Legislature(2017 - 2018)BUTROVICH 205

07/12/2017 03:00 PM CONFERENCE COMMITTEE ON HB 111

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Audio Topic
03:08:13 PM Start
03:08:35 PM HB111
04:53:39 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Testimony <Invitation Only> --
+ HB 111 OIL & GAS PRODUCTION TAX;PAYMENTS;CREDITS TELECONFERENCED
Heard & Held
Location: Butrovich Committee Room, Capitol 205
and Anchorage Legislative Information Office
                    ALASKA STATE LEGISLATURE                                                                                  
                             JHB111                                                                                           
                       Anchorage, Alaska                                                                                        
                         July 12, 2017                                                                                          
                           3:08 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Geran Tarr, Chair                                                                                                
Representative Andy Josephson                                                                                                   
Representative David Talerico (via teleconference)                                                                              
                                                                                                                                
Senator Cathy Giessel, Chair (via teleconference)                                                                               
Senator Bert Stedman (via teleconference)                                                                                       
Senator Donald Olson                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Bryce Edgmon                                                                                                     
Representative George Rauscher                                                                                                  
Representative Chris Birch                                                                                                      
Representative Cathy Tilton                                                                                                     
Representative DeLena Johnson                                                                                                   
Representative Gabrielle LeDoux                                                                                                 
Representative Matt Claman                                                                                                      
Representative Justin Parish (via teleconference)                                                                               
                                                                                                                                
Senator Peter Micciche (via teleconference)                                                                                     
Senator Mia Costello (via teleconference)                                                                                       
Senator Dennis Egan (via teleconference)                                                                                        
Senator Kevin Meyer (via teleconference)                                                                                        
Senator Anna MacKinnon (via teleconference)                                                                                     
Senator John Coghill (via teleconference)                                                                                       
Senator Click Bishop (via teleconference)                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CS FOR HOUSE BILL NO. 111(FIN)(efd fld)                                                                                         
"An Act relating to the oil and gas production tax, tax                                                                         
payments, and credits; relating to interest applicable to                                                                       
delinquent oil and gas production tax; relating to carried-                                                                     
forward lease expenditures based on losses and limiting those                                                                   
lease expenditures to an amount equal to the gross value at the                                                                 
point of  production of oil  and gas  produced from the  lease or                                                               
property where  the lease expenditure  was incurred;  relating to                                                               
information concerning  tax credits, lease expenditures,  and oil                                                               
and gas taxes; relating to  the disclosure of that information to                                                               
the public; relating  to an adjustment in the gross  value at the                                                               
point  of  production;  and relating  to  a  legislative  working                                                               
group."                                                                                                                         
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
SENATE CS FOR CS FOR HOUSE BILL NO. 111(FIN)                                                                                    
"An Act  relating to credits  against the oil and  gas production                                                               
tax;  relating to  the applicability  of  certain credits  earned                                                               
under the oil and gas production  tax to the tax on corporations;                                                               
relating  to tax  credit  certificates against  the  oil and  gas                                                               
production  tax   and  the  issuance  and   assignment  of  those                                                               
certificates;  relating  to  interest  applicable  to  delinquent                                                               
taxes; relating  to lease expenditures;  relating to the  oil and                                                               
gas tax credit fund; and providing for an effective date."                                                                      
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 111                                                                                                                  
SHORT TITLE: OIL & GAS PRODUCTION TAX; PAYMENTS; CREDITS                                                                        
SPONSOR(s): RESOURCES                                                                                                           
                                                                                                                                
02/08/17       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/08/17       (H)       RES, FIN                                                                                               
02/08/17       (H)       TALERICO OBJECTED TO INTRODUCTION                                                                      
02/08/17       (H)       INTRODUCTION RULED IN ORDER                                                                            
02/08/17       (H)       SUSTAINED RULING OF CHAIR Y23 N15 E2                                                                   
02/08/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/08/17       (H)       Heard & Held                                                                                           
02/08/17       (H)       MINUTE(RES)                                                                                            
02/13/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/13/17       (H)       Heard & Held                                                                                           
02/13/17       (H)       MINUTE(RES)                                                                                            
02/17/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/17/17       (H)       Heard & Held                                                                                           
02/17/17       (H)       MINUTE(RES)                                                                                            
02/20/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/20/17       (H)       Heard & Held                                                                                           
02/20/17       (H)       MINUTE(RES)                                                                                            
02/22/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/22/17       (H)       Heard & Held                                                                                           
02/22/17       (H)       MINUTE(RES)                                                                                            
02/22/17       (H)       RES AT 6:30 PM BARNES 124                                                                              
02/22/17       (H)       Heard & Held                                                                                           
02/22/17       (H)       MINUTE(RES)                                                                                            
02/24/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/24/17       (H)       Heard & Held                                                                                           
02/24/17       (H)       MINUTE(RES)                                                                                            
02/27/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/27/17       (H)       Heard & Held                                                                                           
02/27/17       (H)       MINUTE(RES)                                                                                            
02/27/17       (H)       RES AT 7:00 PM CAPITOL 106                                                                             
02/27/17       (H)       Heard & Held                                                                                           
02/27/17       (H)       MINUTE(RES)                                                                                            
03/01/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/01/17       (H)       Heard & Held                                                                                           
03/01/17       (H)       MINUTE(RES)                                                                                            
03/01/17       (H)       RES AT 6:00 PM BARNES 124                                                                              
03/01/17       (H)       Heard & Held                                                                                           
03/01/17       (H)       MINUTE(RES)                                                                                            
03/06/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/06/17       (H)       Scheduled but Not Heard                                                                                
03/06/17       (H)       RES AT 6:30 PM BARNES 124                                                                              
03/06/17       (H)       Heard & Held                                                                                           
03/06/17       (H)       MINUTE(RES)                                                                                            
03/08/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/08/17       (H)       Heard & Held                                                                                           
03/08/17       (H)       MINUTE(RES)                                                                                            
03/08/17       (H)       RES AT 6:00 PM BARNES 124                                                                              
03/08/17       (H)       Heard & Held                                                                                           
03/08/17       (H)       MINUTE(RES)                                                                                            
03/09/17       (H)       RES AT 5:00 PM BARNES 124                                                                              
03/09/17       (H)       -- MEETING CANCELED --                                                                                 
03/10/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/10/17       (H)       Heard & Held                                                                                           
03/10/17       (H)       MINUTE(RES)                                                                                            
03/11/17       (H)       RES AT 12:00 AM BARNES 124                                                                             
03/11/17       (H)       -- MEETING CANCELED --                                                                                 
03/13/17       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/13/17       (H)       <Bill Held Over from 3/11/17>                                                                          
03/14/17       (H)       RES AT 3:00 PM BARNES 124                                                                              
03/14/17       (H)       -- Continued from 3/13/17 Meeting at                                                                   
                         1:00 PM --                                                                                             
03/15/17       (H)       RES RPT CS(RES) NT 4DP 4DNP 1AM                                                                        
03/15/17       (H)       DP: PARISH, DRUMMOND, JOSEPHSON, TARR                                                                  
03/15/17       (H)       DNP: TALERICO, BIRCH, RAUSCHER, JOHNSON                                                                
03/15/17       (H)       AM: WESTLAKE                                                                                           
03/20/17       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/20/17       (H)       Heard & Held                                                                                           
03/20/17       (H)       MINUTE(FIN)                                                                                            
03/21/17       (H)       FIN AT 9:00 AM HOUSE FINANCE 519                                                                       
03/21/17       (H)       Heard & Held                                                                                           
03/21/17       (H)       MINUTE(FIN)                                                                                            
03/21/17       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/21/17       (H)       Heard & Held                                                                                           
03/21/17       (H)       MINUTE(FIN)                                                                                            
03/22/17       (H)       FIN AT 9:00 AM HOUSE FINANCE 519                                                                       
03/22/17       (H)       -- Continued from 3/21/17 at 1:30 PM --                                                                
03/22/17       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/22/17       (H)       Heard & Held                                                                                           
03/22/17       (H)       MINUTE(FIN)                                                                                            
03/23/17       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/23/17       (H)       Heard & Held                                                                                           
03/23/17       (H)       MINUTE(FIN)                                                                                            
03/24/17       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/24/17       (H)       Heard & Held                                                                                           
03/24/17       (H)       MINUTE(FIN)                                                                                            
03/25/17       (H)       FIN AT 10:00 AM HOUSE FINANCE 519                                                                      
03/25/17       (H)       Heard & Held                                                                                           
03/25/17       (H)       MINUTE(FIN)                                                                                            
03/27/17       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
03/27/17       (H)       Heard & Held                                                                                           
03/27/17       (H)       MINUTE(FIN)                                                                                            
04/07/17       (H)       FIN AT 1:30 PM HOUSE FINANCE 519                                                                       
04/07/17       (H)       Heard & Held                                                                                           
04/07/17       (H)       MINUTE(FIN)                                                                                            
04/08/17       (H)       FIN AT 1:00 PM HOUSE FINANCE 519                                                                       
04/08/17       (H)       Moved CSHB 111(FIN) Out of Committee                                                                   
04/08/17       (H)       MINUTE(FIN)                                                                                            
04/09/17       (H)       FIN RPT CS(FIN) NT 4DP 4DNP 2NR 1AM                                                                    
04/09/17       (H)       DP: GARA, GUTTENBERG, SEATON, FOSTER                                                                   
04/09/17       (H)       DNP: WILSON, THOMPSON, PRUITT, TILTON                                                                  
04/09/17       (H)       NR: ORTIZ, GRENN                                                                                       
04/09/17       (H)       AM: KAWASAKI                                                                                           
04/10/17       (H)       MOVED TO BOTTOM OF CALENDAR                                                                            
04/11/17       (H)       TRANSMITTED TO (S)                                                                                     
04/11/17       (H)       VERSION: CSHB 111(FIN)(EFD FLD)                                                                        
04/12/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/12/17       (S)       RES, FIN                                                                                               
04/13/17       (S)       RES WAIVED PUBLIC HEARING NOTICE, RULE                                                                 
                         23                                                                                                     
04/13/17       (S)       FIN WAIVED PUBLIC HEARING NOTICE, RULE                                                                 
                         23                                                                                                     
04/14/17       (S)       RES AT 3:00 PM BUTROVICH 205                                                                           
04/14/17       (S)       Heard & Held                                                                                           
04/14/17       (S)       MINUTE(RES)                                                                                            
04/15/17       (S)       RES AT 9:00 AM SENATE FINANCE 532                                                                      
04/15/17       (S)       Heard & Held                                                                                           
04/15/17       (S)       MINUTE(RES)                                                                                            
04/15/17       (S)       FIN AT 9:01 AM SENATE FINANCE 532                                                                      
04/15/17       (S)       <Pending Referral> Uniform Rule 23                                                                     
                         Waived                                                                                                 
04/15/17       (S)       FIN AT 2:00 PM SENATE FINANCE 532                                                                      
04/15/17       (S)       <Pending Referral> Uniform Rule 23                                                                     
                         Waived                                                                                                 
04/15/17       (S)       RES AT 2:00 PM SENATE FINANCE 532                                                                      
04/15/17       (S)       Heard & Held                                                                                           
04/15/17       (S)       MINUTE(RES)                                                                                            
04/17/17       (S)       RES AT 1:00 PM BUTROVICH 205                                                                           
04/17/17       (S)       Heard & Held                                                                                           
04/17/17       (S)       MINUTE(RES)                                                                                            
04/17/17       (S)       RES AT 5:00 PM BUTROVICH 205                                                                           
04/17/17       (S)       Heard & Held                                                                                           
04/17/17       (S)       MINUTE(RES)                                                                                            
04/18/17       (S)       RES AT 2:00 PM BUTROVICH 205                                                                           
04/18/17       (S)       Heard & Held                                                                                           
04/18/17       (S)       MINUTE(RES)                                                                                            
04/19/17       (S)       RES AT 2:00 PM BUTROVICH 205                                                                           
04/19/17       (S)       Heard & Held                                                                                           
04/19/17       (S)       MINUTE(RES)                                                                                            
04/20/17       (S)       RES AT 2:00 PM BUTROVICH 205                                                                           
04/20/17       (S)       -- MEETING CANCELED --                                                                                 
04/21/17       (S)       RES AT 2:00 PM BUTROVICH 205                                                                           
04/21/17       (S)       -- MEETING CANCELED --                                                                                 
04/24/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/24/17       (S)       -- MEETING CANCELED --                                                                                 
04/24/17       (S)       RES AT 2:00 PM BUTROVICH 205                                                                           
04/24/17       (S)       Moved   SCS   CSHB   111(RES)   Out   of                                                               
                         Committee                                                                                              
04/24/17       (S)       MINUTE(RES)                                                                                            
04/25/17       (S)       RES RPT SCS  4DP 2NR    NEW TITLE                                                                      
04/25/17       (S)       DP: GIESSEL, COGHILL, VON IMHOF, MEYER                                                                 
04/25/17       (S)       NR: HUGHES, STEDMAN                                                                                    
04/25/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/25/17       (S)       <Bill Hearing Canceled>                                                                                
04/25/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
04/25/17       (S)       -- MEETING CANCELED --                                                                                 
04/26/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/26/17       (S)       Heard & Held                                                                                           
04/26/17       (S)       MINUTE(FIN)                                                                                            
04/26/17       (S)       RES AT 2:00 PM BUTROVICH 205                                                                           
04/26/17       (S)       -- MEETING CANCELED --                                                                                 
04/27/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/27/17       (S)       Heard & Held                                                                                           
04/27/17       (S)       MINUTE(FIN)                                                                                            
04/27/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
04/27/17       (S)       -- MEETING CANCELED --                                                                                 
04/28/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/28/17       (S)       Heard & Held                                                                                           
04/28/17       (S)       MINUTE(FIN)                                                                                            
04/28/17       (S)       RES AT 2:00 PM BUTROVICH 205                                                                           
04/28/17       (S)       -- MEETING CANCELED --                                                                                 
04/29/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
04/29/17       (S)       Heard & Held                                                                                           
04/29/17       (S)       MINUTE(FIN)                                                                                            
05/01/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/01/17       (S)       -- MEETING CANCELED --                                                                                 
05/02/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/02/17       (S)       -- MEETING CANCELED --                                                                                 
05/03/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/03/17       (S)       -- MEETING CANCELED --                                                                                 
05/04/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/04/17       (S)       Heard & Held                                                                                           
05/04/17       (S)       MINUTE(FIN)                                                                                            
05/05/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/05/17       (S)       Heard & Held                                                                                           
05/05/17       (S)       MINUTE(FIN)                                                                                            
05/06/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/06/17       (S)       -- MEETING CANCELED --                                                                                 
05/09/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/09/17       (S)       <Bill Hearing Canceled>                                                                                
05/10/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/10/17       (S)       <Bill Hearing Canceled>                                                                                
05/11/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/11/17       (S)       Heard & Held                                                                                           
05/11/17       (S)       MINUTE(FIN)                                                                                            
05/12/17       (S)       FIN RPT SCS  4DP 2NR 1AM NEW TITLE                                                                     
05/12/17       (S)       DP: MACKINNON, BISHOP, VON IMHOF,                                                                      
                         HUGHES                                                                                                 
05/12/17       (S)       NR: HOFFMAN, MICCICHE                                                                                  
05/12/17       (S)       AM: OLSON                                                                                              
05/12/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/12/17       (S)       Moved   SCS   CSHB   111(FIN)   Out   of                                                               
                         Committee                                                                                              
05/12/17       (S)       MINUTE(FIN)                                                                                            
05/13/17       (S)       FIN SCS ADOPTED Y15 N3 E2                                                                              
05/13/17       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
05/13/17       (S)       -- MEETING CANCELED --                                                                                 
05/15/17       (S)       VERSION: SCS CSHB 111(FIN)                                                                             
05/18/17       (S)       FIRST SPECIAL SESSION BILL                                                                             
05/18/17       (H)       FIRST SPECIAL SESSION BILL                                                                             
05/22/17       (H)       CONFERENCE COMMITTEE APPOINTED                                                                         
05/22/17       (H)       TARR (CHAIR), JOSEPHSON, TALERICO                                                                      
06/01/17       (S)       CONFERENCE COMMITTEE APPOINTED                                                                         
06/01/17       (S)       GIESSEL (CHAIR), STEDMAN, OLSON                                                                        
06/09/17       (H)       HB 111 AT 9:00 AM BARNES 124                                                                           
06/09/17       (H)       Heard & Held                                                                                           
06/09/17       (H)       MINUTE (HB 111)                                                                                        
06/23/17       (S)       SECOND SPECIAL SESSION BILL                                                                            
06/23/17       (H)       SECOND SPECIAL SESSION BILL                                                                            
07/12/17       (H)       HB 111 AT 3:00 PM Anch LIO Conf Rm                                                                     
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KEN ALPER, Director                                                                                                             
Tax Division                                                                                                                    
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered  questions and provided information                                                             
during the Conference Committee on HB 111 meeting.                                                                              
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:08:13 PM                                                                                                                    
                                                                                                                                
