Legislature(2019 - 2020)SENATE FINANCE 532


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Audio Topic
09:00:18 AM Start
10:52:51 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Teleconference <Listen Only> --
+ Oil & Gas Initiative Hearing per AS 24.05.186 TELECONFERENCED
- Cori Mills, Department of Law
- Megan Wallace & Emily Nauman, Legislative Legal
- Department of Revenue
**Streamed live on AKL.tv**
                      ALASKA STATE LEGISLATURE                                                                                
                        LEGISLATIVE COUNCIL                                                                                   
                         FEBRUARY 25, 2020                                                                                    
                              9:00 AM                                                                                         
   MEMBERS PRESENT                                                                                                            
   Senator Gary Stevens, Chair                                                                                                
   Representative Louise Stutes, Vice Chair                                                                                   
   Senator Tom Begich                                                                                                         
   Senator John Coghill                                                                                                       
   Senator Cathy Giessel                                                                                                      
   Senator Lyman Hoffman                                                                                                      
   Senator Bert Stedman                                                                                                       
   Senator Natasha von Imhof                                                                                                  
   Representative Bryce Edgmon                                                                                                
   Representative Neal Foster                                                                                                 
   Representative DeLena Johnson                                                                                              
   Representative Jennifer Johnston                                                                                           
   Representative Steve Thompson                                                                                              
   MEMBERS ABSENT                                                                                                             
   Representative Chuck Kopp                                                                                                  
   OTHER MEMBERS PRESENT                                                                                                      
   Senators Bishop, Kiehl, Olson, Wielechowski, Representative                                                                
   Call to Order                                                                                                              
   Oil & Gas Initiative Hearing per AS 24.05.186                                                                              
   SPEAKER REGISTER                                                                                                           
   Cori Mills, Attorney, Department of Law                                                                                    
   Megan Wallace, Director, Legal Services, Legislative Affairs Agency                                                        
   Emily Nauman, Deputy Director, Legal Services, Legislative Affairs                                                         
   Mike Barnhill, Deputy Commissioner, Department of Revenue                                                                  
   Colleen Glover, Tax Division Director, Department of Revenue                                                               
  9:00:18 AM                                                                                                                
I.   CALL TO ORDER                                                                                                          
           CHAIR STEVENS:  called the Legislative Council meeting                                                             
     to  order at  9:00am in  the State  Capitol's Senate  Finance                                                            
     Committee  Room. We have Statute 24.05.186 that requires  the                                                            
     Legislature  to hold  a hearing on  any proposed initiative,                                                             
     and  that's the  purpose of  this meeting  today, to  satisfy                                                            
     that requirement.                                                                                                        
           Several individuals have been asked to present at this                                                             
     meeting:   Department   of  Law,   Department   of   Revenue,                                                            
     Legislative  Counsel.   From Department  of Law,  it will  be                                                            
     Cori  Mills;  from  Legislative  Counsel, it  will  be  Megan                                                            
     Wallace,  Emily Nauman;  and also Department  of Revenue  may                                                            
     be joining us with Colleen Glover and Mike Barnhill.                                                                     
           CHAIR STEVENS requested a roll call vote. Present at                                                               
     the  call were: Senators  Begich, Coghill, Giessel,  Hoffman,                                                            
     Stedman,   Stevens,   von  Imhof;   Representatives   Edgmon,                                                            
     Foster,  Johnson, Johnston, Thompson, Stutes. Representative                                                             
     Kopp was absent. 13 members present.                                                                                     
           CHAIR STEVENS:  We have a quorum to conduct business.                                                              
     Thank  you all  for  being here.   Let's  go ahead  with  our                                                            
     hearing  today.  We'll begin  with Cori Mills, Department  of                                                            
     Law.   Cori,  if you'd  come forward.   Thank  you for  being                                                            
     with  us.   She'll start  the discussion,  and we  appreciate                                                            
     your presentation.   If you'd give your name for the  record,                                                            
II. OIL & GAS INITIATIVE HEARING                                                                                            
           MS. MILLS:  Yes.  Good morning, everyone.  Cori Mills,                                                             
     Assistant Attorney General from the Department of Law.                                                                   
        And just to start off, a few ground rules, I guess,                                                                   
     from  our  perspective.    I  have  been  asked  to  go  over                                                            
     process,  what  the initiative  process  entails,  especially                                                            
     from  this  point forward  for  this  particular initiative,                                                             
     19OGTX, as identified by the Division of Elections.                                                                      
        I won't be doing the substantive discussion of the                                                                    
     initiative,   and   that's,  in   part,  because   we're   in                                                            
     litigation  and, in part, because  the executive branch  does                                                            
     have    some   restrictions   on   discussing   initiatives.                                                             
     Legislative  Legal will be giving  that presentation.  So  if                                                            
     you have  any of those questions, I would refer you  to them.                                                            
     We do have an --                                                                                                         
       CHAIR STEVENS:  Sorry, but before we start, if there                                                                   
     are  any questions that come up  along the way, please  raise                                                            
     your hand,  and I'll try and make sure you're allowed  to ask                                                            
     those questions.  Cori, please go ahead.                                                                                 
          MS. MILLS:  Yes.  But we do put out an attorney                                                                     
     general opinion  on every initiative that is on our  website.                                                            
     I also have a copy if anybody wants it.                                                                                  
        The one thing I would note, just because I get this                                                                   
     question  quite  often,   is  when  we  do  a  review  of  an                                                            
     initiative,    it's   pre-enactment.      And   similar    to                                                            
     legislation,   the   courts   don't   look   at  legislation                                                             
     pre-enactment  and really determine its constitutionality  or                                                            
     legal  issues.  It waits until  enactment.  It does the  same                                                            
     thing  with  initiatives with  some  exceptions.   There  are                                                            
     some  restricted  subjects  that  initiatives   can't  cover.                                                            
     Those   are --  in  the   Constitution  appropriations,   for                                                            
     example, is one of those.                                                                                                
      And then the other thing that the court has said is if                                                                  
     an  initiative  is clearly  unconstitutional  under  existing                                                            
     authority.    So we  look  is there  a  prior case  that  has                                                            
     already  had this exact subject  on this and the exact  means                                                            
     used  has already been deemed  unconstitutional?  That's  the                                                            
     other   circumstance   in  which   we  will   recommend   not                                                            
     certifying an initiative.                                                                                                
           In the case of 19OGTX, the oil and gas initiative, we                                                              
     did  not find that any  of those exceptions  were met, so  we                                                            
     recommended  certification.   And  it  was certified  by  the                                                            
     lieutenant governor, and the petition has been circulated.                                                               
           Now I'm going to kind of go from where we're at in the                                                             
     initiative  process now.  And I  did provide an outline  that                                                            
     I hope all of you have.                                                                                                  
           So petition certification.  The petition was certified                                                             
     back  in October,  and they  gathered signatures  and  turned                                                            
     those signatures  in on January 17th.  So at this point,  the                                                            
     Division  of Elections  and the lieutenant  governor have  60                                                            
     days  to review those signatures  and determine whether  they                                                            
     meet the qualifications in the Constitution.                                                                             
           And the -- I provided the constitutional language, but                                                             
     the language  and short of it  is you have to have  qualified                                                            
     voters  equal to 10 percent in  terms of the signatures,  and                                                            
     then  you have to  have residents  in at least  30 of the  40                                                            
     districts,  House districts represented, and on top of  that,                                                            
     you have  to have 7 percent from each of those 30  districts.                                                            
     So   you   have   an   overall   10 percent --   that's   the                                                            
     28,000-around-500  requirement we have right now -- and  then                                                            
     you have to have 7 percent from each of the 30 districts.                                                                
           So there are -- you have to look at both of those                                                                  
     requirements  when you're looking at whether they've met  the                                                            
     qualifications.   So,  like I said,  the total  this year  is                                                            
     28,501  to meet that minimum  10 percent requirement.  So  if                                                            
     the  petition is certified,  it has  enough signatures,  then                                                            
     the  lieutenant governor notifies  the sponsors and  prepares                                                            
     a ballot  proposition.  And at that point the whole  Division                                                            
     of  Elections  machine  starts working  on  translating  that                                                            
     ballot  into the different languages  it has and making  sure                                                            
     we have a  ballot summary and all of that.  So, like  I said,                                                            
     it  will be  March 17th.   We'll know  by March 17th  whether                                                            
     the petition is certified or whether it's not certified.                                                                 
         And then some people ask about the ballot measure                                                                    
     number  as well.  You know,  will we know the ballot  measure                                                            
     number?     That   doesn't  happen   until  the  Legislature                                                             
     adjourns,  and  that's  partly because  of  the  next  issue,                                                            
     which  is that the  Legislature can void  a petition  through                                                            
     enactment  of  substantially  the same  measure,  and  that's                                                            
     Article XI, Section 4.                                                                                                   
         And this determination is made by the lieutenant                                                                     
     governor.   There's  a statute  that kind  of delegates  this                                                            
     decision  to the lieutenant governor with the concurrence  of                                                            
     the  attorney general.   It's one of  the few statutes  where                                                            
     the attorney general is directly mentioned.                                                                              
          And so what the Department of Law does, if the                                                                      
     Legislature  enacts  something that  may  look substantially                                                             
     similar,  is  we  engage  in  an  attorney  general  opinion,                                                            
     similar  to when the  initiative first  came forward, but  we                                                            
     look at  the enacted law that the Legislature passed,  and we                                                            
     look  at the  initiative  and we  compare them  to  determine                                                            
     whether  we believe  they're substantially similar.   And  we                                                            
     advise  the lieutenant governor on  that, and that becomes  a                                                            
     formal attorney general opinion.                                                                                         
       Like I said, the timing occurs after enactment, so we                                                                  
     don't predetermine.   We don't look at different versions  of                                                            
     a  bill.  We wait  until the governor  has either signed  the                                                            
     bill or it has become law without signature.                                                                             
      CHAIR STEVENS:  Ms. Mills, before you go on, would you                                                                  
     explain  the issue of -- on March  17th is the date at  which                                                            
     it's  certified.   And  we've  been getting  reports  of  the                                                            
     numbers  of signatures, and it's  a little confusing  because                                                            
     it  says we're not --  they're not there,  but the truth  is,                                                            
     we're  only looking  at  a point  in time.   Could  you  just                                                            
     bring us up to date on how that operates?                                                                                
           MS. MILLS:  Yes.  And so the Division of Elections is                                                              
     very  kind of open  and public  with their process.   And  so                                                            
     every  day  they  post  the  updated  numbers  for  how  many                                                            
     signatures  they've reviewed and how many have qualified  and                                                            
     in how many districts, and it's a one-page report.                                                                       
           I believe in this case -- I can't remember the exact                                                               
     number -- but  over 40,000 signatures were turned in.   And I                                                            
     looked at  the report this morning, and I believe the  review                                                            
     has  occurred on 27,000  of those.   So you're still  looking                                                            
     at  about 13,000-plus  that haven't even  been reviewed  yet.                                                            
     So when you  look at that report online, it is not the  final                                                            
     until  we get  to March 17th and  you see  the total  numbers                                                            
     and you have certification.                                                                                              
           CHAIR STEVENS:  So 13,000 have not been verified --                                                                
           MS. MILLS:  Yes, 13,000.                                                                                           
           CHAIR STEVENS:  And just a moment, please.  Mr.                                                                    
           SPEAKER EDGMON:  Yes.  Good morning, Cori.  So on the                                                              
     question  of substantially  similar,  the Department  of  Law                                                            
     couldn't opine  on that -- I think you've been very  clear --                                                            
     until  after  March 17th.    How   long  would  it  take  the                                                            
     department  to  conduct  their  review?    And  I  guess  the                                                            
     context is,  if the Legislature were to engage in  attempting                                                            
     to pass  a bill that was substantially similar, can you  give                                                            
     me some sort of context, some sense of timing here?                                                                      
           MS. MILLS:  Yes.  I'm happy to do that, through the                                                                
     Chair.   It's --  we don't do  it until  enactment, but  that                                                            
     doesn't  mean we're  not  looking at  it.   I mean,  I'll  be                                                            
     honest there, right?  We watch the process.                                                                              
      Once enactment happens, we try to get that opinion out                                                                  
     quickly.   You know,  with initiatives on  the front end,  we                                                            
     have 60  days.  But in this  case, we realize an election  is                                                            
     coming  up.   I believe  the last  one,  if you  look at  the                                                            
     timing --  and the last one  I'm aware of  is HB 44 that  was                                                            
     passed on  the legislative ethics, and that initiative,  that                                                            
     occurred  in a week.   So the opinion  came out a week  after                                                            
         I would imagine -- I can't promise we'd act that                                                                     
     quickly, but  we would do it in a very timely manner to  make                                                            
     sure everyone  knows what is going on the ballot and  what is                                                            
           CHAIR STEVENS:  Thank you, Mr. Speaker.                                                                            
           SPEAKER EDGMON:  Thank you.                                                                                        
           CHAIR STEVENS:  Senator Begich.                                                                                    
       SENATOR BEGICH:  Thank you.  Cori, just following up                                                                   
     on  that, if I  might.   When that review  is conducted,  who                                                            
     would be conducting that review?                                                                                         
       MS. MILLS:  So, through the Chair, Senator Begich, as                                                                  
     the elections  attorney, I would definitely be involved,  but                                                            
     I  will  say that  attorney  general opinions  go  through  a                                                            
     pretty  thorough vetting with  kind of  a team approach,  and                                                            
     ultimately  the attorney  general  does the  final review  of                                                            
           SENATOR BEGICH:  Brief follow-up?                                                                                  
           CHAIR STEVENS:  Please continue, Senator Begich.                                                                   
       SENATOR BEGICH:  Thank you, Mr. Chairman.  And would                                                                   
     you  use outside  counsel as well  in that  review, or  would                                                            
     that be strictly internal?                                                                                               
        MS. MILLS:  Through the Chair, Senator Begich, it's                                                                   
     normally  internal.  You know, circumstances would depend  on                                                            
     whether  we'd use outside  counsel.  I don't  want to say  we                                                            
     absolutely  never do, but  most of that  is done internally.                                                             
     And part  of that is just the swiftness with which it  has to                                                            
     occur  and  the  statute  requires  the  attorney   general's                                                            
     concurrence, so the attorney general has to be involved.                                                                 
           CHAIR STEVENS:  Thank you.  Mr. Speaker, comment?                                                                  
           SPEAKER EDGMON:  Yes.  Not to belabor this point, and                                                              
     thank  you  for taking  the  questions.   But  the  issue  of                                                            
     substantially  similar,   as  best  as  I  know  today  as  a                                                            
     layperson  as it applies to  this particular issue, seems  to                                                            
     be a fairly  wide-open question, if I could put it that  way.                                                            
     I  mean, the  review that's going  to take  place, you  know,                                                            
