Legislature(2005 - 2006)BUTROVICH 205

03/17/2006 03:30 PM RESOURCES


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03:38:59 PM Start
03:42:42 PM SB305
04:36:59 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
= SB 305 OIL AND GAS PRODUCTION TAX
Heard & Held
-- Testimony <Invitation Only> --
Administration Comments on Draft
Committee Substitute
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                         March 17, 2006                                                                                         
                           3:38 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Thomas Wagoner, Chair                                                                                                   
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Ben Stevens                                                                                                             
Senator Bert Stedman                                                                                                            
Senator Kim Elton                                                                                                               
Senator Fred Dyson - via teleconference                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Albert Kookesh                                                                                                          
                                                                                                                                
OTHER MEMBERS PRESENT                                                                                                         
                                                                                                                              
Senator Gretchen Guess                                                                                                          
Senator Gene Therriault                                                                                                         
Senator Lyda Green                                                                                                              
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 305                                                                                                             
"An Act repealing  the oil production tax and  gas production tax                                                               
and providing  for a production tax  on the net value  of oil and                                                               
gas; relating to the relationship  of the production tax to other                                                               
taxes; relating to the dates  tax payments and surcharges are due                                                               
under AS  43.55; relating  to interest  on overpayments  under AS                                                               
43.55; relating  to the treatment  of oil and gas  production tax                                                               
in a  producer's settlement with  the royalty owner;  relating to                                                               
flared gas, and to  oil and gas used in the  operation of a lease                                                               
or property, under AS 43.55;  relating to the prevailing value of                                                               
oil or gas under AS 43.55;  providing for tax credits against the                                                               
tax  due under  AS 43.55  for certain  expenditures, losses,  and                                                               
surcharges; relating to statements  or other information required                                                               
to be filed  with or furnished to the Department  of Revenue, and                                                               
relating  to the  penalty for  failure to  file certain  reports,                                                               
under  AS 43.55;  relating to  the  powers of  the Department  of                                                               
Revenue, and  to the disclosure  of certain  information required                                                               
to be  furnished to  the Department of  Revenue, under  AS 43.55;                                                               
relating   to  criminal   penalties   for  violating   conditions                                                               
governing access to and use  of confidential information relating                                                               
to the  oil and gas  production tax;  relating to the  deposit of                                                               
money  collected by  the Department  of Revenue  under AS  43.55;                                                               
relating to  the calculation of the  gross value at the  point of                                                               
production of  oil or gas;  relating to the determination  of the                                                               
net value  of taxable oil  and gas  for purposes of  a production                                                               
tax on the net value of  oil and gas; relating to the definitions                                                               
of  'gas,' 'oil,'  and certain  other  terms for  purposes of  AS                                                               
43.55;  making  conforming  amendments;   and  providing  for  an                                                               
effective date."                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 305                                                                                                                  
SHORT TITLE: OIL AND GAS PRODUCTION TAX                                                                                         
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/21/06       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/21/06       (S)       RES, FIN                                                                                               
02/22/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/22/06       (S)       Heard & Held                                                                                           
02/22/06       (S)       MINUTE(RES)                                                                                            
02/23/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/23/06       (S)       Heard & Held                                                                                           
02/23/06       (S)       MINUTE(RES)                                                                                            
02/24/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/24/06       (S)       Heard & Held                                                                                           
02/24/06       (S)       MINUTE(RES)                                                                                            
02/25/06       (S)       RES AT 9:00 AM BUTROVICH 205                                                                           
02/25/06       (S)       -- Reconvene from 02/24/06 --                                                                          
02/25/06       (H)       RES AT 10:00 AM SENATE FINANCE 532                                                                     
02/25/06       (S)       Heard & Held                                                                                           
02/25/06       (S)       MINUTE(RES)                                                                                            
02/27/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/27/06       (S)       Heard & Held                                                                                           
02/27/06       (S)       MINUTE(RES)                                                                                            
02/28/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/28/06       (S)       Heard & Held                                                                                           
02/28/06       (S)       MINUTE(RES)                                                                                            
03/01/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/01/06       (S)       Heard & Held                                                                                           
03/01/06       (S)       MINUTE(RES)                                                                                            
03/02/06       (S)       RES AT 1:30 PM BUTROVICH 205                                                                           
03/02/06       (S)       Heard & Held                                                                                           
03/02/06       (S)       MINUTE(RES)                                                                                            
03/02/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/02/06       (S)       Heard & Held                                                                                           
03/02/06       (S)       MINUTE(RES)                                                                                            
03/03/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/03/06       (S)       -- Meeting Canceled --                                                                                 
03/04/06       (S)       RES AT 10:00 AM SENATE FINANCE 532                                                                     
03/04/06       (S)       Presentation by Legislative Consultants                                                                
03/06/06       (S)       RES AT 3:30 PM SENATE FINANCE 532                                                                      
03/06/06       (S)       Heard & Held                                                                                           
03/06/06       (S)       MINUTE(RES)                                                                                            
03/07/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/07/06       (S)       Heard & Held                                                                                           
03/07/06       (S)       MINUTE(RES)                                                                                            
03/08/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/08/06       (S)       -- Meeting Canceled --                                                                                 
03/09/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/09/06       (S)       -- Meeting Canceled --                                                                                 
03/10/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/10/06       (S)       -- Meeting Canceled --                                                                                 
03/11/06       (H)       RES AT 10:00 AM CAPITOL 106                                                                            
03/11/06       (H)       -- Meeting Canceled --                                                                                 
03/13/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/13/06       (S)       Heard & Held                                                                                           
03/13/06       (S)       MINUTE(RES)                                                                                            
03/14/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/14/06       (S)       Heard & Held                                                                                           
03/14/06       (S)       MINUTE(RES)                                                                                            
03/15/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/15/06       (S)       -- Testimony <Invitation Only> --                                                                      
03/16/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/16/06       (S)       -- Meeting Canceled --                                                                                 
03/17/06       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
MARY JACKSON                                                                                                                    
Staff to Senator Wagoner                                                                                                        
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Presented CSSB 305(RES), version Y, for the                                                               
sponsor.                                                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR THOMAS WAGONER called the Senate Resources Standing                                                                     
Committee meeting to order at 3:38:59 PM. Present were Senators                                                               
Elton, Seekins, Stedman, Ben Stevens and Chair Wagoner.                                                                         
                                                                                                                                