CHAIR GERAN  TARR called  the Conference Committee  on HB  111 to                                                             
order   at    3:08   p.m.      Representatives    Talerico   (via                                                               
teleconference), Josephson, and Tarr  and Senators Olson, Stedman                                                               
(via  teleconference),  and  Giessel  (via  teleconference)  were                                                               
present at the call to order.                                                                                                   
                                                                                                                                
        HB 111-OIL & GAS PRODUCTION TAX;PAYMENTS;CREDITS                                                                    
                                                                                                                                
3:08:35 PM                                                                                                                    
                                                                                                                                
CHAIR TARR announced that the only  order of business would be CS                                                               
FOR HOUSE  BILL NO.  111(FIN)(efd fld), "An  Act relating  to the                                                               
oil and gas  production tax, tax payments,  and credits; relating                                                               
to interest applicable to delinquent  oil and gas production tax;                                                               
relating to  carried-forward lease  expenditures based  on losses                                                               
and limiting those  lease expenditures to an amount  equal to the                                                               
gross value  at the point of  production of oil and  gas produced                                                               
from  the  lease or  property  where  the lease  expenditure  was                                                               
incurred; relating  to information concerning tax  credits, lease                                                               
expenditures, and oil  and gas taxes; relating  to the disclosure                                                               
of that information  to the public; relating to  an adjustment in                                                               
the gross  value at the  point of  production; and relating  to a                                                               
legislative working group."  and SENATE CS FOR CS  FOR HOUSE BILL                                                               
NO. 111(FIN),  "An Act  relating to credits  against the  oil and                                                               
gas  production tax;  relating to  the  applicability of  certain                                                               
credits earned  under the oil and  gas production tax to  the tax                                                               
on corporations; relating to tax  credit certificates against the                                                               
oil and  gas production  tax and the  issuance and  assignment of                                                               
those   certificates;   relating   to  interest   applicable   to                                                               
delinquent  taxes; relating  to lease  expenditures; relating  to                                                               
the oil and  gas tax credit fund; and providing  for an effective                                                               
date."                                                                                                                          
                                                                                                                                
CHAIR TARR  stated that the  conference committee  operates under                                                               
Uniform Rule 42.  She  explained that the Conference Committee on                                                               
HB 111  was meeting in  two locations (in Anchorage,  Alaska, and                                                               
via  teleconference in  Juneau);  therefore, she  would lead  the                                                               
discussion  pertaining  to CS  FOR  HOUSE  BILL NO.  111(FIN)(efd                                                               
fld), while  Chair Giessel would  lead the  discussion pertaining                                                               
to SENATE CS FOR CS FOR HOUSE BILL NO. 111(FIN).                                                                                
                                                                                                                                
3:09:47 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  expressed concern about  procedure.  He  said it                                                               
is  standard to  address  a bill  that was  in  existence in  the                                                               
previous session or  special session.  He relayed  that today the                                                               
Senate had  convened and passed  a resolution by  two-thirds vote                                                               
to take up  HB 111.  He offered his  understanding that the House                                                               
would have  to convene and decide  by a two-thirds vote  to bring                                                               
its version before the Conference Committee on HB 111.                                                                          
                                                                                                                                
3:10:52 PM                                                                                                                    
                                                                                                                                
CHAIR TARR  responded that  she and  Chair Giessel  had addressed                                                               
the   issue   through   conversation,   and   she   offered   her                                                               
understanding   that  Chair   Giessel  had   not  indicated   any                                                               
hesitation in moving forward with  a plan to discuss two versions                                                               
today:   Version  F and  Version X.   She  indicated she  had not                                                               
since been  made aware by Chair  Giessel of the desire  to follow                                                               
any other  procedure.   Furthermore, Chair  Tarr stated  that she                                                               
possessed  a legal  memorandum ("memo")  from  Doug Gardner,  the                                                               
director  of Legal  Services, which  indicates that  "all of  the                                                               
actions that we're taking today are acceptable."                                                                                
                                                                                                                                
SENATOR   STEDMAN  opined   that  elected   officials  have   the                                                               
responsibility to explain  to the public what they  are doing and                                                               
why, which includes explaining the  reason for deviating from the                                                               
rules.   That transparency promotes  public support in  a process                                                               
that can  be followed and  understood.   In response to  an offer                                                               
from Chair Tarr to take an  at-ease, he stated that he would like                                                               
an explanation  of the process  she intends  to follow.   He said                                                               
the  Uniform  Rules  set  out the  process  by  which  conference                                                               
committees  operate, and  any deviation  from that  is fine,  but                                                               
should be  explained.  He said  he is aware of  the conversations                                                               
that the two  chairs have had, but he reiterated  that the public                                                               
deserves  to be  given  an  explanation of  the  process and  any                                                               
deviation from it.                                                                                                              
                                                                                                                                
CHAIR TARR responded  that the Conference Committee on  HB 111 is                                                               
operating as  other conference committees  do.  At this  point it                                                               
does not have  "powers beyond the powers of  a regular conference                                                               
committee,"  which means  that  its consideration  of  HB 111  is                                                               
limited  to language  currently in  the latest  House and  Senate                                                               
versions  of  the  bill.   She  offered  her  understanding  that                                                               
Senator  Stedman, having  been involved  in the  meetings of  the                                                               
last few  weeks, would  be aware  of the  extensive conversations                                                               
that had  taken place  to determine "points  of agreement."   She                                                               
said  Chair  Giessel  had  requested Version  F,  while  she  had                                                               
requested  Version  X,  and  she  indicated  that  both  versions                                                               
include  points upon  which  both bodies  have  agreed or  "think                                                               
there might  be agreement,"  as well as  "the five  sections that                                                               
remain for discussion."  She stated  that she is prepared to move                                                               
on with  the plan,  which she discussed  with Chair  Giessel this                                                               
morning; however,  if that is  not what  all members wish  to do,                                                               
she would consider adjourning the meeting.                                                                                      
                                                                                                                                
3:14:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON read a  sentence from the aforementioned                                                               
memo from Doug Gardener, dated July 11, 2017, as follows:                                                                       
                                                                                                                                