     is -- I  mean, I think you've got plenty of discretion,  or I                                                            
     guess  maybe  if  I  were  to put  this  in  the  form  of  a                                                            
     question,  would any proceedings in the Legislature  relative                                                            
     to  hearings  on  this  issue  affect  your --  the  possible                                                            
     outcome of the department's opinion?                                                                                     
           MS. MILLS:  Through the Chair, Speaker Edgmon, what                                                                
     I'd  like  to do  is actually  go  over the  standard  really                                                            
     quickly.   I  think that gives  a good  foundation, and  then                                                            
     I'll  address  your  question  during  that  discussion,   if                                                            
     that's okay.                                                                                                             
           SPEAKER EDGMON:  Thank you.                                                                                        
           CHAIR STEVENS:  That's fine.  Okay.  Thank you so                                                                  
     much.  Please continue then.                                                                                             
           MS. MILLS:  So going to the standard -- and I put on                                                               
     your  handout  kind  of the  two  main cases  we  have  here:                                                            
     Warren  vs. Boucher and State vs.  Trust the People.  And  if                                                            
     I  were to  summarize the test  that the  court applies,  you                                                            
     look  at scope, you look at  purpose, and you look at  means.                                                            
     Those are the three inquiries.                                                                                           
           And the first inquiry on scope, the court must                                                                     
     determine  the scope  of the  subject matter  and afford  the                                                            
     Legislature   greater  or  lesser   latitude,  depending   on                                                            
     whether the subject matter is broad or narrow.                                                                           
           So you really  have to start  there, because the  court                                                            
     says, "If  it is a really complex, broad law, we're going  to                                                            
     give  the Legislature more leeway.   If it has a very  narrow                                                            
     purpose,  it's  very  restricted,  you  know,  it's  got  one                                                            
     provision  that it's trying enact,  the Legislature is  going                                                            
     to have less discretion."                                                                                                
           And then  you move  to  the purpose.   The  court  must                                                            
     consider  whether the general purpose  of the legislation  is                                                            
     the same as the general purpose of the initiative.                                                                       
           And one of the phrases  in the -- and I think it's  the                                                            
     Warren  court talks  about is it  a hollow gesture?   Is  the                                                            
     Legislature  engaging  in  a hollow  gesture  to  bypass  the                                                            
     people's initiative power?                                                                                               
           So moving  to Speaker  Edgmon's question,  I think  the                                                            
     legislative  record  could  be  used  in  a  case  to  either                                                            
     support  or negate that, depending  on whose side you're  on.                                                            
     So  statements  made by  the  Legislature  in the  process  I                                                            
     think could become part of that record in that court case.                                                               
           CHAIR STEVENS:   Could  you  give us  an example  of  a                                                            
     hollow gesture?                                                                                                          
           MS. MILLS:  Well, what I can really do is point  you to                                                            
     the   case  that   found  that   the  Legislature   did   not                                                            
     appropriately  enact a  substantially the  same measure,  and                                                            
     that was State vs. Trust the People.                                                                                     
           And in that case,  the initiative -- the whole  purpose                                                            
     of the  initiative, according to the court, was to  eliminate                                                            
     the   governor's  ability  to   temporarily  or  permanently                                                             
     appoint   a  Senate  appointment,   a  congressional   Senate                                                            
     appointment.    The Legislature  enacted a  special  election                                                            
     for --  to fill  a senator  vacancy, but  they still  allowed                                                            
     the  governor a short  appointment period  to make sure  that                                                            
     district was represented.                                                                                                
           And  the  court  said,  "That  doesn't  do  it."    "It                                                            
     just" --  "the purpose  of the  initiative  was to  eliminate                                                            
     that  power."     And  so  the  Legislature  did  not   enact                                                            
     substantially  the same measure.  It's not the same  purpose.                                                            
     Even  though it may  have been a  shorter appointment  period                                                            
     than  previously,  that was  not  enough.   It needed  to  be                                                            
     eliminated in order to fulfill that.                                                                                     
           But, again, I'd point to in the Warren vs. Boucher                                                                 
     case,  they  were talking  about  creating  campaign  finance                                                            
     reform.   I mean, we're basically  talking about the  origins                                                            
     of APOC, not, you know, it changed over time.                                                                            
           But there the court didn't have a problem with, you                                                                
     know,  many differences  in the two,  creating higher  limits                                                            
     in  the initiative, whereas  the -- or  higher limits in  the                                                            
     legislation,  whereas  there  were  lower   campaign  finance                                                            
     limits  in the  initiative,  very strictly  regulating  media                                                            
     buys  by candidates, and the  legislative enactment ended  up                                                            
     not touching that at all.                                                                                                
           So, but the court said, "This is very broad, and if                                                                
     you look  at the general purpose, there's nothing showing  us                                                            
     that  we're  trying  to  bypass  the  people's  power.    The                                                            
     Legislature  is just using its discretion just like it  would                                                            
     to  amend  an initiative  after  the fact."   And  the  court                                                            
     really drew  on that to say, "We think this is substantially                                                             
     similar even  if some of these intricacies and exact  numbers                                                            
     are different."                                                                                                          
           So those are the two cases we have.  And so any time                                                               
     we   have  an  enactment  that   comes  before  us,  as   the                                                            
     Department  of  Law, we  have to  look  at those  two  cases,                                                            
     which  kind  of give  the  extremes,  right?   Look  at  this                                                            
     three-part test.  And the last one is the means --                                                                       
           CHAIR STEVENS:  Before you go on to that --                                                                        
           MS. MILLS:  Yes.                                                                                                   
           CHAIR STEVENS:  -- I'm still not sure I understand.                                                                
     Looking at  this specific case, I'm not sure if you can  even                                                            
     refer to  this specific case in front of us now.  What  would                                                            
     be considered a hollow gesture?                                                                                          
           MS.  MILLS:    So,  Senator  Stevens,  I  really  can't                                                            
     speculate  on what that would be.   I would just advise  that                                                            
     if  you're looking to enact  a measure that is substantially                                                             
     similar, I  would really pay attention to the purpose  of the                                                            
     initiative,  and the thrust  of what you're  doing should  be                                                            
     focused  on that.  That's  really the best  I can do  without                                                            
     getting into specifics.                                                                                                  
           CHAIR STEVENS:  Thank you,  Ms. Mills.  I realize  that                                                            
     puts you in a tough spot, and I appreciate that answer.                                                                  
           Any further questions or  comments from the members  of                                                            
     Legislative Council?                                                                                                     
           If not, then please continue.                                                                                      
           MS. MILLS:   Thank you.   So  just the means.   I  just                                                            
     want  to cover that last part  of that three-part test.   The                                                            
     court must  consider whether the means by which that  purpose                                                            
     effectuated  are the  same in  both the  legislation and  the                                                            
           And,  again,  though,  if  you  look  at  the  campaign                                                            
     finance  package  that was  passed, there  were differences.                                                             
     So getting hung up on the details can be difficult.                                                                      
           The court  also  said the  means  need only  be  fairly                                                            
     comparable  for substantial similarity to exist.  So,  again,                                                            
     it's  not an exact  measure, and depending  on the  broadness                                                            
     or the narrowness, that means component would change.                                                                    
           Yes.   And so,  ultimately,  the conclusion  I  have --                                                            
     which  is  never  very  helpful  and  is  also  the  lawyer's                                                            
     answer --  is it depends  on the  facts.  I  mean, we  really                                                            
     have  to do  a close  examination of  the initiative,  go  by                                                            
     provision  by provision and do the same with any  legislation                                                            
     that's  passed.    And  there's just --  you  know,  are  you                                                            
     getting closer  to the Warren initiative, or are you  getting                                                            
     closer to  the Trust the People initiative?  It's --  it just                                                            
     really  depends  on  the specific  initiative  and  how  it's                                                            
     framed.    Are  there  any  other  questions  on substantial                                                             
     similarity or how that works?                                                                                            
           CHAIR STEVENS:  Yes.  Representative -- please go                                                                  
     ahead, Mr. Speaker.                                                                                                      
           SPEAKER EDGMON:  So I'm trying to learn a little bit                                                               
     about  legislative record,  because I  think I  can sit  here                                                            
     and say --  and, you know, I ask you to please correct  me to                                                            
     the best of your ability you can on the spot here.                                                                       
           But in terms of campaign finance, the record in the                                                                
     Legislature   versus  this  issue,  I'm  just  sitting   here                                                            
     thinking  that there seems  to be a  lot of latitude  between                                                            
     what  legislative  record could  exist  today and  may  exist                                                            
     two,  three   weeks  down  the  road  and  the  department's                                                             
     interpretation  of the  purpose in terms  of this three-part                                                             
     test  that would ultimately  be administered.   Any  thoughts                                                            
     on that?                                                                                                                 
           MS. MILLS:  Speaker Edgmon, through the Chair, it's                                                                
     just  really hard to  sit here without  -- one, without,  you                                                            
     know,  opining on  a predetermination;  and,  two, without  a                                                            
     specific  scenario in front  of me.   So I'm  not sure I  can                                                            
     clarify  any more than I already  have, all that to say  that                                                            
     any public statements made on the record.                                                                                
           So when we determine substantial similarity or not,                                                                
     that  also triggers a  right to litigate.   And we see  that,                                                            
     you  know, litigation  in initiative  context  occurs a  lot,                                                            
     and this  is another area.  The -- any aggrieved person  -- I                                                            
     think  is how  the statute --  can sue  within 30  days of  a                                                            
     determination.      So   if   it's   determined    it's   not                                                            
     substantially  similar,  you know,  that triggers  one  side.                                                            
     If  it's determined it is  substantially similar, that  could                                                            
     trigger another side.                                                                                                    
           And  so   any  public   statements  made   during   the                                                            
     legislative   process  can   be  brought   into  that   court                                                            
     proceeding  by any of the sides to support their view  of the                                                            
     law, and I think that's valid information.                                                                               
           But ultimately,  you  know, what  the court  has  truly                                                            
     looked at  in these cases is the specifics of the law.   What                                                            
     do  the provisions say?  But  using this language, you  know,                                                            
     "it's  not a hollow gesture"  I think opens  it up to  people                                                            
     using  the  legislative  record  in order  to  support  their                                                            
           CHAIR STEVENS:   Thank  you, Speaker  Edgmon.   A  very                                                            
     important  question.   I'm not sure  we got  a clear  answer,                                                            
     but  I understand that you cannot  maybe give us one,  but --                                                            
     about the legislative record.                                                                                            
           Any further  questions  or comments  for  Ms. Mills  at                                                            
     this  point?  And did you  have further presentation to  make                                                            
     to us, Ms. Mills?                                                                                                        
           MS. MILLS:  So the only  thing I wanted to go over,  if                                                            
     the  Chair wants  me to,  is just  the last  steps, which  is                                                            
     placing  the measure on the  ballot, you know, what  election                                                            
     it  would go on  and then the enactment  and effective  date,                                                            
     because those are questions we get.                                                                                      
           CHAIR STEVENS:    Very important.    And if  you  could                                                            
     cover that, we'd appreciate it.                                                                                          
           MS. MILLS:    Okay.   I'm happy  to.   So  placing  the                                                            
     measure  on the ballot,  the determination  of what  election                                                            
     an  initiative  goes  on  once it's  been  certified  by  the                                                            
     lieutenant  governor  is dependent  on when  the Legislature                                                             
     adjourns.    So  it's not  dependent  on  when certification                                                             
     happens but when Legislature adjourns.                                                                                   
           And it  has to  appear, the  initiative,  on the  first                                                            
     statewide   election   held   more  than   120   days   after                                                            
     adjournment  of the legislative session following the  filing                                                            
     of the petition.                                                                                                         
           And the statute kind of clarifies what "first                                                                      
     statewide   election"  means  and   says,  "First   statewide                                                            
     general,  special, special runoff, or primary election."   So                                                            
     basically  it's  the  gamut  as  long  as  it's  a  statewide                                                            
     election  involving  the entire  population  and not  like  a                                                            
     Senate  district, you know, vacancy  or something like  that,                                                            
     it will qualify.                                                                                                         
           SENATOR BEGICH:  Mr. Chairman.                                                                                     
           CHAIR STEVENS:  I'm sorry.  Yes, Senator Begich.                                                                   
           SENATOR BEGICH:  Thank you, Mr. Chairman.  So does                                                                 
     that  mean that  the way  it's worded,  special -- what  were                                                            
     the -- what was the one after special?                                                                                   
           MS. MILLS:  Special runoff, which is a --                                                                          
           SENATOR BEGICH:  Okay.  Special runoff, right.  But in                                                             
     special   election,  does  that  mean --  does  that   create                                                            
     ambiguity  that a date  could be set  for a special  election                                                            
     simply dealing with the initiative?                                                                                      
           MS. MILLS:  Through the Chair, Senator Begich, the way                                                             
     the   statutes  work,  there  is   no  statute  allowing   an                                                            
     initiative  to  have  its  own election.    It's  only  if  a                                                            
     special  election,  special  runoff  is  called  for  another                                                            
     reason.   You know, and usually  you're dealing with  vacancy                                                            
     issues with  legislative appointments.  But as I think  we're                                                            
     all  aware of  this year,  we also are  in a  fight over  the                                                            
     recall.  So --                                                                                                           
           CHAIR STEVENS:  Yes, Senator Begich.                                                                               
           SENATOR BEGICH:  Just follow-up.  But we have had                                                                  
     special  elections for like  the veterans general obligation                                                             
     bond,  you know, two  decades ago, and  that was the  special                                                            
     election setup.   It was on an off election year established                                                             
     for  an issue  that the  Legislature came  up with.   So  why                                                            
     wouldn't  you be able  to set -- I  mean, I'm not suggesting                                                             
     that  one would,  but why would  you -- why  wouldn't you  be                                                            
     able to?                                                                                                                 
       MS. MILLS:  So, Senator Begich, through the Chair, so                                                                  
     to  clarify, my last  answer was based on  existing law.   If                                                            
     the  Legislature were to pass  another law or statute --  for                                                            
     example,  advisory votes  have happened  the same  way.   You                                                            
     know,  the Legislature has said  in their advisory vote  bill                                                            
     it  will  be  held on  this  date,  you know,  in  a  special                                                            
     election.   So if  the Legislature were  to pass another  way                                                            
     to  have  a  special  election,  if you  want  one  for  just                                                            
     initiatives,  that would be a way to set a special  election.                                                            
     But  in current  law there is  no special  election just  for                                                            