               SB 305-OIL AND GAS PRODUCTION TAX                                                                            
                                                                                                                                
CHAIR   THOMAS  WAGONER   announced   SB  305   to   be  up   for                                                               
consideration.                                                                                                                  
                                                                                                                                
SENATOR SEEKINS moved  to adopt CSSB 305(RES), version  Y, as the                                                               
working document.                                                                                                               
                                                                                                                                
CHAIR WAGONER objected for an explanation.                                                                                      
                                                                                                                                
MARY JACKSON,  Staff to  Senator Wagoner,  who introduced  the CS                                                               
said  it was  worked on  by the  LB&A Committee,  the legislative                                                               
consultants  - Jim  Eason and  Bonnie  Robson -  Don Shepler  and                                                               
Marvin Kirchner from Greenberg Traurig  LLC (specializing in FERC                                                               
and  tax law  issues)  -  and Econ  One.  She  said that  Senator                                                               
Wagoner  had   asked  the  producers  to   suggest  language  for                                                               
definitions and  they had conferred  on that with Alaska  Oil and                                                               
Gas Association (AOGA). He worked  with Dan Dickinson, Consultant                                                               
to the Department  of Revenue and Robynn Wilson,  Director of the                                                               
Tax  Division;  Rob  Mince,  Assistant  Attorney  General;  Roger                                                               
Marks, Economist, and  Dr. Pedro Van Meurs,  both consultants for                                                               
the Administration.                                                                                                             
                                                                                                                                