     There  is   no  legal  impediment  to   the  conference                                                                    
     committees meeting and  the houses ultimately convening                                                                    
     on  the  floor  to  consider  adopting  the  conference                                                                    
     committee substitute, passing  a concurrent resolution,                                                                    
     prior  to   voting  on   adoption  of   the  conference                                                                    
     committee report.                                                                                                          
                                                                                                                                
REPRESENTATIVE  JOSEPHSON said  he thinks  it is  clear that  "no                                                               
one's talking  about advancing a  bill today."   He characterized                                                               
the  current   conference  committee   meeting  as  "a   sort  of                                                               
preliminary  meeting  to  go  over the  versions  of  the  bill."                                                               
Further, he offered  his understanding that "the top  mind in our                                                               
legal  department says  it's entirely  appropriate for  us to  do                                                               
this" and, he added, "that's what we're doing."                                                                                 
                                                                                                                                
3:15:05 PM                                                                                                                    
                                                                                                                                
CHAIR  GIESSEL explained  the procedure  outlined in  the Uniform                                                               
Rules wherein a  concurrent resolution is passed by  each body to                                                               
bring  alive  a  bill  that   died  in  a  previous  session  and                                                               
legitimizes the conference committees  that were appointed during                                                               
a previous  session.  She  opined that Senator  Stedman's request                                                               
for  an  explanation  was  straight forward.    She  offered  her                                                               
understanding  that  in his  legal  memorandum,  Mr. Gardner  had                                                               
opined that the  legislature can waive its  own rules; therefore,                                                               
it is  okay for  the current  Conference Committee  on HB  111 to                                                               
proceed  in bringing  forward  a  bill that  died  in a  previous                                                               
session.   She  reviewed that  today  the Senate  had passed  the                                                               
concurrent  resolution  to  bring  the  bill  back  to  life  and                                                               
legitimized  the appointees  to  the Conference  Committee on  HB                                                               
111.                                                                                                                            
                                                                                                                                
3:17:15 PM                                                                                                                    
                                                                                                                                
CHAIR  TARR asked  Senator Stedman  if he  wanted the  Conference                                                               
Committee on HB 111 meeting to proceed or [adjourn].                                                                            
                                                                                                                                
SENATOR STEDMAN reiterated  his point that the  Senate had passed                                                               
the  resolution, but  the House  had  not done  so; therefore,  a                                                               
discussion can take place today, but  no action can be taken.  He                                                               
expressed  doubt that  the House  would have  the necessary  two-                                                               
thirds vote that would be  required to bring forward the proposal                                                               
that is  in front of  the committee.   He reiterated the  need to                                                               
share  with the  public the  reason  for any  deviation from  the                                                               
rules.                                                                                                                          
                                                                                                                                
CHAIR  TARR explained  the House  does not  want to  spend public                                                               
dollars  to  send  its  legislators [back]  to  Juneau  until  an                                                               
agreement has  been reached.   She mentioned that a  news station                                                               
has  been keeping  a tally  of the  cost of  the ongoing  special                                                               
session.   She  noted  that the  Senate had  gone  to Juneau  and                                                               
conducted a  floor session to pass  the aforementioned concurrent                                                               
resolution.     She  said  the   House  decided,  based   on  the                                                               
consultation with  its lawyers, that  the action to  move forward                                                               
today is  an appropriate  one, and  it is not  going to  send its                                                               
members to Juneau "until such time as it's necessary."                                                                          
                                                                                                                                
3:19:59 PM                                                                                                                    
                                                                                                                                
CHAIR GIESSEL introduced the offering  of the Senate:  Conference                                                               
Committee  Substitute  (CCS)  for HB  111,  Version  30-LS0450\F,                                                               
Nauman,  7/7/17  ("Version  F").    She  explained  the  proposed                                                               
changes  outlined  in the  Sectional  Analysis  [included in  the                                                               
committee  packet].   She highlighted  Sections 1  and 2,  of the                                                               
Sectional Analysis,  which read as follows  [original punctuation                                                               
provided, with some formatting changes]:                                                                                        
                                                                                                                                
     Section 1  Amends AS 31.05.030(n),  Alaska Oil  and Gas                                                                    
     Conservation Act, Powers and duties of commission.                                                                         
     Conforming to  the Sec. 27 requirement  that the Alaska                                                                    
     Oil  and  Gas  Conservation  Commission  determine  the                                                                    
     start of regular production for  purposes of applying a                                                                    
     carry-forward annual loss.  Effective Jan. 1, 2018.                                                                        
                                                                                                                                
     Section  2  Amends   AS  43.05.225,  Administration  of                                                                    
     Revenue Laws, Interest.                                                                                                    
     For  all  delinquent  taxes  under  the  Department  of                                                                    
     Revenue, interest is 5.25 points  above the annual rate                                                                    
     set by  the 12th  Federal Reserve  District, compounded                                                                    
     quarterly,  and is  applied the  entire time  a tax  is                                                                    
     delinquent.  Effective Jan. 1, 2018.                                                                                       
                                                                                                                                
CHAIR  GIESSEL noted  that the  current federal  reserve interest                                                               
rate is  1.75 percent,  and the Senate  had offered  3 percentage                                                               
points above  the federal rate,  while the House had  requested 7                                                               
percent above the federal rate.   She explained that the interest                                                               
rate is  for all delinquent  taxes in  the state, not  just those                                                               
from oil and gas.  The  House members of the Conference Committee                                                               
on HB  111 asked for the  5.25 interest rate shown  in Section 1,                                                               
which the Senate agreed to.   She said that with the 1.75 federal                                                               
reserve rate, the amount would equal 7 percent.                                                                                 
                                                                                                                                
CHAIR  GIESSEL  continued  to  Sections   3-4  of  the  Sectional                                                               
Analysis, which  read as follows [original  punctuation provided,                                                               
with some formatting changes]:                                                                                                  
                                                                                                                                
     Section  3 Amends  AS 43.20.044(a),  Alaska Net  Income                                                                    
     Tax Act, Exploration incentive credit.                                                                                     
     A taxpayer  that earns an  exploration credit  under AS                                                                    
     43.55.025 for work  done after July 1,  2016, may apply                                                                    
     the credit against the  taxpayer's own corporate income                                                                    
     tax.  Effective immediately.                                                                                               
                                                                                                                                
     Section  4 Amends  AS 43.20.047(h),  Alaska Net  Income                                                                    
     Tax  Act, Liquefied  natural gas  storage facility  tax                                                                    
     credit.                                                                                                                    
     Conforming to the future repeal  of the Oil and Gas Tax                                                                    
     Credit  Fund and  conforming  repeals.   Effective  the                                                                    
     later  of   Jan.  1,  2022,   or  when  there   are  no                                                                    
     outstanding applications for credit refunds.                                                                               
                                                                                                                                
     Section  5   Amends  AS   43.55.023(c),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures.                                                                                                              
     Credits  earned  under  this  section  may  be  applied                                                                    
     against prior-year  taxes, interest, penalties  or fees                                                                    
     related to  the oil  and gas production  tax, providing                                                                    
     those  liabilities   have  not   been  subject   to  an                                                                    
     administrative proceeding  or litigation.   Credits may                                                                    
     not  be used  against  conservation  surcharges or  the                                                                    
     private royalty tax.  Effective immediately.                                                                               
                                                                                                                                
CHAIR GIESSEL stated  that the Senate's intent was  to provide an                                                               
opportunity for companies that have  earned cash credits over the                                                               
years to  begin to benefit from  them.  She explained  that there                                                               
has  been  a  reduction  in   the  amount  of  credits  that  are                                                               
available.                                                                                                                      
                                                                                                                                
3:23:51 PM                                                                                                                    
                                                                                                                                
CHAIR GIESSEL directed attention to Sections 6-8, which read as                                                                 
follows [original punctuation provided, with some formatting                                                                    
changes]:                                                                                                                       
                                                                                                                                
     Section  6   Amends  AS   43.55.023(d),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures.                                                                                                              
     Cash  payments  for  credits  under  this  section  are                                                                    
     available only  for lease expenditures  incurred before                                                                    
     July  1, 2017.   Effective  immediately retroactive  to                                                                    
     July 1, 2017.                                                                                                              
                                                                                                                                
     Section  7   Amends  AS   43.55.023(d),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures, as amended by Sec. 6.                                                                                        
     Conforming to the  future repeal in Sec. 30  of the Oil                                                                    
     and Gas Tax  Credit Fund.  Effective the  later of Jan.                                                                    
     1, 2022, or when  there are no outstanding applications                                                                    
     for credit refunds.                                                                                                        
                                                                                                                                
     Section  8   Amends  AS   43.55.023(e),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures.                                                                                                              
     Transferrable  tax  credit  certificates  issued  under                                                                    
     this section  may be applied against  prior-year taxes,                                                                    
     interest, penalties or fees related  to the oil and gas                                                                    
     production  tax, providing  those liabilities  have not                                                                    
     been  subject   to  an  administrative   proceeding  or                                                                    
     litigation.     Credits   may  not   be  used   against                                                                    
     conservation  surcharges or  the  private royalty  tax.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
CHAIR GIESSEL  noted Section 6  is an amendment being  offered by                                                               
the Senate, with the understanding  that the credits being earned                                                               
right now equate  to about $1 million a day  and suspending these                                                               
credits needs  to happen immediately.   Over the next  year, that                                                               
would  equate to  approximately $200  million, which  would be  a                                                               
significant help  to Alaska's budget.   She explained  the reason                                                               
for the timing proposed in Section  7 is to ensure enough time to                                                               
pay out  promised credits  before repealing  the fund  from which                                                               
the payments  come.   Regarding Section 8,  she said  the credits                                                               
may not  be used against  liability for royalty,  spill response,                                                               
or money that would go into the constitutional budget reserve.                                                                  
                                                                                                                                
     Section  9   Amends  AS   43.55.023(g),  Oil   and  Gas                                                                    
     Production  Tax, Tax  credits  for  certain losses  and                                                                    
     expenditures.                                                                                                              
     Conforming to the  future repeal in Sec. 30  of the Oil                                                                    
     and Gas Tax  Credit Fund.  Effective the  later of Jan.                                                                    
     1, 2022, or when  there are no outstanding applications                                                                    
     for credit refunds.                                                                                                        
                                                                                                                                
     Section  10   Amends  AS  43.55.025(a),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Credits under  this section for  work done on  or after                                                                    
     July 1,  2016, may be applied  against corporate income                                                                    
     taxes.  Effective immediately.                                                                                             
                                                                                                                                
CHAIR  GIESSEL noted  that Section  10 applies  to Middle  Earth,                                                               
which pertains  to areas  in the Interior  and the  Western Coast                                                               
where there  are opportunities  for exploration  and development.                                                               
She  said applying  the  credits to  corporate  income tax  would                                                               
allow  companies involved  in exploration  to reap  some benefit.                                                               
She said it involves a small amount of money.                                                                                   
                                                                                                                                
3:27:28 PM                                                                                                                    
                                                                                                                                
CHAIR  GIESSEL  addressed  Sections  11 and  12,  which  read  as                                                               
follows  [original  punctuation  provided, with  some  formatting                                                               
changes]:                                                                                                                       
                                                                                                                                
     Section  11   Amends  AS  43.55.025(a),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration, as amended by Sec. 10.                                                                                        
     Conforming  to the  sunset  of  the AS  43.55.025(a)(4)                                                                    
     credit after Jan. 1, 2018,  in Sec. 10.  Effective Jan.                                                                    
     1, 2018.                                                                                                                   
                                                                                                                                
     Section  12   Amends  AS  43.55.025(b),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     The   40%   credit   for    seismic   work   under   AS                                                                    
     43.55.025(a)(4)  will not  be available  for work  done                                                                    
     after Jan. 1, 2018.  Effective Jan. 1, 2018.                                                                               
                                                                                                                                