        CHAIR STEVENS:  So I think that's clear.  And we do                                                                   
     always adjourn.   We never know when, but we do adjourn,  but                                                            
     that adjournment sets the end process of the election.                                                                   
      MS. MILLS:  Correct.  And this year that would mean to                                                                  
     get  to   have  initiatives  show  up  on  the  primary   the                                                            
     Legislature  would have to adjourn  by April 19th.   Anything                                                            
     after  that would  most  likely go  on the  general  election                                                            
     unless there's  some sort of intervening election in  between                                                            
     the primary and the general.                                                                                             
        And the only other requirement, you know, that's --                                                                   
     that  I think  everyone is aware  of is  that the  lieutenant                                                            
     governor  is required  to hold  public hearings  at least  30                                                            
     days  before  the election  in  each judicial  district,  and                                                            
     that was passed -- I think it was 2014 or so.                                                                            
       So then we come to enactment and effective date.  And                                                                  
     as  you're  aware --  but sometimes  we  get  questions  from                                                            
     members  of the  public.   Enactment and  the effective  date                                                            
     are  two different things.   Enactment occurs on the  date --                                                            
     well, the  date after certification of election results.   So                                                            
     when we  absolutely know that a majority of votes has  passed                                                            
     a  measure,  it's  the  date  after  that's  considered   the                                                            
     enactment date for initiatives.                                                                                          
           And then initiatives have -- are effective 90 days                                                                 
     after  that certification  date.   And there  is no  ability,                                                            
     unlike  legislation, to do  a special  effective date.   It's                                                            
     an automatic 90-day effective date.                                                                                      
           So an example from 2014 -- because these days most of                                                              
     the initiatives  end up on the general election ballot.   The                                                            
     marijuana  initiative was  passed that  way in  2014, and  it                                                            
     went  into effect in late February  of 2015.  So that's  your                                                            
     most likely timeline if it ends up on the general election.                                                              
           And the other question we've gotten is, well, what if                                                              
     you  haven't   been  able  to  enact  the --  or  adopt   the                                                            
     regulations  that have to go along  with it?  Law -- the  law                                                            
     is  effective  regardless  of  whether   regulations  are  in                                                            
     place, and  that's true with legislation as well if for  some                                                            
     reason  there's -- the  effective  date passes  and we  still                                                            
     don't  have  regulations.    So  basically  that  leaves  the                                                            
     Department  of  Revenue  and  the  Department   of  Law  just                                                            
     working   on   those  implementation   details   while   it's                                                            
           And then I just have a really quick -- Department of                                                               
     Revenue  is going to kind of  go over timelines, but a  quick                                                            
     primer  on the  regulations process,  because  that would  be                                                            
     the implementation part of this.                                                                                         
           So, you know, your first step is you have to draft                                                                 
     regulations,  and then  you  have to  put it  out for  public                                                            
     notice  and public  comment  and decide  whether you  want  a                                                            
     public  hearing.   And  you need  to have  at least  30  days                                                            
     between  when  the  public  notice  goes  out  and  when  new                                                            
     regulations  are adopted, and that's a short time frame.   So                                                            
     I   just  want   to  be  clear   that  this   is  the   legal                                                            
     requirements, it's not the practical or best practices.                                                                  
           So then the agency adopts the regulations, and they                                                                
     send  them to the Department of  Law.  The Department of  Law                                                            
     has  a statutory role in reviewing  regulations to make  sure                                                            
     they're   consistent   with   the  law   and   that   they're                                                            
     constitutional.   And our chief regulations attorney has  the                                                            
     power  to  disapprove  regulations that  are  not  consistent                                                            
     with the law.                                                                                                            
           And so the Department of Law does their final review.                                                              
     They  send  over  the approval  or  disapproval  of  specific                                                            
     provisions  to the  lieutenant governor,  and  then it's  the                                                            
     lieutenant governor's duty to file those regulations.                                                                    
           And once filed, the regulations are effective 30 days                                                              
     after  filing unless there's some  further out date that  was                                                            
     included  in the  regulations,  but 30  days is  the  minimum                                                            
     amount  of time you have  between.  So  I just wanted to  lay                                                            
     that  out because some people  think that regulations  happen                                                            
     in  a month.    It's not  a month  process.   It can  take  a                                                            
           So that's all I have to cover for process unless there                                                             
     are any additional questions.                                                                                            
      CHAIR STEVENS:  Thank you, Ms. Mills.  Senator Begich.                                                                  
       SENATOR BEGICH:  Thank you, Mr. Chairman.  Ms. Mills,                                                                  
     the  process  doesn't have  -- it  has  a minimum  amount  of                                                            
     time,  but what is  the maximum  amount of time?   Because  I                                                            
     can  see the  process being  drawn out  or --  at what  point                                                            
     is -- does  the timeline for regulations become so long  that                                                            
     it  becomes what  has  been called,  when at  least  I was  a                                                            
     bureaucrat, the slow roll?                                                                                               
           MS. MILLS:  So, Senator Begich, through the Chair, in                                                              
     the  regulations drafting manual  that the Department of  Law                                                            
     has  to  put  out,  if  a  regulation  --  if  public  notice                                                            
     occurred  and it's  been  a year  and the  regulations  still                                                            
     haven't  been adopted, we consider  that stale and  recommend                                                            
     that  the process  needs  to start  over.   You need  to  get                                                            
     public  involvement  again.   So  that's the recommendation.                                                             
     There's  no -- I don't know of  a legal timeline, but  that's                                                            
     the  recommendation by the  drafting -- regulations  drafting                                                            
           CHAIR STEVENS:  Stale in a year.  Senator Begich.                                                                  
           SENATOR BEGICH:  And, I'm sorry, but that doesn't                                                                  
     really  answer the  questions.   That  just says  stale in  a                                                            
     year  and then another  year and then  another year and  then                                                            
     another   year.     I  mean,   that  process   could  go   on                                                            
     indefinitely.  Is that what you're suggesting?                                                                           
           MS. MILLS:  So through the Chair, Senator Begich,                                                                  
     I would have  to go back and look if we have any case  law on                                                            
     saying  you had to  have regulations,  and somebody brings  a                                                            
     challenge  saying you haven't enacted regulations and it  was                                                            
     required, if there's a "shall adopt."                                                                                    
           But I want to go back to my original comment, which is                                                             
     the law  is effective.  So the law  is in effect.  It has  to                                                            
     be  implemented.   Regulations is  a question  of, you  know,                                                            
     those  implementation details  and what  statutory  authority                                                            
     is  out  there for  the  regulations.   But  I don't  have  a                                                            
     specific  answer to,  you know, how  long is too  long or  is                                                            
     there  a legal limitation on when  the court would say,  "You                                                            
     have to have adopted these."                                                                                             
           CHAIR STEVENS:  Thank you for the questions or                                                                     
     comments or thoughts.  Yes, Madam President.                                                                             
           PRESIDENT GIESSEL:  Thank you, Mr. Chairman.  Cori, so                                                             
     the  initiative  as it's  written  out doesn't  specify  what                                                            
     parts of  law are being addressed.  Who determines where  the                                                            
     initiative language goes in terms of law?                                                                                
           MS. MILLS:  So, Senator Giessel, through the Chair,                                                                
     I'm  actually  going to  defer  that question  to  your  next                                                            
     presenters.    Department  of Law  is  not involved  in  that                                                            
     process.   And  my understanding  is that  it's the  reviser,                                                            
     but I will defer to Megan Wallace and Emily Nauman on that.                                                              
           PRESIDENT GIESSEL:  Thank you.                                                                                     
       CHAIR STEVENS:  Thank you, Madam President.  Further                                                                   
     comments,  questions,  thoughts?   Thank you,  Ms. Mills.   A                                                            
     very   thorough   explanation.     You've   gone   over   the                                                            
     certification  of the petition, if a petition is voided,  the                                                            
     substantial,  the same and similar,  the putting the  measure                                                            
     on  the ballot and  enactment and the  effective date.   Very                                                            
     thorough.  Thank you very much.                                                                                          
           SENATOR BEGICH:  Thank you, Cori.                                                                                  
          CHAIR STEVENS:  So we'll move on then to Megan                                                                      
     Wallace,  Leg. Legal attorney,  and I  believe she has  Emily                                                            
     Nauman  with her from  Legislative Legal.   If you'd come  up                                                            
     and join us and state your names for the record, please.                                                                 
        MS. WALLACE:  Good morning.  For the record, Megan                                                                    
     Wallace,  Director  of Legal  Services, and  I have  with  me                                                            
     today Emily Nauman, the Deputy Director of Legal Services.                                                               
        I will begin by kind of picking up where Ms. Mills                                                                    
     left off.   So she discussed enactment effective dates.   And                                                            
     in  response to Senator Giessel's  question in terms of  what                                                            
     happens  with the initiative  if it's  enacted by the  voters                                                            
     and where  does it go in statute?  How do we put it into  our                                                            
     Alaska Statutes?                                                                                                         
        And as Senator Giessel pointed out, the initiative                                                                    
     language  itself  does not  specifically amend  any  existing                                                            
     Alaska  Statutes.    It  has a  broad  general  statement  in                                                            
     following  Section 1 before Section 2, "that notwithstanding                                                             
     any other  statutory provisions to the contrary, the  oil and                                                            
     gas  production   tax  in  AS  43.55  shall  be  amended   as                                                            
       Therefore, as Ms. Mills indicated, the determination                                                                   
     as to  where to place the statutes  is within the purview  of                                                            
     the reviser  of statutes.  Likely, this provision --  or this                                                            
     initiative  in its  entirety  is likely  to be  placed in  AS                                                            
     43.55,  that chapter,  likely  as its  own article.   And  it                                                            
     will --  it's my  best  estimation that  it will  get  placed                                                            
     into statute exactly as it looks before you today.                                                                       
           I think the Legislature is accustomed to Leg. Legal                                                                
     kind  of doing a  cleanup or technical  changes, those  kinds                                                            
     of  things, and  that would  not occur  with  respect to  the                                                            
     ballot  initiative.   Our  reviser,  as  you all  are  aware,                                                            
     generally  do  reviser bills  and  do technical  cleanups  of                                                            
           And to put it in a little bit of context, the                                                                      
     marijuana  initiative  that  was  passed  in  2014  was  just                                                            
     cleaned up in a reviser bill last year in SB 71 in 2019.                                                                 
           So the process for Leg. Legal is to allow the                                                                      
     initiative  to  take effect,  to  see  it -- how  it's  being                                                            
     carried  out,  you know,  make sure  to  see if  there's  any                                                            
     litigation  and allow the Legislature  to take any action  if                                                            
     it   wants  to   before  we   do  any   technical   cleanups,                                                            
     particularly  if there are any questions about the  substance                                                            
     of  the issue, because the cleanups  that the reviser can  do                                                            
     are only  technical revisions that do not change the  meaning                                                            
     of  the law.   And so  we want  to be extra  diligent not  to                                                            
     make   any  changes  that  could   have  an  impact  on   the                                                            
     implementation or the meaning of the initiative.                                                                         
           CHAIR STEVENS:  So the effective date is 90 days after                                                             
     certification  of the election, and it could take up  to four                                                            
     or  five years to get  it finalized and  then in statute;  is                                                            
     that what you're saying?                                                                                                 
           MS. WALLACE:  Mr. Chairman, it would go immediately                                                                
     into  the  statutes.   It  would  be placed in  --  it  would                                                            
     become  law, and it would be  placed in the Alaska  Statutes.                                                            
     It would  take probably two or three years, at a minimum,  to                                                            
     have  any technical cleanups  through a  reviser bill, so  to                                                            
           CHAIR STEVENS:  Thank you.  Madam President.                                                                       
         PRESIDENT GIESSEL:  Thank you, Mr. Chairman.  So,                                                                    
     Megan, I'm  somewhat alarmed to hear that there's no  cleanup                                                            
     in  light  of the  fact  that there  are  terms used  in  the                                                            
     initiative  that  don't  otherwise  appear  in  law  in  some                                                            
     cases,  or  they're  extremely vague  compared  to  our  very                                                            
     specific  currently  written law.   So  that seems  a  little                                                            
     frightening  that then  they're going to  be implemented  and                                                            
     financial   impacts  will  be  made  as  a  result  of   this                                                            
     initiative.  Could you clarify that?                                                                                     
       MS. WALLACE:  Through the Chair, Senator Giessel, for                                                                  
     the reasons  you just described, which is that we may  have a                                                            
     vague  term, the reviser cannot  make any changes that  would                                                            
     have the impact of changing the meaning of the law.                                                                      
      And so, you know, if Leg. Legal goes in and we replace                                                                  
     one word  or phrase with another,  in light of the fact  that                                                            
     it might  be vague or open to interpretation, that change  in                                                            
     and  of itself is a policy  change that only the  Legislature                                                            
     can  make and  that the  reviser doesn't  have  the power  to                                                            
     make  because that change  of a phrase or  a word could  have                                                            
     an   impact  on  the   outcome  of   interpretation  of   the                                                            
         CHAIR STEVENS:  Yes, please, we'll go to Senator                                                                     
     Hoffman,  and  then  go  to  you,  Representative.    Senator                                                            
       SENATOR HOFFMAN:  Thank you, Mr. Chairman.  But under                                                                  
     the  provisions of  the law,  you say  that this legislation                                                             
     will  be -- initiative  will  be enacted.   So  that --  does                                                            
     that  mean that taxes will  be collected and the Legislature                                                             
     can appropriate them?                                                                                                    
           MS. WALLACE:  Through the Chair, Senator Hoffman, yes,                                                             
     the initiative  will be enacted; it will be law.  It will  be                                                            
     placed  in  the Alaska  Statutes  in some  location,  like  I                                                            
     said,  likely in  AS 43.55.   If  taxes are  collected,  they                                                            
     will be subject to appropriation by the Legislature.                                                                     
           And the next topic that I was going to address is                                                                  
     while  the  reviser  won't  go  in  and  make  any  of  these                                                            
     technical  corrections,  you  know, likely  for  two,  three,                                                            
     maybe four  years, the Legislature at any time has the  power                                                            
     to amend the initiative.                                                                                                 
           Article XI, Section 6 restricts the Legislature from                                                               
     repealing the  initiative for a period of two years,  but the                                                            
     Legislature  is able  to amend  the initiative  at any  time.                                                            
     And  so if the  Legislature feels as  though there are  vague                                                            
     terms  or that they need to  make some technical corrections                                                             
     to  make the  initiative  better fit  in alignment  with  the                                                            
     Alaska Statutes,  the Legislature could go in and make  those                                                            
           We have had some litigation in terms of how far the                                                                
     Legislature  can go in their amendments.  And in the  case of                                                            
     Warren  v. Thomas,  the Alaska Supreme  Court described  that                                                            
     what  they'll   do  is  they'll  look  to  see  whether   the                                                            
     Legislature   exceeded  their  broad  power  by  passing   an                                                            
