GRE did  not have                                                                    
any impact on their  production. She asked for clarification                                                                    
from industry.                                                                                                                  
                                                                                                                                
Co-Chair   Meyer  remembered   that  the   industry  favored                                                                    
"targeted capital  credits" over  the GRE. He  remarked that                                                                    
capital  credits did  not favor  the  state's economics.  He                                                                    
anticipated  that the  GRE would  provide industry  the same                                                                    
benefit; just  not "upfront." The credit  was only available                                                                    
if industry produced oil.                                                                                                       
                                                                                                                                
SB  21  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:48:36 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:48 p.m.                                                                                          
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
SB 21 AK SFIN CSSB21 (FIN) Analysis JMayer PFC 12 March 2013.pptx SFIN 3/12/2013 1:30:00 PM
SB 21