CHAIR  GIESSEL, regarding  Section 12,  compared seismic  work to                                                               
ultrasounds.    She related  that  the  Senate Finance  Committee                                                               
learned  that the  state is  receiving massive  volumes of  data,                                                               
related to  seismic activity, which may  or may not be  useful to                                                               
the state; therefore, the credit needs to be repealed.                                                                          
                                                                                                                                
CHAIR GIESSEL moved  on to Sections 13 through 18,  which read as                                                               
follows  [original  punctuation  provided, with  some  formatting                                                               
changes]:                                                                                                                       
                                                                                                                                
     Section  13   Amends  AS  43.55.025(f),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Exploration credits  under AS  43.55.025 for  work done                                                                    
     after  July 1,  2016, against  corporate income  taxes.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section  14   Amends  AS  43.55.025(g),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Exploration  tax credits  under this  section that  are                                                                    
     transferred  to another  taxpayer  may  not be  applied                                                                    
     against   the  purchaser's   corporate  income   taxes.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section  15   Amends  AS  43.55.025(h),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Tax  credit certificates  and  tax  credits under  this                                                                    
     section  may  be   applied  against  prior-year  taxes,                                                                    
     interest, penalties or fees related  to the oil and gas                                                                    
     production  tax, providing  those liabilities  have not                                                                    
     been  subject   to  an  administrative   proceeding  or                                                                    
     litigation.     Credits   may  not   be  used   against                                                                    
     conservation  surcharges or  the  private royalty  tax.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section  16   Amends  AS  43.55.025(i),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Exploration credits issued under  this section for work                                                                    
     done after July 1, 2016,  may be used against corporate                                                                    
     income tax,  but may  not be  used to  reduce corporate                                                                    
     income taxes below zero.  Effective immediately.                                                                           
                                                                                                                                
     Section  17   Amends  AS  43.55.025(k),  Oil   and  Gas                                                                    
     Production Tax, Alternative tax  credit for oil and gas                                                                    
     exploration.                                                                                                               
     Conforming to the sunset of  the seismic credit in Sec.                                                                    
     12.  Effective Jan. 1, 2018.                                                                                               
                                                                                                                                
     Section 18 Adds  a new subsection to  AS 43.55.025, Oil                                                                    
     and Gas Production Tax, Alternative  tax credit for oil                                                                    
     and gas exploration.                                                                                                       
     Creates a  conditional tax credit certificate  that the                                                                    
     Department  of Revenue  must issue  to explorers.   The                                                                    
     conditional  certificate enables  the holder  to submit                                                                    
     an  application  for a  refund  while  waiting for  the                                                                    
     state  to issue  a transferrable  certificate, but  the                                                                    
     conditional certificates  may not  be purchased  by the                                                                    
     state.   Effective immediately  retroactive to  July 1,                                                                    
     2017.                                                                                                                      
                                                                                                                                
CHAIR  GIESSEL, regarding  Section 18,  explained that  there are                                                               
companies in  line waiting  for credit, and  the State  of Alaska                                                               
has  been reducing  the amount  of money  available for  payment;                                                               
therefore, "as they  wait, they fall further and  further back in                                                               
line."                                                                                                                          
                                                                                                                                
3:31:43 PM                                                                                                                    
                                                                                                                                
CHAIR GIESSEL moved on to Sections 19 through 26, which read as                                                                 
follows [original punctuation provided, with some formatting                                                                    
changes]:                                                                                                                       
                                                                                                                                
     Section  19   Amends  AS  43.55.028(a),  Oil   and  Gas                                                                    
     Production   Tax,  Oil   and   gas   tax  credit   fund                                                                    
     established; cash purchase of tax credit certificates.                                                                     
     The tax  credit fund is  only able to purchase  oil and                                                                    
     gas tax  credits issued  for work  done before  July 1,                                                                    
     2017, and to purchase  instate refinery and LNG storage                                                                    
     facility  income tax  credits.   Effective  immediately                                                                    
     retroactive to July 1, 2017.                                                                                               
                                                                                                                                
     Section  20   Amends  AS  43.55.028(e),  Oil   and  Gas                                                                    
     Production   Tax,  Oil   and   gas   tax  credit   fund                                                                    
     established; cash purchase of tax credit certificates.                                                                     
     Allows  the Department  of Revenue  to accept,  but not                                                                    
     purchase, a  conditional certificate from  an explorer.                                                                    
     Effective immediately retroactive to July 1, 2017.                                                                         
                                                                                                                                
     Section  21   Amends  AS  43.55.029(a),  Oil   and  Gas                                                                    
     Production Tax, Assignment of tax credit certificate.                                                                      
     Conforming to the  Sec. 29 repeal of  the net operating                                                                    
     loss credit. Effective Jan. 1, 2018.                                                                                       
                                                                                                                                
     Section  22   Amends  AS  43.55.160(d),  Oil   and  Gas                                                                    
     Production Tax,  Determination of production  tax value                                                                    
     of oil and gas.                                                                                                            
     Conforming to the  Sec. 29 repeal of  the net operating                                                                    
     loss credit.  Effective Jan. 1 2018.                                                                                       
                                                                                                                                
     Section  23   Amends  AS  43.55.160(e),  Oil   and  Gas                                                                    
     Production Tax,  Determination of production  tax value                                                                    
     of oil and gas.                                                                                                            
     North Slope and Middle  Earth lease expenditures may be                                                                    
     used  to  establish   a  carried-forward  annual  loss.                                                                    
     Gross value reductions  for new oil cannot  make a loss                                                                    
     larger  than  it  would  otherwise  be.    Also,  makes                                                                    
     conforming changes  to the  Sec. 29  repeal of  the net                                                                    
     operating loss credit  and the Sec. 24  terms for lease                                                                    
     expenditures.  Effective Jan. 1, 2018.                                                                                     
                                                                                                                                
     Section  24   Amends  AS  43.55.165(a),  Oil   and  Gas                                                                    
     Production Tax, Lease expenditures.                                                                                        
     Lease expenditures  include those, for the  North Slope                                                                    
     and Middle  Earth, that were  unable to be  deducted in                                                                    
     the previous year.  Effective Jan. 1, 2018.                                                                                
                                                                                                                                
     Section  25   Amends  AS  43.55.165(f),  Oil   and  Gas                                                                    
     Production Tax, Lease expenditures.                                                                                        
     Conforming to the  Sec. 29 repeal of  the net operating                                                                    
     loss credit.  Effective Jan. 1, 2018.                                                                                      
                                                                                                                                
     Section  26 Adds  a new  paragraph to  AS 43.55.165(l),                                                                    
     Oil and Gas Production Tax, Lease expenditures.                                                                            
     Defines  "carried-forward   annual  loss"  as   a  loss                                                                    
     established per Sec. 23.  Effective Jan. 1, 2018.                                                                          
                                                                                                                                
3:34:37 PM                                                                                                                    
                                                                                                                                
     Section 27  Adds new subsections  to AS  43.55.165, Oil                                                                    
     and Gas Production Tax, Lease expenditures.                                                                                
     Implements new  terms for how a  carried-forward annual                                                                    
     loss is  applied.  A  taxpayer may choose to  apply all                                                                    
     or  some of  its  loss, or  to carry  it  forward.   In                                                                    
     applying  carry-forward   annual  losses,   a  producer                                                                    
     subject to  the minimum tax  may apply the  amount that                                                                    
     would  reduce  taxes  to the  equal  amount  under  the                                                                    
     minimum  tax  (before  the  application  of  any  other                                                                    
     credits),  and  not  to  zero.    Carry-forward  annual                                                                    
     losses in excess of the  amount applied to reduce taxes                                                                    
     to the  equal of the  minimum tax are  carried forward.                                                                    
     Carry-forward annual  losses may  be applied  only once                                                                    
     production starts from the property  on which they were                                                                    
     incurred;  at  that time,  the  losses  may be  applied                                                                    
     against a  taxpayer's entire  segment (ie,  North Slope                                                                    
     or Middle Earth).  Effective Jan. 1, 2018.                                                                                 
                                                                                                                                
     Section  28   Amends  AS  43.55.170(c),  Oil   and  Gas                                                                    
     Production Tax, Adjustments to lease expenditures.                                                                         
     Conforming to the  Sec. 29 repeal of  the net operating                                                                    
     loss credit.  Effective Jan. 1, 2018.                                                                                      
                                                                                                                                
     Section 29 Repealer                                                                                                        
     Repeals   the    net   operating   loss    credit,   AS                                                                    
     43.55.023(b), on Jan. 1, 2018.                                                                                             
                                                                                                                                
     Section 30 Repealer                                                                                                        
     At the later  of Jan. 1, 2022, or  when all outstanding                                                                    
     applications  for   credit  refunds  have   been  paid,                                                                    
     repeals  the  Oil  and  Gas  Tax  Credit  Fund  and  AS                                                                    
     43.55.028; assignability  of credits to  third parties,                                                                    
     AS 43.55.029; and makes  conforming repeals in sections                                                                    
     of  statute  referencing  the  fund:  AS  43.05.230(l),                                                                    
     Administration  of  Revenue  Laws,  Disclosure  of  tax                                                                    
     returns    and    reports,   annual    disclosure    of                                                                    
     disbursements  from the  fund; AS  43.20.046(e), Alaska                                                                    
     Net Income  Tax Act,  Gas storage facility  tax credit,                                                                    
     use of fund to pay  the credit; AS 43.20.047(e), Alaska                                                                    
     Net  Income  Tax  Act, Liquefied  natural  gas  storage                                                                    
     facility tax  credit, use  of fund  to pay  the credit;                                                                    
     and  AS  43.20.053(e),  Alaska   Net  Income  Tax  Act,                                                                    
     Qualified   in-state    oil   refinery   infrastructure                                                                    
     expenditures  tax  credit,  use  of  fund  to  pay  the                                                                    
     credit.                                                                                                                    
                                                                                                                                
3:37:57 PM                                                                                                                    
                                                                                                                                
CHAIR GIESSEL directed attention to Section 31 of the Sectional                                                                 
Analysis, which read as follows [original punctuation provided,                                                                 
with some formatting changes]:                                                                                                  
                                                                                                                                
     Section 31 Legislative Working Group                                                                                       
     Adds a new section to uncodified law establishing a                                                                        
     Legislative Working Group to analyze the state's oil                                                                       
     and gas fiscal regime and recommend changes to the                                                                         
     Second Session of the 30th Alaska State Legislature.                                                                       
     Articulates specific points for the working group to                                                                       
     analyze, specifies membership, and provides support by                                                                     
     the legislature's consultants now under contract.                                                                          
     Effective immediately.                                                                                                     
                                                                                                                                
CHAIR GIESSEL said Section 31 reflects a concession made by the                                                                 
Senate to a request made by the House.                                                                                          
                                                                                                                                
CHAIR GIESSEL  brought attention  to the issue  of applicability,                                                               
found in Sections 32 through  34 of the Sectional Analysis, which                                                               
read  as  follows  [original   punctuation  provided,  with  some                                                               
formatting changes]:                                                                                                            
                                                                                                                                
     Section 32 Applicability                                                                                                   
     Credits under AS 43.55.025 may be applied against                                                                          
     corporate income taxes by the company that incurred                                                                        
     the credits, regardless of when the credits were                                                                           
     earned.  Effective immediately.                                                                                            
                                                                                                                                
     Section 33 Applicability                                                                                                   
     Credits may be applied against prior year oil and gas                                                                      
     tax liabilities, regardless of when the credits were                                                                       
     earned.  Effective immediately.                                                                                            
                                                                                                                                