     amendment  and whether or not  it so vitiates the  initiative                                                            
     as  to  constitute  a  repeal.    In  other  words,  did  the                                                            
     Legislature  make  changes  so  drastic   to the  initiative                                                             
     language that it makes a mockery of the initiative?                                                                      
           And so, again, not very clear or specific.  It's going                                                             
     to  be a very fact-intensive review  in terms of the  changes                                                            
     that  the Legislature  made and  whether or not  it goes  too                                                            
     far or whether there are technical changes.                                                                              
           CHAIR STEVENS:  Thank you, Megan.  Senator Hoffman,                                                                
     thank  you.    Representative Johnson.    And  then,  Senator                                                            
     Begich,   did  you   have  a   comment  or --   no.     Okay.                                                            
     Representative Johnson.                                                                                                  
       REPRESENTATIVE JOHNSON:  Thank you, Mr. Chair.  So if                                                                  
     you  have  in  an initiative --  this  initiative,  say  it's                                                            
     self-contradictory  within its  own body  of the initiative,                                                             
     then --  and say we  were to implement  taxes based on  that,                                                            
     our  best interpretation,  at what  point do you  just get  a                                                            
     legal  opinion saying  this is self-contradictory?   We  just                                                            
     get  to pick which  one we want  to go with?   If you  would,                                                            
     just  help me understand how we  might be potentially set  up                                                            
     for having  to have some kind of  litigation if we do do  our                                                            
     very best within what we're given.                                                                                       
           MS. WALLACE:  Certainly.  Through the Chair,                                                                       
     Representative  Johnson,   so I  imagine   the  process  will                                                            
     evolve.     You   know,  the   Department   of  Revenue   and                                                            
     administration  will  identify   how  this  is  going  to  be                                                            
     carried out, and the Legislature can examine that.                                                                       
        And if the Legislature determines that it needs to                                                                    
     clarify  or   make  any  changes  to  the  language   of  the                                                            
     initiative,  that will  happen,  you know,  by bill.   And  I                                                            
     suspect  that there will be a  lot of discussion through  the                                                            
     committee  process  as  to  the  legislative  intent  of  the                                                            
     changes, what the purpose of those changes are.                                                                          
          And all of that discussion would be part of the                                                                     
     analysis  as to -- you  know, likely from  Leg. Legal  giving                                                            
     you some  kind of our best analysis  as to whether or not  we                                                            
     think  the amendments are at risk  of litigation in terms  of                                                            
     going  too far.  I  suspect that the  Department of Law  will                                                            
     weigh in on those amendments potentially, if asked.                                                                      
       And, ultimately, to be frank, there's probably a high                                                                  
     chance  of litigation if one --  you know, if the  initiative                                                            
     feels --  the backers of the initiative feel the Legislature                                                             
     goes too far or some other, you know, citizen.                                                                           
          CHAIR STEVENS:  Please, Representative Johnson.                                                                     
           REPRESENTATIVE JOHNSON:  Thank you, Mr. Chair.  So                                                                 
     walk me  through then the process.  So we have an enactment,                                                             
     we  have the  effective date, and  we have  uncertainty.   We                                                            
     spend some  time, as a Legislature, trying to figure  out how                                                            
     to  come to  a conclusion on  how we  would either  implement                                                            
     taxes  or we would  implement this --  the initiative.   What                                                            
     happens  in that intervening time?   Do we collect taxes  and                                                            
     then  maybe refund them  if we come up  with some -- I  mean,                                                            
     tell me  about some of the different scenarios that we  might                                                            
     have before  us that we have to  be thinking about as far  as                                                            
     timeline  goes as far  as coming to certainty  on this if  we                                                            
     don't have certainty on the initiative.                                                                                  
           MS. WALLACE:  Through the Chair, Representative                                                                    
     Johnson,  I'm going to  punt a little bit  since we have  the                                                            
     Department  of Revenue  here.  They  can -- they're  probably                                                            
     the  best to  answer in  terms of  what happens  during  that                                                            
     uncertainty   time   in  terms   of  collection   of   taxes,                                                            
     refunding.   That's a little --  that's outside of the  scope                                                            
     of what Leg. Legal would look at.                                                                                        
           But those are all certainly going to be policy issues                                                              
     for the  Legislature to grapple with if the initiative  takes                                                            
     effect.   And, like I said,  because the Legislature has  the                                                            
     broad  power to  amend the  initiative, the  Legislature  can                                                            
     make  that  policy  decision  and  evaluate   what,  if  any,                                                            
     changes  they need  to  be -- need  to be  made in  light  of                                                            
     whatever results from execution of the initiative.                                                                       
           CHAIR STEVENS:  Very good question.  Thank you,                                                                    
     Representative.   We'll make sure that we direct that  to the                                                            
     department when they are before us.  Any further comments?                                                               
           MS. WALLACE:  I'm going to turn it over to Emily to                                                                
     discuss  the substance  of the  initiative.   As a  reminder,                                                            
     our office  provides policy-neutral nonpartisan advice.   Our                                                            
     analysis  of the  initiative is  just that,  our analysis  to                                                            
     date.  And with that, I will turn it over to Emily.                                                                      
           CHAIR STEVENS:   Thank  you, Ms. Wallace.    Appreciate                                                            
     your comments.  And going on then to Emily Nauman.                                                                       
           MS. NAUMAN:  Good morning.   It's my intention just  to                                                            
     run  through the sectional  that I  provided.   I have a  few                                                            
     additional  notes and  comments in  addition to  the memo  we                                                            
     provided  you.   Please stop  me if  you have  any  questions                                                            
     about the  substance of the initiative, and I'll answer  them                                                            
     as best as I can.                                                                                                        
           Section 1 of  the initiative sets  out the short  title                                                            
     for  the initiative.   Once it's  enacted would  be known  as                                                            
     the Fair Share Act.                                                                                                      
           Section 2 of the initiative states that Sections  3 and                                                            
     4,  which set  out these  new additional  taxes, would  apply                                                            
     only  to fields, units,  and non-unitized  reservoirs on  the                                                            
     North   Slope    that   have   both   produced   more    than                                                            
     40,000 barrels  of oil per day in the previous year and  that                                                            
     unit field  or non-unitized reservoir has also produced  more                                                            
     than 400  million barrels of oil cumulatively.  That  section                                                            
     also   states  that  production   taxes --  that  all   other                                                            
     production taxes shall be unchanged by the initiative.                                                                   
           One key difference  that Section  2 highlights  between                                                            
     the  initiative  and the  current  production tax  system  is                                                            
     that  taxes will be  assessed by field.   Currently, our  tax                                                            
     structure assesses production taxes by producer.                                                                         
           Our current  production  tax  system  has  two  primary                                                            
     parts:   The  first is  a net  production tax  value  system.                                                            
     This  is  our  primary  production  tax.   We  also  have  an                                                            
     alternative   minimum  tax  based   on  gross  value.     The                                                            
     initiative  sets out a similar structure but, again,  does it                                                            
     by field instead of by producer.                                                                                         
           So Section  3 sets  out the alternative  gross  minimum                                                            
     tax.   Under Section 3, the  fields, units, and non-unitized                                                             
     reservoirs  that meet  the requirements  of  Section 2  would                                                            
     have  a 10 percent  tax on the  gross value at  the point  of                                                            
     production starting at $50.                                                                                              
           And technically, the initiative is a little bit -- the                                                             
     wording  is -- it took me a few  minutes to do the math,  but                                                            
     at $50,  the tax will actually go up to 11 percent.   There's                                                            
     a  1 percent increase  for each  $5 increase in  a barrel  of                                                            
     oil  over  $50,  capped  at 15 percent  of  the  gross  value                                                            
           That   section   also    states   that   no    credits,                                                            
     carry-forward   lease   expenditures,   including   operating                                                            
     losses  or other offsets,  may be used  to reduce the  amount                                                            
     of tax below the amount provided in that section.                                                                        
           And, again, Section 3 is -- or I should say not again.                                                             
     A unique  feature of the initiative  is it collects taxes  by                                                            
     month.    Our  current  production  tax  system  while --  or                                                            
     sorry.   Let me rephrase  that.  The  taxes are assessed  and                                                            
     due,  levied   each  month.    Our  current  production   tax                                                            
     collects  taxes  each month,  but  the  tax is  actually  due                                                            
     annually, so  there's a true-up at the end of the year.   And                                                            
     I'm  sure Department  of  Revenue can  talk more  about  that                                                            
     process if you're interested in it.                                                                                      
           So already we see two large, what I would think,                                                                   
     differences   between  our   current  tax   system  and   the                                                            
     initiative;  one being that we're taxing by field instead  of                                                            
     by  producer, and the  second that we're  levying the tax  by                                                            
     month instead of annually.                                                                                               
           Section 4 sets out what is, I imagine, parallel to our                                                             
     current   primary   tax  structure,   which  is   an   annual                                                            
     production  tax  based on  net  production  tax value.    The                                                            
     initiative  sets out  that this is  an additional production                                                             
     tax.   It's unclear  what it's an  additional production  tax                                                            
     to,  but  I think  we  can  assume that  it's  an  additional                                                            
     production  tax to the  rate set out  in 40.55.011(e),  which                                                            
     is our primary tax system.                                                                                               
        Under the initiative, the additional production tax                                                                   
     applies when  the price of a barrel of oil is more than  $50,                                                            
     and it  is the difference between $50 and the production  tax                                                            
     value  of a barrel of oil  multiplied by 15 percent.   Again,                                                            
     this net production tax is levied by month.                                                                              
       Section 4 also states that the per-barrel credits --                                                                   
     that's  AS 43.55.024(i)  and (j)  -- cannot  be used  against                                                            
     that production tax.                                                                                                     
       Section 5 of the initiative states that each producer                                                                  
     subject  to  the  tax  shall  calculate  the  taxes --  shall                                                            
     calculate  their  taxes separately  for  oil  and gas.    The                                                            
     introduction  of the term  "gas" in Section  5 could lead  to                                                            
     some  confusion  in  the interpretation  of  the  initiative.                                                            
     It -- read  alone, Section 5 has the potential to imply  that                                                            
     the taxes  set out in Sections 3 and 4 also apply to gas.   I                                                            
     don't  believe   that's  the  intention  of  the  initiative                                                             
     sponsor,   but  it's  the  first   mention  of  gas  in   the                                                            
     initiative  and could cause  potentially some implementation                                                             
       Again, it requires the producers to pay taxes each --                                                                  
     the taxes  in the initiative each month and also states  that                                                            
     lease  expenditures  for  each  field  unit  or non-unitized                                                             
     reservoir  must be calculated, deducted, and carried  forward                                                            
        Section 6 sets out -- or Section 6 is what triggers                                                                   
     the  sort of parallel comparison  where we're looking at  the                                                            
     tax  levy  by  Section 3  and  the  tax levy  by  Section  4,                                                            
     determining  the  greater amount  and  a producer  shall  pay                                                            
     under  that  amount.    I  think  you're  going  to  have  to                                                            
     remember  this is by  month.  So potentially  the way that  I                                                            
     understand  the  initiative, each  month the  producer  could                                                            
     flip back and forth between the gross tax and the net tax.                                                               
           Section 7 requires all filing and supporting                                                                       
     information  related  to  the  calculation   and  payment  of                                                            
     Sections  3 and 4  provided to the  Department of Revenue  to                                                            
     be a matter of public record.                                                                                            
           And Section 8 states that nothing in the initiative                                                                
     dedicates   revenue,  makes  or  repeals  an  appropriation,                                                             
     enacts  local or special  legislation, or otherwise  performs                                                            
     an  unconstitutional act.   Section  8 also  states that  the                                                            
     revenues of  the initiative could be used to fund  government                                                            
     services,   capital  projects,   the   Permanent  Fund,   and                                                            
     Permanent Fund dividends.                                                                                                
           Section 9 is a severability clause.                                                                                
           CHAIR STEVENS:  Thank you, Emily.                                                                                  
           MS. NAUMAN:  Any questions?                                                                                        
           CHAIR STEVENS:  Questions?  Senator Stedman.                                                                       
           SENATOR STEDMAN:  Thank you, Mr. Chairman.  I don't                                                                
     know  if this  is  a proper  time to  ask it  or  if it's  to                                                            
     Revenue,  but this  is the first  time I've taken  a look  at                                                            
     the language.   I'm understanding that the current  structure                                                            
     we  have is either-or,  either a gross tax  or at some  point                                                            
     in time you  default into the net tax.  This appears to  be a                                                            
     calculated  gross tax  and then  a layered net  tax north  of                                                            
     $75;  is  that correct?    So  it's not  either-or,  it's  in                                                            
     addition to?                                                                                                             
           MS. NAUMAN:  Through the Chair to Senator Stedman, I                                                               
     can't speak  to the dollar amounts at which the tax would  be                                                            
     triggered.   I just don't have  enough information to  answer                                                            
     that question.                                                                                                           
           But I would say for the field -- and remember, the                                                                 
     producers  are still going  to be paying  an annually  levied                                                            
     tax,  potentially the  current gross  minimum tax  on top  of                                                            
     that  for a  particular field monthly.   They  may be  paying                                                            
     this  alternative gross  minimum tax  for the  field or  what                                                            
     appears  to  me  to be  the  net  production  tax  additional                                                            
     amount  provided  by the  initiative layered  on top  of  the                                                            
     annual  production tax currently  in law under 43.55.011(e).                                                             
     Does that answer your question?                                                                                          
        SENATOR STEDMAN:  It starts to.  We've got a lot of                                                                   
     work to do  to sort this out.  And another concern I  have or                                                            
     just looking  back in history, we've had a lot of  discussion                                                            
     on  the  integration  between  oil  and  gas   and  potential                                                            
     impacts,  you know,  when we get  a big gas  sale, when  that                                                            
     comes and  how that cost of gas is impacting our oil  revenue                                                            
     positive or negatively.                                                                                                  
        But it appears that this connects directly the gas                                                                    
     tax;  is that correct?  Would  be with the mentioning of  it,                                                            
     that  it would come under the  same tax scenario, or if  not,                                                            
     do  they have  to be  separated, and  how would  they --  how                                                            
     would you separate them?                                                                                                 
      MS. NAUMAN:  Through the Chair to Senator Stedman, the                                                                  
     initiative  appears to require producers that will be  paying                                                            
     taxes  under the  structure  set out  in the  initiative,  in                                                            
     other  words, producers who produce  oil from fields,  units,                                                            
     or  non-unitized reservoirs  that meet  the requirements  set                                                            
     out  in Section 2 to  file taxes where  they do separate  oil                                                            
     and  gas under Section  5 of  the initiative.   I think  that                                                            
     those --  the  provisions  of  the  initiative  will  require                                                            
     substantial  regulations  for the  Department of  Revenue  to                                                            
     sort  out  how those  producers  will  file and  how  they'll                                                            
     separate their lease expenditures.                                                                                       
           CHAIR STEVENS:  Senator Stedman.                                                                                   
         SENATOR STEDMAN:  Thank you, Mr. Chairman.  Just                                                                     
     something  I  think  we need  to  delve into  a  little  bit,                                                            
     because,   as  I  recall,   we  had  significant  difficulty                                                             
     allocating  operating and capital expenditures to oil  and/or                                                            
     gas when  they both come out of  the same hole in the  ground                                                            
     at the  same time.  So I have  no idea, other than we've  had                                                            
     numerous  meetings  at  Resources  over the  years  and  this                                                            
     table  on that  subject.   And it  gets extremely  confusing,                                                            
     and   so   I   look  forward   to   that   conversation   and                                                            
           CHAIR STEVENS:  Thank you, Senator Stedman.  Senator                                                               
     von Imhof.                                                                                                               
           SENATOR VON IMHOF:  Thank you.  So Senator Stedman did                                                             
     sort  of allude  to  the fact  that there  seems to  be  many                                                            
     layers of  taxes on top of each other.  So I'm only going  to                                                            
     just kind  of briefly discuss one layer that's alarming,  the                                                            
     alternative gross minimum tax.                                                                                           
           So right now it's about 4 percent.  And how I read                                                                 
     this  is it's going  to jump to 10  percent with a  potential                                                            
     max up  to 15 percent with also  at higher prices.  So  we're                                                            
     looking  at  quadrupling,  almost  quadrupling   the  current                                                            
     taxes  that we have now, particularly  in an area where  it's                                                            
     the lower  price per barrel, where it's very slim margins  at                                                            
     that point.   And, you know, the companies aren't making  all                                                            
     that much  revenue and need that to make payroll to  continue                                                            
     with operations even in some of the rigs.                                                                                
           And I kind of look at it like with every tax that we                                                               
     have,  there is a corresponding  behavior.  And you see  that                                                            
     with  the argument with  sin taxes.  When  you have taxes  on                                                            
     alcohol  or cigarettes, why do you  do that?  Well, to  raise                                                            
     prices enough to potentially curtail behavior.                                                                           
           What kind of behavior are we trying to curtail with                                                                
     this bill?   Like let's just have no production on the  North                                                            
     Slope,  just make  everything idle  underneath $50.   Oh,  by                                                            
     the  way, I think prices  are at about $53.   So I just  look                                                            
     at   this  and  see   this  as  very   alarming,  and   we're                                                            
     essentially  just wanting  to drive  the oil  companies  into                                                            
     the ground and make them shut down.                                                                                      
           CHAIR STEVENS:  Thank you, Senator von Imhof.                                                                      
           Senator Coghill.                                                                                                   
      SENATOR COGHILL:  Thank you.  For when it's my turn to                                                                  
     explain  the initiative to  some of the  folks back home,  it                                                            
     looks  to me like what you brought  out is, in Section 2  and                                                            
     3  we  are  taxing  fields  and  in  5  and  6  we're  taxing                                                            
     producers.   And I know there's different layers.  But  so in                                                            
     the  field -- we have  several producers  we might have,  for                                                            
     example,  in a field.  How do  I explain that dynamic to  the                                                            
     person  who signed the initiative  and said, "We're going  to                                                            
     tax  the  oil  companies,  but  we're  really  talking  about                                                            
     fields"?  How does that distinguish from 5 and 6?                                                                        
       MS. NAUMAN:  Through the Chair to Senator Coghill, I                                                                   
     apologize  for the confusion.   The initiative -- the  entire                                                            
     initiative  taxes producers, but the  tax is actually on  the                                                            
     field,  so that applies  to Sections 3, 4,  5 for the  entire                                                            
        CHAIR STEVENS:  Would you say that again and only a                                                                   
     little bit slower?                                                                                                       
       MS. NAUMAN:  The initiative in its entirety assesses                                                                   
     taxes  by  field.   So Sections  3,  4, 5,  and 6,  they  all                                                            
     assess  taxes by field.   Our current  production tax  system                                                            
     assesses  taxes by  producer.   So at a  very general  level,                                                            
     producers  pool together all of their income from across  the                                                            
     state  or for  specific purposes  by region  -- sometimes  we                                                            
     separate  out areas  like  the Cook  Inlet -- and  then  they                                                            
     take  all their lease expenditures  for the state, you  know,                                                            
     with  some  particular  area  set  out,   and  combine  those                                                            
     together,  and the producer then  pays taxes on that  revenue                                                            
     from --  for -- I have to say  with exceptions for the  state                                                            
     for the year.                                                                                                            
           Producers will still be doing that for areas that are                                                              
     not --  what   I  presume  are  areas  not  covered   by  the                                                            
     initiative.    But  these  fields that  are  covered  by  the                                                            
     initiatives,  producers  will be  paying taxes  by field,  so                                                            
     for income and costs related to that field each month.                                                                   
           SENATOR COGHILL:  Mr. Chairman, if I could just                                                                    
     clarify that?                                                                                                            
           CHAIR STEVENS:  Yes, please, Senator Coghill.                                                                      
           SENATOR COGHILL:  It looks to me like in the                                                                       
     initiative  the fields are fairly narrowly defined.   They're                                                            
     a certain  minimum production and maximum production,  right?                                                            
     And  so those are, I think,  Prudhoe, Kuparuk, and one  other                                                            
     field.  So  I think isn't that true that this just targets  a                                                            
     couple  of major  producing fields  based on  the numbers  of                                                            
     the excess  of 40,000 or in  excess of 400,000 for the  total                                                            
     cumulative?   There can  only be two or  three fields on  the                                                            
     North Slope, right?                                                                                                      
           MS. NAUMAN:  Through the Chair to Senator Coghill,                                                                 
     from  reading  the  information provided  by  the  initiative                                                            
     sponsor, that's my understanding of their intent.                                                                        
           I have a couple of comments.  The initiative uses the                                                              
     terms "fields,  unit, and non-unitized reservoir," which  are                                                            
     terms  that  are  not currently  defined  in  the  production                                                            
     taxes  statutes.  So  although they might  seem to be  fairly                                                            
     understandable  concepts,  there's quite  a bit  of room  for                                                            
     interpretation,  especially in the term  "field."  We have  a                                                            
     definition  of "field"  elsewhere  in statute  in the  Alaska                                                            
     Oil and  Gas Conservation Commission laws.  I would not  want                                                            
     to rely  on that definition to assess taxes personally.   The                                                            
     Department of Revenue might feel differently.                                                                            
           "Unit" is defined elsewhere in statute, again, in the                                                              
     Oil   and  Gas  Conservation   Commission  statutes,  but   I                                                            
     believe --  and this  is from  a practical  perspective,  not                                                            
     from --  or  sorry, from  a  legal perspective,  not  from  a                                                            
     practical  perspective -- it's possible  that there could  be                                                            
     multiple  fields within  a unit  or multiple  units within  a                                                            
     field,  which  means  that  it would  be  very  difficult  to                                                            
     assess  or to know certainly what  exact piece of land  would                                                            
     be  subject --  where  the ring-fence  would  be  around  the                                                            
     object that is subject to the taxation.                                                                                  
       SENATOR COGHILL:  Thank you, Mr. Chairman.  That's as                                                                  
     clear  as  mud  to  me,  but  it  just   shows  kind  of  the                                                            
     complexity  of the issue.  First, for me from reading  it, it                                                            
     looked  to  me like  we  were  talking about  fields  in  one                                                            
     section  and  producers  in  another.    And  it  seems  like                                                            
     we're --  whoever is producing  is going to  get a tax;  it's                                                            
     just how.  And so I'll start from there.  Thank you.                                                                     
           CHAIR STEVENS:  Thank you, Senator Coghill.                                                                        
      Any further explanation before we go on?  Okay.  Thank                                                                  
     you; Senator Begich.                                                                                                     
           SENATOR BEGICH:  Thank you, Mr. Chairman.                                                                          
        A couple of clarifying points:  When I was reading                                                                    
     Section  5, I had  a different interpretation  than you,  and                                                            
     I'm  just wondering  if my  interpretation  carries water  at                                                            
     all, not to bring water into an oil and gas field.                                                                       
          But when I read the section, it says, "For each                                                                     
     producer, the  taxes set forth in Section 3 and 4, which  are                                                            
     explicitly  oil,  shall  be  calculated  separately  for  the                                                            
     following: for oil and for gas."                                                                                         
      Isn't that just a way of identifying that they -- that                                                                  
     the  intent of the writer  of the initiative  is to be  clear                                                            
     that it's  for oil that you're calculating and not trying  to                                                            
     confuse  it  by -- I  mean,  isn't that  one interpretation,                                                             
     that they're  trying to separate the two out and ensure  that                                                            
     the producers are accounting for it separately?                                                                          
        MS. NAUMAN:  Through the Chair to Senator Begich, I                                                                   
     agree  that your  interpretation  is both  probably the  most                                                            
     reasonable  and,  based  on  my  reading  of  the initiative                                                             
     sponsors, is  probably what was intended.  You could  read it                                                            
     also,  breaking it  out, the taxes  set forth  in Sections  3                                                            
     and 4 shall be applied separately to gas.                                                                                
           SENATOR BEGICH:  Sure.                                                                                             
           MS. NAUMAN:  And that was where I read the ambiguity                                                               
     into the --                                                                                                              
           CHAIR STEVENS:  Senator Begich.                                                                                    
           SENATOR BEGICH:  Thank you, Mr. Chair.  The follow-up                                                              
     then  to that  is, earlier we  heard from  the Department  of                                                            
     Law  that  intent matters,  what  we say  here at  the  table                                                            
     would  be indicative of  our intent in  terms of alternative                                                             
     legislation or anything like that.                                                                                       
           Wouldn't it also apply that the intent that you've                                                                 
     spoken  to from  the writers  of the  initiative would  apply                                                            
     here  or would at  least have  the weight of  law behind  the                                                            
     interpretation as opposed to an alternative interpretation?                                                              
           MS. NAUMAN:  Through the Chair to Senator Begich,                                                                  
     Megan  and I  had many  discussions in  preparation for  this                                                            
     meeting.   We  kind  of divided  up the  tasks, and  I  think                                                            
     Megan is ready to answer the question.                                                                                   
           MS. WALLACE:  For the record, Megan Wallace, Director                                                              
     of Legal Services.                                                                                                       
           Through the Chair, Senator Begich, you're correct,                                                                 
     when  the -- if this results in  litigation and the court  is                                                            
     trying  to assess a proper  interpretation of this  language,                                                            
     it's likely  going to trigger some constitutional issues.   I                                                            
     mean,  initiatives are  a creature of  the Constitution,  and                                                            
     so  the Supreme  Court will  look, you  know,  at their  past                                                            
     precedent,  but they also will  give weight to the intent  of                                                            
     the initiative,  and they will try to give deference  to that                                                            
     intent.   And  I suspect that,  you know,  they'll be --  you                                                            
     know, litigation  is two sided.  So -- likely the  initiative                                                            
     sponsors  will explain what  their intent  was, and it  might                                                            
     be countered, you know, by the opposition.                                                                               
           SENATOR BEGICH:  And one last --                                                                                   
           CHAIR STEVENS:  Oh, yes, Senator Begich.                                                                           
        SENATOR BEGICH:  Thank you, Mr. Chairman.  I don't                                                                    
     think anybody  doubts there isn't going to be litigation,  so                                                            
     that's,  you know, one way or the  other.  But the -- when  I                                                            
     look at  the initiative and sort of the intent behind  it and                                                            
     the  way it's crafted -- and I  have read comments that  were                                                            
     forwarded to  the committee or to the council by the  sponsor                                                            
     that  were forwarded  on to  all of  us --  it seemed  pretty                                                            
     clear  that the idea  was to narrowly  construe it to  legacy                                                            
     fields  and that there's  -- that there  isn't a doubt  about                                                            
     that, and  yet I'm hearing doubt at the table now.  So  which                                                            
     is it?   Was it -- was -- the comments from the sponsor,  are                                                            
     they  not clear  that  this is  meant to  be focused  on  the                                                            
     legacy  fields?  It seems  pretty clear to  me from both  the                                                            
     writing  of the  initiative and  from the  letters that  were                                                            
     provided to this council.                                                                                                
       MS. WALLACE:  Through the Chair, Senator Begich, our                                                                   
     purpose  here at the  table is  to just flag  issues that  we                                                            
     spot.   And as you  noted, this might  be a contested  issue,                                                            
     and  we certainly don't -- aren't  going to weigh in on  what                                                            
     a   court  is  likely  to   conclude  with  respect  to   any                                                            
     disagreements.   So I  think what Emily did  was just flag  a                                                            
     potential  argument  as  to  maybe  some  ambiguity  but  not                                                            
     express  any  opinion  as  to  whether  --  what  side  would                                                            
     prevail if that were contested.                                                                                          
           SENATOR BEGICH:  I'm not asking that.                                                                              
           CHAIR STEVENS:  Senator Begich, please continue.                                                                   
       SENATOR BEGICH:  Thank you.  I'm not asking to opine                                                                   
     on  which side would  prevail.   What I'm asking  is, is  the                                                            
     initiative  narrowly construed  or not?   You  know, I  mean,                                                            
     I'm  simply  asking  based  on  what   you've  read,  is  the                                                            
     initiative narrowly construed to legacy fields or not?                                                                   
           MS. NAUMAN:  Through the Chair to Senator Begich, in                                                               
     my  effort to  be  as policy-neutral  as possible,  I  really                                                            
     tried  to focus on the  language of the  initiative.  To  the                                                            
     extent   that  I  looked   at  the   interpretation  of   the                                                            
     initiative  by the sponsor,  I tried to  keep my exposure  to                                                            
     that  fairly minimal.   I understand that's  a factor that  a                                                            
     court  and likely Department of  Revenue will consider,  that                                                            
     they would speak to that when they're adopting regulations.                                                              
           My task, as your legislative attorney, is to look at                                                               
     the law  that's in front of  me and determine what it  means.                                                            
     I  think that  the interpretation  that you  have offered  as                                                            
     the  explanation  from  the  sponsor  is  probably  the  most                                                            
     reasonable  and likely  interpretation, but  reading it  just                                                            
     purely   from  a   sterile  context,   I   think  that   both                                                            
     interpretations are possible.                                                                                            
           SENATOR BEGICH:  Fair enough.  Thank you.                                                                          
           CHAIR STEVENS:  Very interesting question.  I thank                                                                
     you  for clarifying that, and  we do appreciate the  position                                                            
     this puts you in.  Senator Stedman.                                                                                      
           SENATOR STEDMAN:  Thank you, Mr. Chairman.  Again,                                                                 
     this  is  the very  first  hearing of  this  completely  very                                                            
     complex  subject matter.   But under  the current structure,                                                             
     if  we have a major  gas sale, we  have significant  exposure                                                            
     to  field  allowances, potentially  eliminating  our  revenue                                                            
     stream,  and the concern  is to  have net zero.   And  that's                                                            
     not  a  wacky  thing to  throw  on  the table,  it's  just  a                                                            