     Section 34 Applicability                                                                                                   
     The new provisions related to lease expenditures apply                                                                     
     to lease expenditures incurred on or after Jan. 1,                                                                         
     2018.  Effective Jan. 1, 2018.                                                                                             
                                                                                                                                
CHAIR  GIESSEL moved  on to  the issues  of transition  language,                                                               
retroactivity, and  conditional affect, addressed in  Sections 35                                                               
through  41 of  the  Sectional Analysis,  which  read as  follows                                                               
[original punctuation provided, with some formatting changes]:                                                                  
                                                                                                                                
     Section 35 Transition language                                                                                             
     Interest   rates  charged   on  delinquent   taxes  for                                                                    
     calendar year 2017 are the  rates in statute before the                                                                    
     changes  in  Sec.  2  take  effect  on  Jan.  1,  2018.                                                                    
     Effective Jan. 1, 2018.                                                                                                    
                                                                                                                                
     Section 36 Transition language                                                                                             
     Ensures  the public  disclosure  of  tax credit  refund                                                                    
     recipients is  made on April  30 of the  year following                                                                    
     the year  in which the Oil  and Gas Tax Credit  Fund is                                                                    
     repealed, as the public disclosure  is also repealed to                                                                    
     conform.  Effective the later  of Jan. 1, 2022, or when                                                                    
     there  are  no   outstanding  applications  for  credit                                                                    
     refunds.                                                                                                                   
                                                                                                                                
     Section 37 Transition language                                                                                             
     Taxpayers who incur a loss  before Jan. 1, 2018, remain                                                                    
     eligible for  the net operating loss  credit in current                                                                    
     statute  that   is  repealed  as   of  Jan.   1,  2018.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section 38 Transition language                                                                                             
     Taxpayers  who incur  a loss  before the  Jan. 1,  2018                                                                    
     repeal of the  net operating loss credit  may apply for                                                                    
     a net operating loss credit.  Effective Jan. 1, 2018.                                                                      
                                                                                                                                
     Section 39 Transition language                                                                                             
     When the Oil and Gas  Tax Credit Fund is repealed after                                                                    
     outstanding  applications have  been paid,  any balance                                                                    
     of the  fund lapses into  the general fund.   Effective                                                                    
     the  later  of Jan.  1,  2022,  or  when there  are  no                                                                    
     outstanding applications for refunds.                                                                                      
                                                                                                                                
     Section 40 Transition language                                                                                             
     Dept. of  Revenue may adopt  regulations retroactively.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section 41 Retroactivity                                                                                                   
     Sections  related to  the  eligibility  of credits  for                                                                    
     cash  refunds   are  retroactive   to  July   1,  2017.                                                                    
     Effective immediately.                                                                                                     
                                                                                                                                
     Section 42  Conditional effect,  notification language.                                                                    
     Effective immediately.                                                                                                     
     Sections related to  the repeal of the Oil  and Gas Tax                                                                    
     Credit Fund take effect only  after the Commissioner of                                                                    
     Revenue  notifies  the  revisors   when  there  are  no                                                                    
     outstanding  applications  for   the  purchase  of  tax                                                                    
     credits, and  it has  been at least  one year  since an                                                                    
     application has been received.  Effective immediately.                                                                     
                                                                                                                                
3:41:08 PM                                                                                                                    
                                                                                                                                
CHAIR GIESSEL highlighted effective dates, as shown in Sections                                                                 
43-46 of the Sectional Analysis, which read as follows [original                                                                
punctuation provided, with some formatting changes]:                                                                            
                                                                                                                                
     Section 43 Effective date                                                                                                  
     Sets an  immediate effective date for  sections related                                                                    
     to the ability to  use Middle Earth exploration credits                                                                    
     against   the  company's   own  corporate   income  tax                                                                    
     liability, and  to use credits  against prior  year tax                                                                    
     liabilities   that  have   not  been   subject  to   an                                                                    
     administrative  proceeding  or  to litigation.    Also,                                                                    
     sets   an  immediate   effective   date  for   sections                                                                    
     retroactively   changing  the   eligibility  for   cash                                                                    
     credits.                                                                                                                   
                                                                                                                                
     Section 44 Effective date                                                                                                  
     Sets a  Jan. 1,  2018, effective  date for  Section 24,                                                                    
     which is  treated separately  because it  makes changes                                                                    
     to  a  section  of  statute that  is  undergoing  other                                                                    
     changes this year based on House Bill 247 of 2016.                                                                         
                                                                                                                                
     Section 45 Effective date                                                                                                  
     Sets an  effective date of  the later of Jan.  1, 2022,                                                                    
     or Jan. 1 of the year  in which notice is provided that                                                                    
     all  outstanding applicants  for credit  purchases have                                                                    
     been  paid, for  the  repeal  of the  Oil  and Gas  Tax                                                                    
     Credit Fund and conforming sections.                                                                                       
                                                                                                                                
     Section 46 Effective date                                                                                                  
     Sets  a  Jan. 1,  2018  effective  date for  all  other                                                                    
     sections.                                                                                                                  
                                                                                                                                
3:41:49 PM                                                                                                                    
                                                                                                                                
CHAIR GIESSEL said  tax policy is complex, which is  why it takes                                                               
so long for  it to be written, and she  emphasized the importance                                                               
of all legislators understanding it.                                                                                            
                                                                                                                                
3:42:11 PM                                                                                                                    
                                                                                                                                
CHAIR  TARR  announced  the  discussion would  now  turn  to  the                                                               
offering  of the  House:   Conference Committee  Substitute (CCS)                                                               
for HB  111, Version 30-LS0450\X, Nauman,  7/10/17 ("Version X").                                                               
She  noted the  following related  publications available  in the                                                               
committee packet:  a Sectional  Analysis, a one-page summary, and                                                               
a page  with three columns,  which compares the House  and Senate                                                               
versions along  with a list  of compromises.  She  indicated that                                                               
the  three-column   page  illustrates   that  very   few  changes                                                               
recommended  by the  House have  been  incorporated, which  means                                                               
significant concessions have  been made by members  of the House,                                                               
including:   not changing the  statutory tax rate to  25 percent;                                                               
not changing the interest rate  to 7 percent; weaker ring fencing                                                               
language; elimination  of new  transparency language;  removal of                                                               
language that ended the per  barrel credit; removal of adjustment                                                               
to GVR; removal of conversation  to the PPV brackets; and removal                                                               
of progressivity at higher prices.                                                                                              
                                                                                                                                
CHAIR TARR directed attention to  the one-page summary of Version                                                               
X and  pointed out  some specific sections.   She  specified that                                                               
Sections 1, 23,  24, 26, 27, 34, and 44,  in Version F, pertained                                                               
to carry-forwards, and  they were incorporated into  Version X in                                                               
Sections  21, 22,  23, 24,  and 25.   She  stated that  the House                                                               
majority considers  [HB 111] a  critical piece of  legislation in                                                               
determining the  state's fiscal plan.   She reviewed  that Alaska                                                               
currently  has a  multibillion dollar  deficit, and  to date  the                                                               
legislature   has   "drained   the   savings   account"   -   the                                                               
Constitutional   Budget  Reserve   (CBR);   therefore,  the   one                                                               
remaining fund  is the  Alaska Permanent Fund.   She  stated that                                                               
every dollar not  earned through a reasonable oil  tax "puts more                                                               
pressure on use of the  [permanent fund dividend] (PFD) for state                                                               
government."                                                                                                                    
                                                                                                                                
3:45:20 PM                                                                                                                    
                                                                                                                                
CHAIR TARR stated  that the agreement [between the  House and the                                                               
Senate] is on  ending cash credits.  She said  Alaska is the only                                                               
place in the world that offers  the cash credits, and the program                                                               
is  not working.   She  related that  the state  has more  than a                                                               
billion-dollar   obligation  in   cash  credits   currently,  and                                                               
Governor Bill  Walker has vetoed  payments of those  cash credits                                                               
over the last  few years, because the state cannot  afford to pay                                                               
them  at this  time; she  indicated that  the state  is, instead,                                                               
paying the  statutory minimum.   She said, "We have  admitted and                                                               
talked about  how this  has been unstable  and bad  for business,                                                               
and that is what has motivated us to correct the system today."                                                                 
                                                                                                                                
CHAIR  TARR noted  the point  of disagreement  is in  determining                                                               
what  will replace  the  cash  credits.   She  said the  Senate's                                                               
Version F would maintain a  status quo system by eliminating cash                                                               
credits  but  allowing  for  carry-forward  losses  at  the  same                                                               
statutory rate currently  allowed.  She said  that is problematic                                                               
for  House  members,  because  the  current  tax  system  has  an                                                               
artificially high statutory tax rate at  35 percent.  She the tax                                                               
calculation  includes   allowing  lease   expenditure  deduction,                                                               
transportation  deduction,  and  the  addition of  a  per  barrel                                                               
credit.  The  effective tax rate currently paid  in Alaska varies                                                               
between 8 and  12 percent; the statutory tax rate  is 35 percent.                                                               
She explained, "What that means  is when they apply their losses,                                                               
they're  applying  them  at  about  20  percent  more  than  they                                                               
actually pay in  taxes."  Chair Tarr said  House majority members                                                               
view   switching  from   one  unaffordable   system  to   another                                                               
problematic.   She opined that  if stability in the  oil industry                                                               
is the goal, then the State  of Alaska must offer incentives that                                                               
it can afford.                                                                                                                  
                                                                                                                                
CHAIR TARR said fiscal notes  that accompanied the versions of HB                                                               
111 that  passed the House and  Senate at the end  of the regular                                                               
session  [of 2017]  show more  than a  $20 million  difference by                                                               
2027,  and   she  questioned  whether  that   is  affordable  and                                                               
sustainable.   Not paying credits  to the industry has  caused "a                                                               
domino effect  in the industry  that has been bad  for business."                                                               
She reiterated that  the idea to use a  carry-forward loss system                                                               
as  a   deduction  on  future  taxes   concerns  [House  majority                                                               
members].  Further, she said  the repetitively changing oil taxes                                                               
every year will also be bad  for business, which she said efforts                                                               
have  been made  to resolve  "that point  of disagreement."   She                                                               
emphasized that that resolution of  disagreement has not yet been                                                               
reached.                                                                                                                        
                                                                                                                                
3:48:35 PM                                                                                                                    
                                                                                                                                
CHAIR TARR reiterated that [the  House majority] does not want to                                                               
put into a  place a program that allows an  additional 20 percent                                                               
to be  earned as  losses, because  it thinks  it is  not fiscally                                                               
responsible  or sustainable.    She  said, "We  also  want to  be                                                               
mindful of how this fits into  the overall need for a fiscal plan                                                               
and try to  figure out how we will  maintain essential services."                                                               
She   said  historically   the  state's   oil  tax   revenue  has                                                               
significantly funded  state services;  however, in  the low-price                                                               
environment that [tax revenue] has  been reduced substantially to                                                               
the point where  it covers a much smaller portion  of the state's                                                               
expenses.   She  said  the  state has  used  savings  to pay  the                                                               
difference over the last few years.   She reiterated that now all                                                               
that is  left is the  permanent fund.   She emphasized  the House                                                               
majority's commitment to maintaining  the permanent fund dividend                                                               
for the  people of Alaska.   She said in  the past oil was  $94 a                                                               
barrel; the low  point was $27 a barrel; and  for the last couple                                                               
years, the  price has  been hovering  around $50  a barrel.   She                                                               
indicated that  the news  announced a few  weeks ago  that Alaska                                                               
hit a nine-month low  and the price was in the  low forties.  She                                                               
said  not having  a tax  system that  works well  in a  low-price                                                               
environment has been motivation to create a sustainable plan.                                                                   
                                                                                                                                