     mathematical  potential exposure, very potential exposure  we                                                            
     have  that I'm sure the Revenue  and DNR are concerned  about                                                            
     also.    So  does  this  bill  impact  the  field   allowance                                                            
     exposure   that  we  may  face   in  any  way  that   appears                                                            
           MS. NAUMAN:   Through the Chair  to Senator Stedman,  I                                                            
     don't  know the answer  to that question.   I would happy  to                                                            
     be -- happy  to look into it a little bit more.  Perhaps  the                                                            
     Department  of Revenue could provide  some analysis on  that.                                                            
     I can't provide any comment.                                                                                             
           CHAIR STEVENS:  Thank you, Senator Stedman.                                                                        
           SENATOR STEDMAN:    As  a  follow-up,  Mr. Chairman,  I                                                            
     think  that could come  in the future  with different  folks.                                                            
     And  maybe  they take  -- it  will  take some  time  to  sort                                                            
     through  this and  figure it out,  but it's  an issue  that's                                                            
     very  seldom talked about  that has a  huge financial  impact                                                            
     on  the state potentially,  and we need  to understand it  at                                                            
     the table also.                                                                                                          
           CHAIR  STEVENS:    Thank  you.    Yes,  Representative                                                             
           REPRESENTATIVE JOHNSON:    Just one  last thing:    Are                                                            
     there  any  rules  on  what we  can  and  cannot  share  with                                                            
     constituents  as  we go  forward  about  the initiative?    I                                                            
     mean, could  we have a town hall and explain to them what  we                                                            
     don't  know, do  know?   I  just would  like you  to  clarify                                                            
           MS.  WALLACE:    Through   the  Chair,  Representative                                                             
     Johnson,  I don't want  to give bad advice  on the record  in                                                            
     committee,  but I would be happy to provide some analysis  to                                                            
     the committee if you wish.                                                                                               
           CHAIR STEVENS:   Thank you, Megan.   Further  comments?                                                            
     Senator Begich.                                                                                                          
           SENATOR  BEGICH:   Just  as  a  member  of  the  Ethics                                                            
     Committee,  it might be a question for the Ethics  Committee,                                                            
     I think.  John might agree with that.                                                                                    
           CHAIR STEVENS:    Everything  has  to  be  answered  by                                                            
     Ethics.  Yes, Senator Coghill.                                                                                           
           SENATOR COGHILL:  Just a structural question:  You                                                                 
     know,  our tax  system is  complex already  as it  is.   Does                                                            
     this narrow  it enough to create a situation where if  we did                                                            
     this,  would we  be in a  danger of  a specialized  tax on  a                                                            
     particular  field that  would create  the similarly  situated                                                            
     tension  amongst  other fields,  where  you might  treat  one                                                            
     field  so disparately different than  the other and create  a                                                            
     backlash for us?                                                                                                         
           MS. NAUMAN:  Through the Chair to Senator Coghill, I                                                               
     have  two comments:  The first  is, my understanding of  your                                                            
     question  is  that  you  are  hypothetically  thinking  about                                                            
     creating  legislation  to  meet  that  substantially  similar                                                            
     task; is that correct?                                                                                                   
           SENATOR COGHILL:  Maybe I should --                                                                                
           CHAIR STEVENS:  Senator Coghill.                                                                                   
           SENATOR COGHILL:  If we are contemplating this law as                                                              
     it  is, would we  be in danger  of taxing  one group so  much                                                            
     more  than  another  group that  we  would be  in  danger  of                                                            
     having   a  situation  where  we're   taxing  one  group   so                                                            
     differently  than another group  that we  would be in  danger                                                            
     of  failing what  normally the  courts would  call  similarly                                                            
     situated situations?                                                                                                     
           I remember once when we did a tax to fishing people                                                                
     that were  from out of state, we got our hand slapped  really                                                            
     hard  on  that, and  we  ended up  having  to pay  back  some                                                            
     significant  money.   And  I just  wondered if  this  wanders                                                            
     into that question.                                                                                                      
           MS. NAUMAN:  Through the Chair to Senator Coghill, you                                                             
     are  alluding  to  an equal  protection  analysis  under  the                                                            
     Alaska  and United States  Constitutions.   Any time that  we                                                            
     treat similarly  situated individuals or persons differently                                                             
     as the  government, we do trigger potential equal protection                                                             
       Equal protection analysis is a sliding scale based on                                                                  
     the  factor by  which the  differential treatment  is  based.                                                            
     This  would  be  an economic  factor;  in  other  words,  the                                                            
     behavior  that  is differentiating  the individual  is  being                                                            
     assessed  different tax rates is  an economic one.  That's  a                                                            
     very low  bar.  That said, the  court will still look at  the                                                            
     reasons, the  purpose, and the means used to accomplish  that                                                            
     differential treatment in the equal protection analysis.                                                                 
        I think another potential smaller issue to add onto                                                                   
     that  is  the producers  that will  be  subject to  this  tax                                                            
     might  also have  much more  complex production  tax  filings                                                            
     that could be an administrative burden as well.                                                                          
           SENATOR COGHILL:  Thank you, Mr. Chairman.                                                                         
       CHAIR STEVENS:  Thank you, Senator Coghill.  Further                                                                   
     questions or comments?  Senator Stedman.                                                                                 
      SENATOR STEDMAN:  I hate to keep bringing these little                                                                  
     things  up, but  every year  we get  the Revenue  Sourcebook,                                                            
     Mr. Chairman,   and   it's  a   consolidation   of   multiple                                                            
     companies'  monthly  reporting to  the  agencies.   And  they                                                            
     boil  it down to one  view, the entire  year for us there  in                                                            
     the Legislature.                                                                                                         
      So would this initiative then potentially change that,                                                                  
     where we  would be having monthly data produced from  all the                                                            
     fields  and  then consolidated  to  us  in a  monthly  format                                                            
     or -- and still an annual number?                                                                                        
      It just -- it seems like -- I guess for those watching                                                                  
     at  home, it's difficult  to sit here at  the table when  you                                                            
     have --  say you  have four  major companies  or three  major                                                            
     companies.   They all have  different cost structures.   They                                                            
     all report  monthly, and we get a consolidated number at  the                                                            
     end  of the  year  and have  to  set policy.   And  we  might                                                            
     favor --  one  might win,  one might  lose,  and one  of  the                                                            
     companies  might  be in  the  middle and  noncommittal.    It                                                            
     makes  it difficult.  So are  we compounding that  challenge,                                                            
     or  are  we --  probably  a  better  question   for  Revenue,                                                            
     Mr. Chairman.                                                                                                            
           MS. NAUMAN:  Through the Chair to Senator Stedman,                                                                 
     that  is  --  you're  right,  it's  a  better  question   for                                                            
           Something else that you might be interested in                                                                     
     knowing,  if you're able  to ask the  Department of  Revenue,                                                            
     is  how they would intend  to audit the  now monthly tax  due                                                            
     rather  than having one year of  data and one year to  audit.                                                            
     It  seems possible  they might  have to  perform audits  each                                                            
           CHAIR STEVENS:  Thank you, Emily, for those comments.                                                              
     Further  questions  or  comments  from members  of  the  Leg.                                                            
     Council?    Well,  that  was a  fascinating  discussion.    I                                                            
     appreciate the time you've spent with us and very thorough.                                                              
           So let's go on then to our next.  We have then Deputy                                                              
     Commissioner   Mike  Barnhill  and   Tax  Division   Director                                                            
     Colleen  Glover, and  I understand  that Cori  Mills will  be                                                            
     joining them.                                                                                                            
           Just a comment, Deputy Commissioner.  You have two                                                                 
     former  Revenue   commissioners  hovering  over  your   back.                                                            
     We're  pleased to see Mr. Corbus  and Mr.  Alper here in  the                                                            
           MR. BARNHILL:  Thank you, Mr. Chair.  I am aware of                                                                
     many  people hovering over my  shoulder today, but thank  you                                                            
     for inviting us.                                                                                                         
           We're going to focus our comments today primarily on                                                               
     the process  of implementing the initiative.  Because  of the                                                            
     sensitivities  regarding  the  pending  litigation  over  the                                                            
     meaning of  the initiative, we're going to try as hard  as we                                                            
     can  to  avoid answering  many  of the  questions  that  were                                                            
     posed  in the  last  presentation, but  we do  think  there's                                                            
     ways  of getting information to  the Legislature in the  form                                                            
     of  scenarios that are presented  outside the context of  the                                                            
           So, for  instance,  if the  finance  committees  wanted                                                            
     information  on what would  happen if  the minimum gross  tax                                                            
     was  changed in  some way, those  are scenarios  that we  can                                                            
     present   information  on  through  our  economics   research                                                            
           So with that, I'm going to turn it over to Ms.  Glover,                                                            
     and she's going to talk about implementation process.                                                                    
           CHAIR STEVENS:   Thank  you,  Mr. Barnhill.   That  was                                                            
     indeed brief.                                                                                                            
           MS. GLOVER:  Good morning, committee.  Colleen  Glover,                                                            
     for  the record,  Tax Director,  Department of  Revenue.   So                                                            
     I'll  just walk through  the process of  what the  department                                                            
     will  do  in  order to  implement  this  initiative  if  it's                                                            
           As you've  heard earlier  that the  initiative  becomes                                                            
     effective  90 days after certification, then -- and we  would                                                            
     then be --  have to have our system available for a  taxpayer                                                            
     for  the next monthly return that  would be filed after  that                                                            
     90-day process.                                                                                                          
           So currently our system --  our tax revenue  management                                                            
     system  kind  of  has  two aspects:    There's  kind  of  the                                                            
     internal  system  that  does  all  the  programming  and  the                                                            
     calculations  of the taxes, and then there's a customer  user                                                            
     interface,  which we  call Revenue  Online, and  this is  for                                                            
     all our tax types.                                                                                                       
           And so  the system  would need  to be  updated for  our                                                            
     customers/taxpayers   to  be  able  to  file  their   monthly                                                            
     returns,  as  well as  the  back-end programming  to  do  the                                                            
     calculations.   That  all would  need  to be  done within  90                                                            
     days  of enactment  of  this initiative.   Our  estimate  for                                                            
     cost  is  $7.5 million to  do  this.   Most  of the  work  is                                                            
     programming.   We expect  a significant  workload to be  able                                                            
     to  program these  changes within  90 days.   That  is a  big                                                            
     lift to do in 90 days.                                                                                                   
           Then as far as the regulation process, we will begin                                                               
     working  on  those.   The  timeline you  heard.   It  can  be                                                            
     anywhere  from  six  months  to  a  year,  depending  on  the                                                            
     complexity  of the  regulations.   You heard  Ms. Mills  talk                                                            
     about  kind of the  minimum timeline.   It is our experience                                                             
     for any  kind of major oil and  gas tax changes in the  past,                                                            
     that  that would  be several  months  up to  a year  to do  a                                                            
     thorough   public  notice  process,  public  workshops,   and                                                            
           There's -- we expect that within the 90 days we will                                                               
     have  programming  complete,  but  we expect  there  will  be                                                            
     changes  after  that.   We  don't  expect it's  going  to  be                                                            
     exactly  perfect after  90 days and  whether the regulations                                                             
     are  finalized or not at  that time.  So  we expect to be  in                                                            
     kind  of this transitional period  where we will be  testing,                                                            
     reprogramming,   testing,    reprogramming   until   we   get                                                            
     everything  completely done and tested in time for the  final                                                            
           And that -- unless there's questions on that, we --                                                                
           CHAIR STEVENS:  Ms. Glover, thank you.  Senator                                                                    
           SENATOR BEGICH:  Just to clarify and question.  You                                                                
     said  it would  be difficult  to do  monthly tax  collection,                                                            
     but  didn't  we collect  taxes  monthly  under the  old  ACES                                                            
     regime from the oil industry?                                                                                            
           MS. GLOVER:  Senator Begich, through the Chair, I                                                                  
     didn't  mean, if I  said that,  it would be  difficult to  do                                                            
     monthly  tax collections.   We  do monthly  tax returns  now.                                                            
     There's  a  monthly  return  that's   filed  monthly  now  by                                                            
     taxpayers.   It's  an estimated  tax we  do collect  monthly,                                                            
     but the  return is an annual return currently.  But there  is                                                            
     a monthly filing, or it's called a return in our system.                                                                 
       SENATOR BEGICH:  Thank you.  Thank you, Mr. Chairman.                                                                  
      CHAIR STEVENS:  Thank you, Senator.  Further questions                                                                  
     or  comments, concerns or thoughts?   We're going to let  you                                                            
     off  awful easy it looks  like.  And  you have your  attorney                                                            
     with you, so what can we ask?                                                                                            
           Senator Coghill.                                                                                                   
        SENATOR COGHILL:  Maybe I'll drill a little deeper                                                                    
     into  that.  Collecting  monthly is one  thing, but would  it                                                            
     be  contemplated, as was proposed  earlier, that there  would                                                            
     be audit provisions done following that collection process?                                                              
       MS. GLOVER:  Senator Coghill, through the Chair, the                                                                   
     audit -- in  statute right now we have a six-year statute  of                                                            
     limitations for auditing returns.                                                                                        
      SENATOR COGHILL:  So at this point, it looks like that                                                                  
     wouldn't change  that unless there was a regulatory need  to.                                                            
     So,  you know,  we're struggling  with  how do  we deal  with                                                            
     fields  and producers, which  is a new concept  in law.   And                                                            
     so you would  have to then begin to look at producers  within                                                            
     whatever  field you could define,  right?  So you would  have                                                            
     to  probably start thinking  about fields  as a taxpayer  now                                                            
     differently  than  you do.   And  so  is that  something  you                                                            
     would   leave  up   to  regulation,   or   would  you   start                                                            
     immediately    looking   at   auditing   those   with    that                                                            
     contemplation in mind?                                                                                                   
       MS. GLOVER:  Senator Coghill, through the Chair, the                                                                   
     audits  typically happen much  later in  the process.   Right                                                            
     now  we are auditing  the 2014  tax year, so  those are  much                                                            
     later  in the  process.   And as  far as  interpretation  and                                                            
     policy  calls, those have  not yet been decided.   And so  if                                                            
     this  initiative is  enacted, we would  work with Department                                                             
     of Law on those.                                                                                                         
           SENATOR COGHILL:  Thank you.                                                                                       
           CHAIR STEVENS:   Thank you,  Senator.   And to  Senator                                                            
     von Imhof and then Senator Stedman.                                                                                      
           SENATOR VON  IMHOF:   Thank  you.   So I'm  looking  at                                                            
     Section  7, public records.   So all  filings and supporting                                                             
     information  provided  by  each producer  to  the department                                                             
     relating  to the calculation  of payment  of the taxes  shall                                                            
     be a matter of public record.                                                                                            
           So all filings and  supporting information, that  might                                                            
     be their  daily revenue log, all  the money that came in  for                                                            
     that particular  month by whom, what their expenses were,  so                                                            
     essentially  opening  their  books and  their  checkbook  and                                                            
     making  it a  public record.   Do  you know  of -- any  other                                                            
     corporation   that  pays  taxes  to  Alaska  now,  is   their                                                            
     checkbook public?                                                                                                        
           MS. GLOVER:   Senator  von  Imhof, through  the  Chair,                                                            
     currently  under statute  all taxpayers and  all taxes  under                                                            
     43 -- Chapter 43 are confidential.                                                                                       
           SENATOR VON IMHOF:  So  we are carving out an  industry                                                            
     and  making their particular  books, no  one else, but  their                                                            
     particular  books  public  to the  state,  the  country,  the                                                            
           MS. MILLS:  Cori Mills again, for the record.   Senator                                                            
     von  Imhof, through  the Chair,  I don't want  to comment  on                                                            
     exactly  how broad or  narrow this would  be for the  reasons                                                            
     we talked  about before, but this does -- would change  those                                                            
     confidentiality  provisions for the  specific tax enacted  in                                                            
     this law.                                                                                                                
           CHAIR STEVENS:  Senator von Imhof.                                                                                 
           SENATOR VON IMHOF:   So I just have  to comment on  the                                                            
     fairness   of  that,  the --   how  businesses  can   operate                                                            
     competitively   with  that,   how  we   are  highlighting   a                                                            
     particular  business  over  others   and  just  the  punitive                                                            
     nature  of that on so many levels.   And I just -- I find  it                                                            
     despicable  that we would treat  a particular company or  any                                                            
     number of companies like that.                                                                                           
      CHAIR STEVENS:  Thank you, Senator von Imhof.  Senator                                                                  
          SENATOR STEDMAN:  Thank you, Mr. Chairman.  My                                                                      
     co-chair corked  me on the question I was going to ask  about                                                            
     the  filings.  But  let me couch  it a different  way.   They                                                            
     use   the   word   "all,"   "all   filings   and  supporting                                                             
     information."    And  we've had,  over  the  years,  numerous                                                            
     presentations  on the inability that Alaska has of accessing                                                             
     information  in our  oil basin.   Virtually every consultant                                                             
     that we've  hired has brought that to our attention.   That's                                                            
     just  the way  we've been  structured and  we struggle  along                                                            
     with and always comment about the lack of information.                                                                   
         My understanding is Norway, they have a very open                                                                    
     process  in the North Sea and  compared -- so it's very  easy                                                            
     to see the cost and revenue of the industry.                                                                             
       But where is the boundary between the industry norms                                                                   
     worldwide  for  public  --  or  for  us  to  have  access  to                                                            
     information   and  the  word  "all  filings  and  supporting                                                             
     information"?   I'm  just not so  sure that  where that  line                                                            
     is,  and it's something I think  we need to clarify  clearly.                                                            
     There's  a  need,  in  my  opinion,   for  us  to  have  more                                                            
     information.   But what  is the definition  of "more,"  where                                                            
     we  don't breach --  like Senator von  Imhof mentioned,  have                                                            
     the  information to the point  where it's egregious and  puts                                                            
     the corporations  in a position where they have -- you  know,                                                            
     lose   maybe  some   competitive  advantage   against   their                                                            
     competitors?   So I think we need  to explore that on a  more                                                            
     of a comparative basis.  "All" is rather an inclusive term.                                                              
       CHAIR STEVENS:  Thank you.  We'll begin with Senator                                                                   
     Stutes  and --  I'm sorry,  Stutes  and Senator  Begich,  and                                                            
     then  we'll   get  the  rest  of  you.    Please  go   ahead,                                                            
     Representative Stutes.                                                                                                   
           VICE-CHAIR STUTES:  Thank you, Mr. Chair.  I'm curious                                                             
     on  this "all filings and supporting  information."  Is  that                                                            
     required   for  other  resource   revenue  that  this   state                                                            
     receives   from  any   of  the  other   producers  of   other                                                            
           MS. GLOVER:  Vice-Chair Stutes, as I can only speak to                                                             
     tax  revenues, if  you have  questions on  royalty  revenues,                                                            
     that  would  be  a  question  for  DNR.    But  there  is  no                                                            
     requirement  in -- for  other taxes  under Chapter  43.   The                                                            
     only --  there  are some  limitations  on  data that  we  can                                                            
     aggregate   and  give,  but  we   do  not  release   taxpayer                                                            
     confidential information for any taxes.                                                                                  
           VICE-CHAIR STUTES:  Thank you.                                                                                     
           CHAIR STEVENS:  Thank you.  So if I have this right,                                                               
     we  have -- Senator  Begich wishes  to speak, Representative                                                             
     Johnston,  Representative  Johnson.    Anyone  else?    Okay.                                                            
     Senator Begich.                                                                                                          
           SENATOR BEGICH:  Thank you, Mr. Chairman.  Just on                                                                 
     echoing  comments from  the co-chairs  of  Finance but  maybe                                                            
     from  a   different  angle.    It's  my  understanding   from                                                            
     presentations  that I've had from  the Legislature's oil  and                                                            
     gas  experts that -- supporting  what you just said,  Senator                                                            
     Stedman --  that other jurisdictions  do require substantial                                                             
     transparency,  and the issue  is where  the line is  probably                                                            
     where we're going to.                                                                                                    
           But isn't it true some of our own taxpayers report on                                                              
     Alaska through  other transparency agreements that they  have                                                            
     with --  for example,  British Petroleum,  when  it comes  to                                                            
     reporting  to  the International  Association,  because  they                                                            
     have  signed on to that, they  have to report their  profits,                                                            
     and   they    have   to   report   their   expenses    within                                                            
     jurisdictions.  I mean, that's true, right, currently?                                                                   
          MS. GLOVER:  Senator Begich, through the Chair,                                                                     
     it's --   I   can't   really   speak   to   what  taxpayers'                                                             
     requirements  are for reporting,  like SEC  filings.  But  if                                                            
     they do  report information publicly, that doesn't then  give                                                            
     us  the authority  for us  to report  that  information.   So                                                            
     regardless  of whether  a taxpayer reports  it themselves  in                                                            
     the public domain, we cannot provide that.                                                                               
       SENATOR BEGICH:  Right.  I think it's just getting to                                                                  
     my  point of  the balance of  what transparency  ought to  be                                                            
     allowed.   For  example, can --  do we know  what the --  for                                                            
     Exxon  or for BP what  the profits or  expenses were here  in                                                            
         MS. GLOVER:  Senator Begich, through the Chair, I                                                                    
     don't  have that information.  I  think you should ask  those                                                            
     taxpayers that information.                                                                                              
        SENATOR BEGICH:  All right.  And that's my point I                                                                    
     think is  that there's a balance that has to be struck  here,                                                            
     Mr. Chairman,  at some point.   And I  think supporting  what                                                            
     you're  saying,  Co-Chair  Stedman,  and  the reasonableness                                                             
     argument  that Senator --  Co-Chair von Imhof  brought up  is                                                            
     what  is the balance between the  level of information?   And                                                            
     part of  our responsibility I think would be to define  that,                                                            
     were this  initiative to pass would be to define that,  or if                                                            
     it  were to  be replaced,  to ensure  that we  speak to  that                                                            
     transparency  issue one  way or  the other.   But clearly  we                                                            
     don't  know the answer to those  questions, and I think  that                                                            
     hampers  our ability at the --  at our table to identify  how                                                            
     we address budgets.                                                                                                      
           CHAIR STEVENS:  Thank you, Senator Begich.                                                                         
           Mr. Barnhill, did you have a response?                                                                             
           MR. BARNHILL:  Mr. Chair, I think one of the                                                                       
     difficulties   we,  the  Department   of  Revenue,  have   in                                                            
     participating  in the conversation at the table as presented                                                             
     is  there's a  very  specific statute  that says  that  state                                                            
     funds,  in the  context of an  initiative, can  only be  used                                                            
     for  nonpartisan education.   And  so that's --  that is  the                                                            
     posture  in which we  sit before you.   The various  comments                                                            
     at  the  table are  phrased  in  terms of  advocacy,  and  we                                                            
     really  do not  want  to participate  in advocacy  on  either                                                            
           In that spirit, there are important issues of tax                                                                  
     policy   regarding   transparency   of  how   we   administer                                                            
     statutes,  and  I think  we  can bring  back  a presentation                                                             
     outside  the context  of  the initiative  on what  those  tax                                                            
     policy considerations  are and what practices are within  the                                                            
     state of Alaska and outside the state of Alaska.                                                                         
           But when we have advocacy going on at the table over                                                               
     specific   provisions   in   this   initiative,    that's   a                                                            
     conversation    we'd    rather    refrain    from    actively                                                            
     participating in.                                                                                                        
           CHAIR STEVENS:  I understand that, and I understand                                                                
     you  will certainly be asked those  questions later.  I  will                                                            
     allow  Senator  Begich  to  continue  questioning,  and  then                                                            
     we'll go down to Johnston, Johnson, and Senator Stedman.                                                                 
           SENATOR BEGICH:  I just want to take exception to the                                                              
     comments  that were  just made by  Mr. Barnhill that  there's                                                            
     advocacy  going  on  at this  table.   What  I'm  hearing  in                                                            
     people  who are questioning issues  around an initiative,  no                                                            
     one  here  has  spoken  either  in  favor   or  against  this                                                            
     initiative.    And  I think  that,  at the  very  least,  the                                                            
     conversations  at this  table should  not  be categorized  in                                                            
     that manner  by somebody who's sitting there because  I think                                                            
     that's unfortunate.                                                                                                      
           CHAIR STEVENS:  Thank you, Senator Begich.  So a                                                                   
     lesson   for  all  of   us  to  consider.     Moving  on   to                                                            
     Representative Johnston.                                                                                                 
         REPRESENTATIVE JOHNSTON:  Yes, thank you, Senator                                                                    
     Stevens.   Just  a follow-up  to Senator  Stedman's  comments                                                            
     about  the Norwegian  transparency.   I think  that we  might                                                            
     find   that  Statoil,  which  is   owned  partially  by   the                                                            
     Norwegian   government  but   is  traded,   is --  has   less                                                            
     restriction  on  what  they  disclose  and  what  they  don't                                                            
     disclose   than  their  Norwegian   oil  company,  which   is                                                            
     majority  owned by  the Norwegian government,  than they  had                                                            
     more transparency.   So it's not quite as clear as  sometimes                                                            
     it's presented as.  A follow-up question?                                                                                
       CHAIR STEVENS:  Yes, please, Representative Johnston.                                                                  
       REPRESENTATIVE JOHNSTON:  I -- the definition of the                                                                   
     fields to  be taxed, I'm trying to think of a scenario  where                                                            
     those  fields become more fluid  than they would be today  by                                                            
     definition,  because you have a minimum amount that needs  to                                                            
     be  produced  and then  you have  the  amount that  has  been                                                            
     produced.    And it's  the  minimum  is where  I  could  have                                                            
     concerns,  whereas if  this tax is  implemented, the  efforts                                                            
     to  draw  oil  from the  field  would  be  less economically                                                             
     feasible,  and so those  fields could be --  drop out of  the                                                            
     taxation and could happen rather quickly.                                                                                
       And on the other hand, you could have fields in other                                                                  
     units that  maybe came on faster, and what kind of  oversight                                                            
     would  that require?  I'm back  to Senator Coghill's idea  as                                                            
     far  as auditing.   Even though  it's a  yearly audit,  we're                                                            
     now  talking monthly  and by the  field and if  this was  far                                                            
     more fluid than we can see right now.                                                                                    
         MS. GLOVER:  Representative Johnston, through the                                                                    
     Chair,  in the initiative  it does have  those thresholds  of                                                            
     the  40,000 barrels per day  in the preceding  year and  then                                                            
     the  400 million  cumulative.   So it's  possible that  there                                                            
     are  fields that could be -- qualify  today and won't in  the                                                            
     future  or  that  don't  qualify  today  that  could  in  the                                                            
     future, including  new fields, however that becomes  defined.                                                            
     As  far as  the defining or  tracking or  a reporting,  those                                                            
     are policy calls that have not been made yet.                                                                            
           REPRESENTATIVE JOHNSTON:  Thank you.                                                                               
           CHAIR STEVENS:  Thank you very much, Representative                                                                
     Johnston.     We'll  move   on  to  Representative   Johnson,                                                            
     Stedman, and then Coghill.                                                                                               
           SENATOR STEDMAN:  Thank you, Mr. Chairman.  Just                                                                   
           CHAIR STEVENS:  Representative Johnson first.                                                                      
           SENATOR STEDMAN:  Oh, excuse me.                                                                                   
           REPRESENTATIVE JOHNSON:  Thank you, Mr. Chair.  So, I                                                              
     mean,  I recognize  and  acknowledge the  sensitive  position                                                            
     that  you are in  in this situation,  and I appreciate  that.                                                            
     And as  you can imagine, all of  us sitting at the table  are                                                            
     in a bit  of a sensitive position as well because we need  to                                                            
     figure  out exactly how much this  is going to cost us as  we                                                            
     move  forward.   We're planning  to be done,  and really  you                                                            
     are   the  Department   of  Revenue's  key   to  helping   us                                                            
     understand  what those numbers are.   And while you can't  be                                                            
     specific,  I  mean,  we're all  trying  to get  to  the  same                                                            
     conclusion  I --  or the  same sense  of what's  happening  I                                                            
           I, too, have some concerns about the confidentiality,                                                              
     and  I'd like  to think  that that's  not a  partisan  issue,                                                            
     that's  a  business  issue.   But  if you  would --  and  I'm                                                            
     trying  to put this in  a more general  sense.  If you  could                                                            
     walk  me through the scenario  of a ring-fenced field,  where                                                            
     you  have tax, as if  it was this  initiative, how would  you                                                            
     see  the administration -- not  your administration, but  the                                                            
     administration  of those  fields  by the  companies, how  are                                                            
     they  going to  share the  cost as  a -- I  mean, obviously,                                                             
     there's administrative  costs that they wouldn't necessarily                                                             
     say  that's  attributed  to  that field,  but  if  you  start                                                            
     ring-fencing  it and you're going to now get down into  those                                                            
     kind  of details,  we're going  to see  things attributed  to                                                            
     fields  in  a way  that they've  never  had to  account  for,                                                            
     we've never  had to account for.  And how hard and  expensive                                                            
     is  it going to be  for the Department  of Revenue really  to                                                            
     sort  that out  and  say, okay,  are you --  if you  were  to                                                            
     audit  something according to a  field specifically, are  you                                                            
     going  to be  able to tell  if the  administrative costs  are                                                            
     being  attributed to  a field  for tax  purposes would  be --                                                            
     how are you going to know one way or the other?                                                                          
          I guess what I'm trying to figure out is from a                                                                     
     revenue  perspective,  not  necessarily   specific  to  this,                                                            
     trying  to be specific as much --  you know, not as  specific                                                            
     to  the initiative  so  much, but  what kind  of difficulty?                                                             