3:50:30 PM                                                                                                                    
                                                                                                                                
CHAIR  TARR   mentioned  a  one-page  summary,   which  she  said                                                               
describes the  point of disagreement.   She said Version  X would                                                               
end cash  credits; however, an  agreement needs to be  reached as                                                               
to what would replace  them.  She said there are  just a few days                                                               
left  in the  Second  Special  Session.   She  said "we"  believe                                                               
putting an  effective date in  place would force  the legislature                                                               
to  continue working  on the  issue.   She stated,  "There is  no                                                               
intention on  the part of  the House  that that program  would be                                                               
eliminated altogether."   The intent is  to set up a  program the                                                               
state can  afford.  She  said she  thinks anyone in  the industry                                                               
would say  that "not being  able to  offer the incentive  is just                                                               
like having  no incentive  at all."   She reiterated  the concern                                                               
that  Alaska could  become  less attractive  to  investors if  it                                                               
continues to address this issue perennially.                                                                                    
                                                                                                                                
CHAIR  TARR pointed  to the  second bullet  point on  the summary                                                               
page.  She said [the House  majority] is concerned about the July                                                               
1  date  proposed by  the  Senate,  because consultants  and  the                                                               
Department  of Revenue  (DOR) have  cautioned  that mid-year  tax                                                               
changes can  be problematic.   She said  [the House  majority] is                                                               
"approaching" the  July 1 recommendation "cautiously."   She said                                                               
DOR  has  suggested  a  way  that this  can  be  accomplished  by                                                               
allowing the  losses to be  calculated for  the year:   the first                                                               
six months of  losses would be eligible for cash  credits and the                                                               
last six months would be carry-forward losses.                                                                                  
                                                                                                                                
CHAIR  TARR  acknowledged  the  work  of  Legislative  Legal  and                                                               
Research Services.                                                                                                              
                                                                                                                                
3:56:49 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN offered his understanding  that contrary to Chair                                                               
Tarr's comment about  the lack of funds in the  CBR, that reserve                                                               
has approximately  $2 billion in  it.  He  said he does  not want                                                               
the public  to think  "the only  thing is  left is  the permanent                                                               
fund and  we've liquidated everything  in sight."  He  said there                                                               
is also a billion dollars in  the fund used for energy relief, as                                                               
well as  "some other  miscellaneous funds  sloshing around."   He                                                               
suggested a clarification be made for the public.                                                                               
                                                                                                                                
3:57:52 PM                                                                                                                    
                                                                                                                                
KEN ALPER,  Director, Tax Division, Department  of Revenue (DOR),                                                               
in  response  to  Senator Stedman's  remarks,  relayed  that  the                                                               
balance of  the CBR  at the  end of  June 2017  was approximately                                                               
$4.5 billion;  the deficit in the  budget that was passed  by the                                                               
legislature  and signed  by the  governor on  June 30,  2017, was                                                               
approximately $2.5  billion, and it will  be paid for out  of the                                                               
CBR; forecasts show  there will be approximately  $2 billion left                                                               
at  the  end  of  the   current  fiscal  year,  next  June  2018,                                                               
"presuming the  price and production  of oil meet  our forecast."                                                               
He emphasized  that the amount  in the CBR  a year from  now will                                                               
not be sufficient  to pass a budget with a  similar size deficit,                                                               
and this creates  an urgency for the legislature to  find a long-                                                               
term solution to the fiscal problem.                                                                                            
                                                                                                                                
3:59:25 PM                                                                                                                    
                                                                                                                                
SENATOR GIESSEL stated that during  the period of January through                                                               
May 2017, $70  million went into the CBR from  royalties and $843                                                               
million went  into "total take."   Of  the total take,  $615 went                                                               
into the  general fund (GF);  $251 went into the  permanent fund;                                                               
and $1.7 million  went into the school fund.   She indicated that                                                               
Version F  reflects the Senate's  focus on  continued production,                                                               
because royalty values  are significant.  She  said $58.3 million                                                               
in the month of May alone in royalties is a huge number.                                                                        
                                                                                                                                
MR.  ALPER explained  how money  gets into  the CBR.   Under  the                                                               
Alaska   State  Constitution,   money   that   results  from   an                                                               
administrative proceeding or  some sort of legal  action, such as                                                               
a lawsuit  or audit -  when the state  gets a settlement  on past                                                               
taxes or past royalty - is put in  the CBR.  He said the original                                                               
billions  of dollars  that went  in to  the CBR  were settlements                                                               
from  large royalty  lawsuits  from the  1970s,  '80s, and  early                                                               
'90s.   He said Senator  Giessel referred to  additional payments                                                               
that came in  from proceedings.  He offered an  example.  He said                                                               
typically the division  forecasts about $100 million  per year of                                                               
new  money  going into  the  CBR.    Because  of a  couple  large                                                               
settlements related  to the Federal Energy  Regulatory Commission                                                               
(FERC), the  amount put in  the CBR in  fiscal year 2017  (FY 17)                                                               
was over $300 million.                                                                                                          
                                                                                                                                
4:03:03 PM                                                                                                                    
                                                                                                                                
SENATOR OLSON  asked Mr. Alper  "what kind of optimism"  he could                                                               
give the public in terms of either Version F or Version X.                                                                      
                                                                                                                                
MR.  ALPER said  he  is  encouraged by  the  points of  agreement                                                               
between the  two versions.  He  said most of the  sections in the                                                               
two  versions are  in accord,  and  the two  bodies have  reached                                                               
compromise  on what  many may  consider "secondary  provisions of                                                               
the bill," such as the ability  to use credits against prior year                                                               
taxes,  the  linkage in  corporate  income  tax of  Middle  Earth                                                               
exploration credits,  and the consensus  on interest rate.   Most                                                               
important, he  indicated, is  that either  version will  move the                                                               
state away  from cash credits.   He said, "That's a  program that                                                               
however  wise  it might  have  been  ten  years ago  and  however                                                               
helpful  it  might have  been,  it's  something Alaskans  can  no                                                               
longer afford; ... therefore, we're leaning away from it."                                                                      
                                                                                                                                
MR. ALPER  said what to  replace that  with and how  to calculate                                                               
values into  the future is  "a manageable point  of disagreement"                                                               
on  which he  believes  the two  bodies should  be  able to  find                                                               
compromise.   He  said,  "Then we  can  get out  of  this era  of                                                               
cashable tax  credits and move  forward with a clear  head, until                                                               
perhaps  taking a  closer  look at  taxes at  some  point in  the                                                               
future, the  way that this  working group envisions."   He stated                                                               
that the  governor supports passage of  HB 111 in some  form that                                                               
would  eliminate  cash  credits,  and  he  reiterated  that  both                                                               
Version X and Version F would  do that.  He encouraged the Senate                                                               
and House  to continue  to talk  to find a  middle ground  on the                                                               
valuation of losses  - "on what some would  call 'cost recovery'"                                                               
-  so  that  the  project  can be  completed  in  2017  and  [the                                                               
legislature can] move on to passing a fiscal plan.                                                                              
                                                                                                                                
MR.  ALPER, in  response  to a  follow-up  question from  Senator                                                               
Olson, said the  only bill in the Second Special  Session call is                                                               
HB 111.  He  said he is here to help  everyone understand what is                                                               
in the different  versions of the bill, but the  House and Senate                                                               
must  finish the  job  of  reaching consensus.    He offered  his                                                               
belief that "we can get this bill  done on Saturday."  He said he                                                               
cannot say what happens after that.                                                                                             
                                                                                                                                
MR. ALPER, in response to a  question from Senator Olson, said he                                                               
thinks  that  in the  absence  of  a formal  carry-forward  lease                                                               
expenditure program and  a formal credit program,  passing the 35                                                               
sections on which  the House and Senate  concur essentially would                                                               
mean passing  the House version.   He indicated this  would cause                                                               
consternation   in  the   industry,   because   it  would   leave                                                               
uncertainty as to  what would happen to  immediate and short-term                                                               
expenditures that are  being made.  He said  he appreciates Chair                                                               
Tarr's  explanation  that  the  idea  is  to  fix  taxes  with  a                                                               
retroactive effective  date - to assign  whatever the appropriate                                                               
value  is  to a  carry-forward  once  the  next bill  is  passed;                                                               
however, he  reiterated that not  knowing what value  will result                                                               
from spending creates uncertainty.                                                                                              
                                                                                                                                
SENATOR  OLSON asked  if he  is correct  that the  administration                                                               
would not be satisfied with 35 out of 40 [agreed upon sections].                                                                
                                                                                                                                
MR.  ALPER answered  that  the ultimate  purpose  of "leaving  it                                                               
blank" was to force everyone back to  the table to pass a bill as                                                               
soon as possible.   He said, "As long as  there's some confidence                                                               
- real  confidence - that we're  going to pass that  bill and not                                                               
leave everyone hanging, I imagine  people shouldn't have to worry                                                               
about it  for too long."   He acknowledged the difficulty  of the                                                               
task.   He  said he  is not  sure "what  the timing  would be  to                                                               
finish that  project," and he  concluded that he is  not prepared                                                               
to [answer  the question] on  behalf of the administration  as to                                                               
whether it would support Version X.                                                                                             
                                                                                                                                
4:09:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON,  regarding the viability of  Version X,                                                               
asked if  the following  scenario would be  "workable":   most of                                                               
Version F adopted; and carry-forward  lease expenses expired at a                                                               
time-certain, but a time adequate  to allow both chambers to work                                                               
on "the  issues that we've  compromised away  that Representative                                                               
Tarr talked about."                                                                                                             
                                                                                                                                
MR.  ALPER  answered that  the  two  versions that  have  already                                                               
passed,  Version Q  in the  House and  Version L  in the  Senate,                                                               
contrasted most in  terms of the valuation ten years  from now of                                                               
carried  forward lease  expenditures.   He said  [Version L]  had                                                               
roughly  $1.4 billion-worth  of accumulated  carry-forward [lease                                                               
expenditures], while  Version Q  had approximately  $600 million,                                                               
which  is a  difference of  about $800  million.   Version X,  he                                                               
said, is  zero, because carry-forwards would  be eliminated under                                                               
that  version.    He  said  Representative  Josephson's  question                                                               
relates to a  loss of value over  time.  He stated  that one main                                                               
reason for the gap  that was in Version Q and  L was that Version                                                               
Q  held a  provision that  carry-forwards left  unused for  seven                                                               
years begin  to lose 10  percent of  their value per  year, which                                                               
has been referred to as a  "downlift" - the opposite of an uplift                                                               
- but  he said he  is not fond  of the  term.  He  concluded, "If                                                               
there  were a  different version  of ...  an erosion  - something                                                               
that was not  quite so onerous, maybe a longer  time horizon or a                                                               
smaller percentage -  and the Senate were amenable  to that, that                                                               
would certainly  go a  long way  toward splitting  the difference                                                               
between the versions of the bill."                                                                                              
                                                                                                                                
REPRESENTATIVE JOSEPHSON  acknowledged that that would  be one of                                                               
area  of  compromise, but  clarified  that  he is  talking  about                                                               
adopting the Senate's  proposed carry-forward lease expenditures,                                                               
but  sun-setting the  expenditures as  a guarantee  to the  House                                                               
that  "some  of the  serious  restructuring  that we  believe  is                                                               
necessary for an  overhaul of the state's fiscal  crisis would be                                                               
taken up in earnest next January."                                                                                              
                                                                                                                                
MR.   ALPER  offered   his   understanding  that   Representative                                                               
Josephson is suggesting the  Senate's structure of carry-forwards                                                               
valued at the  rate of 35 percent until some  point in the future                                                               
when they would  go to zero.   He said he thinks  this plan would                                                               
create  less "immediate"  anxiety  for  those making  investments                                                               
now, and it would certainly  put pressure [on the legislature] to                                                               
"come back and resolve the tax issue."                                                                                          
                                                                                                                                