     How  hard  is it?    How much  expense  will  it be  to  your                                                            
     department  to really  try to implement  something where  you                                                            
     identify  fields and sort out of  those pieces that we --  in                                                            
     some ways we don't even know exactly what's coming?                                                                      
         MR. BARNHILL:  Through the Chair, Representative                                                                     
     Johnson,  so  there's  a  certain  level   of  complexity  to                                                            
     Alaska's oil  and gas production tax that's sort of  imbedded                                                            
     in  the way we've  decided to tax  this particular  industry.                                                            
     There's a  complexity that will be imbedded in any change  to                                                            
     that law.                                                                                                                
       Our best estimate at this time is what we've said in                                                                   
     our  financial  cost  statement,  that  it's  going  to  take                                                            
     $5 million  to  program our  tax revenue  management  system,                                                            
     it's  going to  take $2.5 million  in staff time.   We  don't                                                            
     want  to  comment  on  how  comparatively  hard  it  is  with                                                            
     respect  to current law because  we're trying to manage  that                                                            
     line between advocacy and nonpartisan.                                                                                   
           But it will impose a burden, which we're currently                                                                 
     calculating  to be $7.5 million.   And it will impose a  time                                                            
     burden in  terms of implementation, you know, at least  three                                                            
     months to  reprogram the system, several months to a  year to                                                            
     completely implement regulations.                                                                                        
           CHAIR STEVENS:  Representative Johnson, comments?                                                                  
           REPRESENTATIVE JOHNSON:  May I --                                                                                  
           CHAIR STEVENS:  Please.                                                                                            
           REPRESENTATIVE JOHNSON:  -- follow up?  Thank you,                                                                 
     Mr. Chair.                                                                                                               
           So how do you see yourself being able to really audit                                                              
     and  figure out how much is  being attributed to each  field?                                                            
     I  saw your  numbers in  here, and  I appreciate  that.   And                                                            
     then  there's  probably  things  imbedded  in  there  that  I                                                            
     didn't  pick up.   I'm sure  there probably is.   But  beyond                                                            
     just --   well,  I   mean,  there's   the  numbers,   there's                                                            
     reprogramming  by  month,  and  so  on and  so  forth.    But                                                            
     there's a  bigger piece to this of trying to figure out  what                                                            
     can  you really  attribute to  a field  and  what you  aren't                                                            
     going  to be able  to attribute  to a field.   I mean,  those                                                            
     are  going to be  some -- I mean,  there's policy issues  you                                                            
     guys  are going to have  to figure out  within this, and  I'm                                                            
     just  wondering  if  you're --  you know,  if  you  have  any                                                            
     comments on that?                                                                                                        
           MR. BARNHILL:  Through the Chair, Representative                                                                   
     Johnson, I  have no further comments in that we've taken  our                                                            
     best guess  at what the burdens  are going to be in terms  of                                                            
     cost  and staff time,  but with respect  to the specifics  of                                                            
     how we do the auditing, I believe our estimate is fair.                                                                  
           Ms. Glover, do you want to --                                                                                      
           MS. GLOVER:  Rep Johnson, through the Chair, so for                                                                
     audits,  currently  we  have  things  by unit.    We  do  get                                                            
     information  for  the  major  units,  and  obviously  there's                                                            
     different  working interest owners  for different units.   So                                                            
     there  is   a  mechanism  that  information  is  shared   and                                                            
     cross-checked  between different taxpayers  at a unit  level.                                                            
     So that is something within our current audit practices.                                                                 
           CHAIR STEVENS:  Thank you, Representative Johnson.                                                                 
     And  thank you for your  response as well.   Just a  reminder                                                            
     that  the purpose of  this meeting is  really an overview  of                                                            
     the  initiative before us,  not really  intended to get  into                                                            
     the  details  or  the  merits of  the  initiative.    Senator                                                            
     Stedman and then Senator Coghill.                                                                                        
           SENATOR STEDMAN:  Thank you, Mr. Chairman.  Let me, if                                                             
     I  could --  I'll  try to  make  it brief,  just  digress  to                                                            
     Senator  Begich's  earlier  question/concern.     When  we're                                                            
     dealing with  the public records, we have struggled with  the                                                            
     issue  of  Conoco's corporate  reporting  disclosing  Alaska,                                                            
     which  is nice.   BP's information we  don't have access  to.                                                            
     We have  to get it out of an international document.   Exxon,                                                            
     of course, is a different one.                                                                                           
           And then when we go down and look down the end of the                                                              
     table  and  we  see  revenue --  Department  of  Revenue  and                                                            
     Department  of Natural  Resources, you've got  to be  careful                                                            
     which department  you're asking the question to because  some                                                            
     questions  cannot be answered by  the Department of  Revenue,                                                            
     but  they  can  be answered  by  the  Department  of  Natural                                                            
     Resources.   And until you're around the table a while,  it's                                                            
     hard  to  pick that  up.   So  it's  very difficult  for  the                                                            
     layman,  as mentioned earlier  by the  speaker, that come  to                                                            
     these  tables like we all do, and  try to sort this out  from                                                            
     a public policy perspective.  It's difficult.                                                                            
           So with that, Mr. Chairman, I would like to ask, as we                                                             
     go  forward, that  we try  to clarify  some  of these  things                                                            
     over the  next month or so, including this "all filings."   I                                                            
     mean, it's  kind of an inclusive term, but there is an  issue                                                            
     here that is of concern.                                                                                                 
           CHAIR STEVENS:  Very good point.  Thank you, Senator                                                               
     Stedman.  Senator Coghill.                                                                                               
           SENATOR COGHILL:  Maybe I should just stop where                                                                   
     Senator  Stedman came  in because  the "all  filing,"  you're                                                            
     going to  have a gross and a net and a producer and a  field.                                                            
     And  so  there's going  to  be different  ways  that  they're                                                            
     going to have to be categorized, I suppose.                                                                              
           This is -- as you were saying, this is just a new                                                                  
     category that  you're going to have to try to figure  out how                                                            
     to implement.   Is that what we understand?  Plus, there's  a                                                            
     switching.    You  can switch  between.   And  so  those  are                                                            
     things  I think -- when I want  to explain it to people  that                                                            
     I have to  talk to back home, I need to understand that  it's                                                            
     a  new type of  filing, and it  could be gross  tax or a  net                                                            
     tax.   And if the producer is  in one field and not  another,                                                            
     do  they then have  to report  the same thing,  and is  their                                                            
     taxes  then   going  to  be  open  different  than,   say,  a                                                            
     competitor?   And those are things we need to be able  to say                                                            
     to  our  constituents, how  this  system  works and  how  you                                                            
     might contemplate calculating that.                                                                                      
           MS. GLOVER:  For the record, Senator Coghill, through                                                              
     the  Chair, I can  talk to kind of  simplistically about  how                                                            
     the taxes  today -- I mean, currently there is -- the  tax is                                                            
     a  net profits tax,  the production tax.   The gross  minimum                                                            
     floor  is a tax  floor.  So information  that taxpayers  file                                                            
     today,  the system will  calculate both  to figure out  which                                                            
     tax is owed.  So that is true today.                                                                                     
           And currently for the North Slope, all oil is in one                                                               
     tax  segment, and  so that  information gets  aggregated  for                                                            
     the  taxpayer for all of  the North Slope  oil.  That is  how                                                            
     it  is  today.    As  far as  how  this  would  work  in  the                                                            
     initiative,  those  are still  interpretive issues  that  are                                                            
     policy calls,  interpretations that we have not made  at this                                                            
     point in time.                                                                                                           
       SENATOR COGHILL:  I just need to be able to say that                                                                   
     to  people.  There are  some things that  we do now that  are                                                            
     complex,  as you have  said, but there  are new complexities                                                             
     coming  in this particular  regard.  I just  need to be  able                                                            
     to  say that  out loud,  Mr. Chairman.   That's  all.   Thank                                                            
       CHAIR STEVENS:  Thank you, Senator Coghill.  Senator                                                                   
     von Imhof.                                                                                                               
       SENATOR VON IMHOF:  Thank you.  So in the past, your                                                                   
     department  has testified  here in the  committee and  talked                                                            
     about the  backlog of audits that we've had in the past,  and                                                            
     I think at one point it was about six years.                                                                             
        And then I think you testified recently that you're                                                                   
     absolutely  getting caught  up, and, you  know, the  millions                                                            
     of  dollars that we're  sort of leaving on  the table is  now                                                            
     being deposited  into the CBR and other accounts, so  this is                                                            
     great news.                                                                                                              
          But I'm wondering if we're going to be doing a                                                                      
     backslide,  because  with  this  is  new  system  of  monthly                                                            
     returns  and that they're new  via fields or even  production                                                            
     sites  and  not  necessarily producers,  how  many  more  tax                                                            
     returns  and  audits  will  the  department  be  doing  on  a                                                            
     monthly,  quarterly, annual  basis?  And  what kind of  staff                                                            
     are you  going to need and annual resources do you think  you                                                            
     might  need?  You mentioned earlier  5 million to in 90  days                                                            
     hopefully  change the software,  but I would imagine  there's                                                            
     going  to be  significant ongoing  costs  as well.   Can  you                                                            
     comment on that?                                                                                                         
      MS. GLOVER:  So, Senator von Imhof, through the Chair,                                                                  
     we  don't  expect there  to  be additional  resources  needed                                                            
     for -- you  know, for the future for this.  The $7.5  million                                                            
     estimate is  for the next -- would be for the time period  up                                                            
     to  about a  year after, if  the initiative  was enacted,  to                                                            
     actually do a lot of the work and upfront planning.                                                                      
           We do, though, expect that that workload for our                                                                   
     current  oil  and gas  production  tax  audit team  would  be                                                            
     impacted  if this  initiative were  enacted.   We would  need                                                            
     them  to help.  It's  a lot of testing  for the system,  help                                                            
     with  the regulations process.   So we do expect that,  based                                                            
     on past  practices when other oil and gas taxes were  passed,                                                            
     that the  resources would then focus on the enactment  of any                                                            
     new tax  law.  That is partially  what has kind of got us  in                                                            
     this backlog today was from prior tax laws.                                                                              
           So we do expect that the resources within their                                                                    
     priority  would be enactment of any  oil and gas tax law  and                                                            
     not the  audit.  So we do  expect the duration of our  audits                                                            
     to  slip,  and  whether  it  would  go  beyond  the  six-year                                                            
     statute  of limitation  is unknown  at this  time until,  you                                                            
     know,  the  work happens,  but  we don't  expect a  need  for                                                            
     additional resources for the long-term for this.                                                                         
           CHAIR STEVENS:  Thank you.  Mr. Barnhill, did you have                                                             
     any comment?  No.  Senator von Imhof.                                                                                    
           SENATOR VON IMHOF:  Well, thank you, Mr. Chairman.  I                                                              
     just  wanted just  to say so  it sounds  like it's  potential                                                            
     that  the audits  will begin  to slip  as all  hands on  deck                                                            
     start  to  pick up  the workload  of  figuring out  what  all                                                            
     these  taxes are and  whether it's per  field per  production                                                            
     site and so forth.                                                                                                       
           I just worry that with this change of monthly and this                                                             
     change  of ring-fencing,  that the  initial 7.5 million  will                                                            
     only get  you so far and that we may be looking at some  more                                                            
     resources  needed for your  department, and  we just want  to                                                            
     be aware of that possibility.                                                                                            
           CHAIR STEVENS:  Thank you, Senator.  Senator Begich.                                                               
          SENATOR BEGICH:  Just as follow-up.  Thank you,                                                                     
     Mr. Chairman.   On Senator von  Imhof's comment, it would  be                                                            
     your  intent, though -- I  mean, at one  point you're  saying                                                            
     there  won't be any  long-term impact  on your resources  and                                                            
     ability  to do  this, but, on  the other  hand, audits  might                                                            
     slip,  which would  imply there  is a long-term  impact.   So                                                            
     you   would  come  back  to   the  Legislature  and   request                                                            
     additional  support for  auditing and those  purposes if  you                                                            
     felt that that was happening, right?                                                                                     
      MS. GLOVER:  Senator Begich, through the Chair, that's                                                                  
     correct.   At this  point, we aren't  at that six-year  limit                                                            
     as  we had been  in the past.   So we do  think we have  some                                                            
     room  that we would still  be able to --  if we had to  focus                                                            
     early  on  enactment  of a  new  tax,  to kind  of  move  our                                                            
     resources  to that,  but then  also  we just  might push  the                                                            
     audit backlog  back towards that six-year limitation, but  we                                                            
     don't  expect additional resources.   If we did, correct,  we                                                            
     would ask for that in the budget process.                                                                                
           SENATOR BEGICH:  And, Mr. Chairman.                                                                                
           CHAIR STEVENS:  Senator Begich.                                                                                    
           SENATOR BEGICH:  And you identified that the                                                                       
     7.5 million  was not just for setting  up the system but  for                                                            
     the  planning process.   You  just said  that  a second  ago.                                                            
     And  so  you  would  anticipate  in  that  planning  process,                                                            
     whatever  those demands might  be, and  we would expect  then                                                            
     to  see whatever  accommodation  you would  need to  make  to                                                            
     address the audits, correct?                                                                                             
          MS. GLOVER:  Senator Begich, through the Chair,                                                                     
           SENATOR BEGICH:  Thanks.                                                                                           
        CHAIR STEVENS:  Thank you.  Any further comments or                                                                   
     questions for the Department of Revenue?                                                                                 
           Seeing and hearing none, thank you very much for being                                                             
     with  us.   This is the  last time  we will  be hearing  this                                                            
     issue,  of course.  It  will be going  through lots of  other                                                            
     meetings and committee hearings.                                                                                         
           But I do want to say that, according to Statute 24 --                                                              
     25.05.186,  we're  required,  as  a Legislature,  to  hold  a                                                            
     hearing  on   this  initiative.    I  am  pleased  that   the                                                            
     Legislative  Council  has done  this,  seven members  of  the                                                            
     House, seven members of the Senate.                                                                                      
           I do appreciate Cori Mills, Department of Law, for                                                                 
     being  here;  Megan  Wallace,  Emily  Nauman  of Legislative                                                             
     Counsel;  and, of course,  Deputy Commissioner Mike  Barnhill                                                            
     and  the Tax Division  Director, Colleen  Glover.  Thank  you                                                            
     all very much.                                                                                                           
III. ADJOURN                                                                                                                  
           CHAIR STEVENS said if there is nothing further to come                                                             
     before the Council, we are adjourned.                                                                                    
     10:52:51 AM                                                                                                            

Document Name Date/Time Subjects
2.25.20 Leg. Council Meeting Packet.pdf JLEC 2/25/2020 9:00:00 AM
2.25.20 Leg. Council Meeting Packet
Sectional Summary for 19OGTX.pdf JLEC 2/25/2020 9:00:00 AM
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