REPRESENTATIVE JOSEPHSON  clarified that  it is not  the position                                                               
of the  House that  "in perpetuity, there  would be  a zero-value                                                               
assigned  to   carry-forward  lease   expenditures  ...   to  net                                                               
operating losses."                                                                                                              
                                                                                                                                
MR. ALPER said  he thinks the House's position was  made clear in                                                               
the  version that  initially passed  the House:   change  the tax                                                               
rate; change certain credits that  align the carry-forward value;                                                               
and have effective,  nominal tax rates.  He said  if the House is                                                               
not going to  push for those comprehensive changes  now, the goal                                                               
would be to  ensure that conversation happens in the  future.  He                                                               
said,  "My  understanding, from  reading  both  versions of  that                                                               
bill, is that the most important  part is the working group."  He                                                               
indicated  that  a  working  group  means  the  two  bodies  will                                                               
continue the  conversation.  He mentioned  the Legislative Budget                                                               
and  Audit  Committee  bringing  in  consultants  who  will  make                                                               
recommendations.    He opined  that  the  ground  is ripe  for  a                                                               
conversation about  Alaska's fiscal regime,  in terms of  oil and                                                               
gas, next  year, and that  is a two-part  conversation concerning                                                               
fair share and  the issue of raising revenue.   He shared that he                                                               
thinks the  two bodies are  looking for "almost a  verbal, public                                                               
commitment that that conversation is going to happen."                                                                          
                                                                                                                                
CHAIR TARR said  advice from the Division  of Legislative Finance                                                               
is that  the remaining balance of  the CBR cannot be  used to pay                                                               
for next year's budget, because  it is needed for "these cashflow                                                               
purposes."  She said that causes  her to be concerned about where                                                               
the state is today and what its remaining options are.                                                                          
                                                                                                                                
MR.  ALPER said  every  year the  budget  provides language  that                                                               
allows the state  to borrow from the CBR within  a given year for                                                               
cashflow purposes.  This can be done  as a loan that is paid back                                                               
with   interest,   without   the  three-quarter   vote   of   the                                                               
legislature.  He  advised that the people who  manage the state's                                                               
funds believe  at least $2  billion is  needed to meet  any major                                                               
occurrence that might require "a  sudden injection of state money                                                               
to resolve" it.  When the  balance drops below $2 billion, [those                                                               
in  charge   of  the  state's   finances]  are   not  comfortable                                                               
appropriating any  more money  out of  the CBR.   He  added, "And                                                               
that's the number we'll reach at  the end of the new fiscal year,                                                               
11.5 months from now."                                                                                                          
                                                                                                                                
CHAIR  TARR  expressed her  hope  that  hearing that  would  help                                                               
people understand  that although  there are  dollars left  in the                                                               
CBR, they are not available for appropriation at this time.                                                                     
                                                                                                                                
4:18:16 PM                                                                                                                    
                                                                                                                                
CHAIR TARR invited general discussion from committee members.                                                                   
                                                                                                                                
4:18:21 PM                                                                                                                    
                                                                                                                                
SENATOR STEDMAN  said one of  the problems [the  legislature] has                                                               
faced  in changing  from a  gross  tax to  a net  tax is  finding                                                               
stability and predictability for the  oil industry so that it can                                                               
make  forecasts and  have reasonable  expectations on  a rate  of                                                               
return.   He said when  the legislature adopted the  system known                                                               
as  Alaska's Clear  and  Equitable Share  (ACES)  [passed in  the                                                               
Twenty-Fifth  Alaska State  Legislature],  the  industry was  not                                                               
able to  comfortably forecast probability outcomes  and felt ACES                                                               
put Alaska  at a  disadvantage in the  board room  when competing                                                               
for  capital.   He said  the  elimination of  losses proposed  in                                                               
Version X  reminds him of  where the state  has been in  terms of                                                               
the unpredictable  nature of outcomes  for both the  industry and                                                               
the  state.   He said  there  are no  cashable credits  in a  net                                                               
system -  those are  normally done on  capital expenditures.   He                                                               
stated the number one goal of  "most of us" today is to eliminate                                                               
cashable  credits, because  they  don't work  as  perceived.   He                                                               
said, "There has been some substantial  new oil found ... and gas                                                               
in Cook Inlet  that could be targeted for some  of these credits,                                                               
so it wasn't all lost money  out the door, but clearly they don't                                                               
work in  the long run in  the industry and they're  not using ...                                                               
[cashable  credits]  worldwide for  that  very  ... [reason],  so                                                               
we're looking at getting rid of them."                                                                                          
                                                                                                                                
SENATOR STEDMAN stated that with  the net system, there is always                                                               
the ability  to deduct expenditures.   Not having the  ability to                                                               
carry  forward  substantially  alters  the  rate  of  return  and                                                               
"time/value/money profiles  that the industry's  expecting today"                                                               
on its past  expenditures and development, as well  as its future                                                               
development.   He cautioned  that telling  the industry  that the                                                               
legislature   will  come   up  with   a  proposed   solution  and                                                               
legislation in the future will lead  to a lot of uncertainty.  He                                                               
remarked on  the predictability  of "the unpredictability  of the                                                               
legislature."  He opined that going  down this path would lead to                                                               
a substantial, negative impact in the  oil basin, in terms of the                                                               
industry moving forward with additional projects.                                                                               
                                                                                                                                
SENATOR STEDMAN said he thinks the  issue of "35 percent base tax                                                               
with a  per barrel  slider" is  one that  needs to  be addressed,                                                               
with feedback from the three  consultants that have been hired to                                                               
find solutions  to "the mathematical irregularities  that persist                                                               
in our  system with this 35  percent base tax and  the per barrel                                                               
slider."   He said he  does not feel  that having the  35 percent                                                               
base tax  in place  will preclude  the legislature  from allowing                                                               
the net  carry-forward of  losses.   He said  some of  the losses                                                               
will not be taken for a decade.   He explained that one must have                                                               
revenue to  "use your loss," and  to do that, one  must have oil.                                                               
He mentioned  Smith Bay as one  example of where there  have been                                                               
billions of  dollars in expenditures,  and he said  that "they're                                                               
not going to  have production to take  those expenditures against                                                               
for  some  time."    He  said some  other  companies  will.    He                                                               
indicated that this is apparent when  looking at "a full cycle of                                                               
accounting  on  our profitability,  both  to  the state  and  the                                                               
industry."                                                                                                                      
                                                                                                                                
SENATOR  STEDMAN  warned  that  removing the  ability  to  deduct                                                               
expenditure losses and telling the  industry that the legislature                                                               
will fix  that in the future  would be disastrous and  would lead                                                               
to "a  substantial slowdown" greater  than any seen in  the past.                                                               
He said  a projected $54 per  barrel on oil would  result in only                                                               
$1.5 billion in  profit oil; at $45 per barrel  there would be no                                                               
profits.   He said, "So, nobody's  cutting a fat hog  in the butt                                                               
right  now at  these  prices, and  we're not  in  the net  system                                                               
currently  - we're  in gross  tax,  minimum floor,  until we  get                                                               
somewhere close  to $70 a  barrel."  He  said that leads  to some                                                               
complexity, but it also buys some time to sort out the issue.                                                                   
                                                                                                                                
SENATOR STEDMAN  expressed uncertainty that Version  X would have                                                               
the  support of  two-thirds of  House members  for a  proposal he                                                               
described  as  "throwing  the  industry   into  the  freezer  and                                                               
shutting the  door on  them."   He said  the discussion  is about                                                               
something that is "economically alarming,"  and he opined that it                                                               
is not productive  to "ring a fire alarm of  this magnitude" on a                                                               
bill with  "little chance  of getting  the votes."   He  said the                                                               
legislature needs  to end cashable  credits but allow them  to be                                                               
carry-forward.   He  posited  that  there is  no  need  to do  an                                                               
uplift, "downlift,"  or even "time  them out."  He  mentioned the                                                               
consultants and  the intertwining relationship of  this issue and                                                               
other factors related  to the state's tax code, and  he said that                                                               
"it's  very significant  to the  rate of  return and  net present                                                               
value  of these  projects."   He  talked about  working with  the                                                               
industry  and  the  public  to  devise a  fair  handling  of  net                                                               
operating losses, but offered  his understanding that eliminating                                                               
them is  done nowhere  in the  world.  He  opined that  Version X                                                               
would freeze  out the  industry and  effective large  oil fields,                                                               
and he  recommended taking Version X  "with a grain of  salt" and                                                               
putting it "in the shredder."                                                                                                   
                                                                                                                                
4:29:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TALERICO  expressed  appreciation  for  the  work                                                               
Chair Giessel  and Chair Tarr have  done, and he noted  there are                                                               
quite a few points of agreement  in both Version F and Version X.                                                               
He said  he finds the  full elimination  of a net  operating loss                                                               
system  to  be   an  impossible  hurdle.    He   noted  that  the                                                               
consultant, Castle  Gap Advisors,  had presented findings  to the                                                               
legislature  in  February  2017 and  recommended  a  more  global                                                               
perspective on  the oil industry.   Representative  Talerico said                                                               
the  market is  competitive.   He indicated  that the  consultant                                                               
advised that the state have  a system under which operators could                                                               
recover  all their  costs, where  net operating  losses could  be                                                               
carried forward  and be  recovered from  production-based income.                                                               
He said  the point is  that every  other basic tax  system allows                                                               
for that.  He emphasized that  such a system "keeps us active and                                                               
flowing."                                                                                                                       
                                                                                                                                
REPRESENTATIVE TALERICO offered his  understanding that Version F                                                               
would allow those  carry forwards and provide the  ability to get                                                               
to production level  and recover those costs.  He  said he thinks                                                               
that is what  the consultant recommended.  He said  there must be                                                               
upstream investment to have downstream  volume.  He stated, "If I                                                               
was  an investor,  it  may  not necessarily  terrify  me, but  to                                                               
remove this and  have it potentially not ever  be a consideration                                                               
again removes  us from the game  in my opinion."   He said Alaska                                                               
is   an   oil-based   economy,   and   even   when   working   on                                                               
diversification, the state will rely a lot on its oil economy.                                                                  
                                                                                                                                
4:32:44 PM                                                                                                                    
                                                                                                                                
CHAIR GIESSEL opined that if  the legislature's focus had been on                                                               
repealing  cash payments  to oil  companies, then  it could  have                                                               
resolved this issue back in April  2017.  She said the discussion                                                               
has  continued.    She  mentioned  the  cost  of  having  special                                                               
sessions and said, "These absolutely  were not needed."  She said                                                               
the Senate,  House, governor, and  the public all agree  that the                                                               
cash payments  to oil companies  need to  be repealed.   She said                                                               
more than  half of the  Senators are lifelong Alaskans,  who were                                                               
here in  1986 and know what  "the downturns" can feel  like.  She                                                               
expressed fear that  the proposals in Version  X would accelerate                                                               
the  decline of  the state's  gross domestic  product, which  the                                                               
Department of Labor just reported  has gone down four consecutive                                                               
years - an unprecedented length of  time.  She said the repeal of                                                               
the ability to  use losses, as is provided in  the federal income                                                               
tax code,  would have  an egregious effect  on the  state's major                                                               
industry and, by association, on  families, businesses, and jobs.                                                               
She stated  her belief that  the state has  experienced attrition                                                               
because of  this [economic]  decline.  She  said, "Our  vision is                                                               
for our children and our grandchildren  in this state, and we are                                                               
trying ...  to reign in  the spending on  the cash payments.   We                                                               
all agree  to do  this and  we're dragging this  out."   She said                                                               
[the legislature] is wrestling over  the rewrite of a tax policy,                                                               
on which  it has not yet  heard a complete presentation  from its                                                               
consultants.   She  emphasized that  the issues  being considered                                                               
are complex,  and the legislature has  not had a full  vetting of                                                               
them.                                                                                                                           
                                                                                                                                
CHAIR  GIESSEL said  DOR  put out  a white  paper  in June  2017,                                                               
entitled "Valuing  Carried Forward Lease Expenditures  Versus Oil                                                               
and Gas  Credits."   The content  of the  white paper  points out                                                               
that  the  losses are  something  companies  will have  to  carry                                                               
forward until  there is  production; it never  comes out  of [the                                                               
state's]  treasury;  "they  have  to deduct  it  from  their  tax                                                               
payment  when they  have production."   So,  the loss  deductions                                                               
require production.  Further, she  said when there is production,                                                               
the state will be getting  royalties, corporate income taxes, and                                                               
property taxes.  She stated,  "Carrying these forward is actually                                                               
not as devastating as the House is trying to portray it."                                                                       
                                                                                                                                
CHAIR GIESSEL  pointed out that  the value  of a dollar  today is                                                               
not the  same as  the value  of a  dollar going  forward, because                                                               
inflation  erodes the  value.   The value  of the  deductions, by                                                               
carrying them  forward 7-10 years,  goes down  significantly, but                                                               
it does not go down for  the state.  She explained, "By retaining                                                               
... this money  that we're paying out right now  in cash payments                                                               
- this money can be invested."   She said the state has financial                                                               
investments  currently that  are making  7 percent  return.   She                                                               
said the  carry forward  losses are being  portrayed as  a credit                                                               
that someone would  get today, but they are not  at all the same;                                                               
they are significantly less lucrative.                                                                                          
                                                                                                                                
CHAIR  GIESSEL told  Chair Tarr  that the  Senate members  of the                                                               
Conference  Committee on  HB  111 continue  to  be interested  in                                                               
compromise and in  agreeing with the House to  end cash payments.                                                               
She noted that the House had  recessed until Friday, and she said                                                               
no action  can be  taken by  the Conference  Committee on  HB 111                                                               
until  the House  has convened,  passed a  concurrent resolution,                                                               
and  legitimized its  conference  committee.   She expressed  her                                                               
willingness to continue to discuss  the differences of the Senate                                                               
and House versions with Chair Tarr.                                                                                             
                                                                                                                                
4:39:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON  said  he thinks  fundamentally  "we're                                                               
here because  we lack  a fiscal  plan."   He emphasized  that the                                                               
state has financial problems but  great resources on which it can                                                               
rely now.   He expressed the  possibility of figuring out  a good                                                               
fiscal  plan as  being like  putting  chess pieces  in the  right                                                               
places.  He expressed concern  that without further discussion on                                                               
the proper  rate for  carry-forward lease  expenditures in  a way                                                               
that puts pressure  on both bodies to act, "the  other body would                                                               
not  act."   He said  [the Senate]  "refused to  take up  any new                                                               
revenue."   He said  the House  had a hearing  on a  Senate bill,                                                               
which  he  indicated  would  "happen  in  2018."    He  said  tax                                                               
directors  noted that  although there  may be  $2 billion  in the                                                               
CBR, the  state cannot spend  that money.   He agreed  with Chair                                                               
Tarr that a  solution needs to be found as  soon as possible, and                                                               
he said the House prepared that solution.                                                                                       
                                                                                                                                
REPRESENTATIVE JOSEPHSON  said he speaks candidly  about his view                                                               
of "the other body's willingness  to look at revenue," because of                                                               
comments made such  as [Senator Stedman's] remark  that Version X                                                               
should be put  in the shredder.  He explained,  "Candor should be                                                               
met with  further candor."   He  said, "I  would note  that there                                                               
were a  number of laborers  here; they  rely on a  robust capital                                                               
budget."   He  mentioned an  amount of  $130 million  having been                                                               
spent on the capital budget.   He emphasized the need for balance                                                               
and the request of his caucus  for fairness.  He said [the House]                                                               
is willing  to postpone the discussion  on reform of the  oil tax                                                               
structure to  2018 and  to compromise  - for  now.   He expressed                                                               
concern that  the Senate's unwillingness to  discuss "the revenue                                                               
question"  will continue  on  "with  a look  at  the overall  tax                                                               
structure."                                                                                                                     
                                                                                                                                
REPRESENTATIVE  JOSEPHSON said  he thinks  the House  understands                                                               
that as a general rule, "the  100 percent of expenses are what is                                                               
customary,"  but the  question is  the  rate at  which the  state                                                               
would contribute to  those expenses.  He said the  House wants to                                                               
resolve cash credits.   Regarding the comment  [by Chair Giessel]                                                               
that this  could have been  done in  April, he remarked  that the                                                               
House had  a desire to  end cash credits in  2016.  He  said, "My                                                               
colleagues  at the  time were  most eager,  and we  only finished                                                               
half the job last year."   He said he understands that ultimately                                                               
the net  operating losses would have  to take some other  form as                                                               
part of a profits-based system,  and not having that could create                                                               
anxiety.   He  remarked on  the  time taken  by the  legislature,                                                               
saying, "We're  the people that  shop for Christmas  on Christmas                                                               
Eve."  He said he thinks  a deadline by which serious discussions                                                               
must  take  place by  both  bodies  would  make  it happen.    He                                                               
expressed his wish  that "something can bear fruit  over the next                                                               
couple days," and he expressed  appreciation for the hard word of                                                               
Chair Giessel and Chair Tarr.                                                                                                   
                                                                                                                                
4:44:07 PM                                                                                                                    
                                                                                                                                
SENATOR  OLSON applauded  the efforts  by  all parties  involved,                                                               
especially Chairs  Tarr and  Giessel, in  trying to  resolve this                                                               
issue.  He said there certainly  is a lot of distance between the                                                               
two bodies, but  the people sent legislators to Juneau  to do the                                                               
work.  He encouraged a  compromise that will end the hemorrhaging                                                               
of the state and, even though  many people will not be happy with                                                               
the outcome,  will offer some financial  stability throughout the                                                               
state.                                                                                                                          
                                                                                                                                
4:45:03 PM                                                                                                                    
                                                                                                                                
CHAIR TARR summarized  that both bodies agree on the  need to end                                                               
cash credits.   The Senate  offered a measure wherein  any unpaid                                                               
credits could  be used  against other  liabilities to  the state,                                                               
which would recuse  the liability in a shorter  duration of time,                                                               
which she  said is  a move  in the right  direction.   She echoed                                                               
Representative Josephson that  there is no intention  on the part                                                               
of the House to  not allow for recovery of losses.   The point of                                                               
disagreement, she reviewed, is "how  generous that will be."  She                                                               
said,  "Our  concern  is  if  it's too  generous,  it  leaves  us                                                               
vulnerable to pressure for continued  changes, which will lead to                                                               
continued instability  in the  industry, which  could be  bad for                                                               
jobs  and the  economy."   She  indicated that  the House  stated                                                               
early on that  its goal was to  create a system that  could be in                                                               
place  for five  to  seven  years, which  may  seem difficult  to                                                               
accomplish.   She  pointed  out that  the  Economic Limit  Factor                                                               
(ELF) formula [passed  in the Tenth Alaska  State Legislature and                                                               
modified in 2005] was in place  for decades, and it has only been                                                               
in  the recent  past that  the legislature  has been  continually                                                               
changing the tax regime.   She opined that the legislature should                                                               
be  committed to  a path  that will  resolve these  issues for  a                                                               
period of  time that would allow  a focus on other  major issues,                                                               
such as education and health care.                                                                                              
                                                                                                                                
CHAIR TARR  said while she  does not want  to get involved  in "a                                                               
blame  game,"  there  were instances  where  "people  sent  their                                                               
members home," which made it  more difficult to address business.                                                               
She  acknowledged  the time  it  takes  to bring  60  individuals                                                               
together with diverse points of  view and work through processes.                                                               
In that  regard, she said  she thinks the entire  legislature has                                                               
been working hard.                                                                                                              
                                                                                                                                
CHAIR TARR stated  that the deduction is not a  cash payment, but                                                               
it is a loss  of revenue to the state that  would otherwise go to                                                               
state  services.    She  said,  "The  question  for  us,  without                                                               
resolving this  issue, is:   What would  a fiscal plan  look like                                                               
going forward and where will the  revenue come from?"  She talked                                                               
about  receiving multiple  resolutions for  the last  three years                                                               
from businesses,  nonprofits, and local governments  pleading the                                                               
legislature to come up with a  fiscal plan.  She talked about the                                                               
importance  of the  industry to  the state  and need  to craft  a                                                               
system with  more predictability.   She said when Senate  Bill 21                                                               
[passed  in  the  Twenty-Eighth  Alaska  State  Legislature]  was                                                               
passed,  the  legislature  did not  contemplate  $27  per  barrel                                                               
prices and the new normal  being a low-price environment, because                                                               
$60 per barrel seemed like a low price at that time.                                                                            
                                                                                                                                
4:49:24 PM                                                                                                                    
                                                                                                                                
CHAIR  TARR said  while it  is  true that  inflation affects  the                                                               
price  of a  dollar into  the future,  it is  also true  that "we                                                               
don't  depreciate those  assets."   She said  100 percent  of the                                                               
cost of a  capital expenditure can be recovered at  the time that                                                               
the losses  are applied.   Conversely,  equipment sold  cannot be                                                               
sold at  the same  price at  which it was  purchased on  day one.                                                               
She said  the state does  receive royalties, but  people consider                                                               
that in  different ways  - some  as government  take and  some as                                                               
"the part that Alaskans own and get  a royalty for."  She said it                                                               
is true  that Alaska receives corporate  income tax, but it  is a                                                               
much-reduced dollar amount relative to  what the severance tax or                                                               
petroleum  production tax  has been  over  the years.   She  said                                                               
property tax  largely goes  to local  communities.   Regarding an                                                               
overall fiscal plan for state  government and the source of those                                                               
state dollars,  she stated, "We  think that the revenue  from our                                                               
petroleum tax will remain a key component of that."                                                                             
                                                                                                                                
CHAIR  TARR echoed  Chair Giessel's  remarks about  continuing to                                                               
work toward a resolution.  She  said she remains optimistic.  She                                                               
thanked  those in  attendance.   She reemphasized  the hard  work                                                               
that is  being done by  the legislature throughout the  year, and                                                               
she said she wants the public to  know that work is done not just                                                               
during the  meeting process.   She encouraged any members  of the                                                               
public interested in the issue to visit her office.                                                                             
                                                                                                                                
4:53:39 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There  being  no  further  business  before  the  committee,  the                                                               
Conference Committee on HB 111 was adjourned at 4:54 p.m.                                                                       

Document Name Date/Time Subjects
CCSHB111 Work Draft Version X 7.10.17.pdf JHB111 7/12/2017 3:00:00 PM
HB 111
CCSHB111 Work Draft Ver F.pdf JHB111 7/12/2017 3:00:00 PM
HB 111
CCSHB 111 Work Draft Ver. X, Summary 7.11.2017.pdf JHB111 7/12/2017 3:00:00 PM
HB 111
CCSHB 111 Work Draft Version X, Sectional Analysis.pdf JHB111 7/12/2017 3:00:00 PM
HB 111
HB 111 Version F Sectional Summary .pdf JHB111 7/12/2017 3:00:00 PM
HB 111
HB 111 Version F Sectional Summary .pdf JHB111 7/12/2017 3:00:00 PM
HB 111