3:42:42 PM                                                                                                                    
MS.  JACKSON started  the review  by  saying the  title had  some                                                               
changes and  the first was that  "net value" was inserted  at the                                                               
request  of AOGA.  Other  changes reflected  the  new Cook  Inlet                                                               
sections, the new surcharges in Sections  27 - 30, and the cross-                                                               
reference  definition  to the  Stranded  Gas  Development Act  in                                                               
Section 31.                                                                                                                     
                                                                                                                                
She continued  explaining that Sections  1, 2 (old Section  4), 3                                                               
(old Section 2),  and 4 (old Section 3) had  no changes. Sections                                                               
5 and  6 were  new and  had language that  provided for  the Cook                                                               
Inlet  Basin. Section  7  had several  sections  of new  language                                                               
requested by  AOGA and ASRC [Arctic  Slope Regional Corporation].                                                               
The term "gas" was inserted on page  5, line 7. Also page 5, line                                                               
27, had revisions to reflect that  there is a tax on the royalty.                                                               
Section 8  had language  that maintained the  status quo  in Cook                                                               
Inlet. Section 9 changed "upon"  to "on". Section 10 (old Section                                                               
7) had a 95 percent "true  up" per quarter that was originally 90                                                               
percent  annually. Section  11 (old  Section 8)  had no  changes.                                                               
Section  12  (old  Section  9) had  changes  requested  by  AOGA.                                                               
Section 13 (old Section 10) had  no changes. Section 14 had a new                                                               
phrase to replace  "produce, but" with "produced,  but either not                                                               
sold or if  gas is sold". Section 15 had  references for the Cook                                                               
Inlet  Basin. Section  16 (old  Section 12)  was lumped  together                                                               
with Section  17 to  replace the  $73 million  standard deduction                                                               
language.  On   page  10,  line   11,  percentage   language  was                                                               
underlined that the committee needed to consider.                                                                               
                                                                                                                                
On  page 12,  line 11  (and throughout  the bill),  the effective                                                               
date of  "July 1, 2006" was  changed to "April 1,  2006". On page                                                               
12, line  21, 3(a) and 3(b)  were new and was  a clarification as                                                               
to  what  would be  the  ownership  interest,  a concern  of  the                                                               
administration's.                                                                                                               
                                                                                                                                
3:49:52 PM                                                                                                                    
SENATOR BEN  STEVENS asked if  Section (f)  on page 11,  line 14,                                                               
was new.                                                                                                                        
                                                                                                                                
MS. JACKSON replied yes.                                                                                                        
                                                                                                                                
3:51:37 PM                                                                                                                    
SENATOR STEDMAN  wondered if language  starting on page  11, line                                                               
24 (g), about the commissioner  repurchasing the transferable tax                                                               
credits was new.                                                                                                                
                                                                                                                                
MS. JACKSON responded  that she didn't have that  language in any                                                               
of her revisions and suggested that  it might have been picked up                                                               
from the House version by the drafter.                                                                                          
                                                                                                                                
SENATOR STEDMAN noted  that language on page 10,  line 18, talked                                                               
about a "person's"  tax liability and he thought  it should refer                                                               
to "corporate" tax liability.                                                                                                   
                                                                                                                                
SENATOR SEEKINS responded that "person" covers all entities.                                                                    
                                                                                                                                
3:53:13 PM                                                                                                                    
SENATOR BEN  STEVENS noticed that  language on page  12, starting                                                               
on line 16, dealing with abandonment, was new also.                                                                             
                                                                                                                                
3:57:41 PM                                                                                                                    
SENATOR STEDMAN asked  for a more complete explanation  of the CS                                                               
so people  at home  could follow what  the committee  was talking                                                               
about.                                                                                                                          
                                                                                                                                
MS. JACKSON  said she could do  that and she also  noted that the                                                               
PDF files were available on  the Internet. She said the committee                                                               
would not  take action on  this bill  until next Tuesday  to give                                                               
people ample time to review it.                                                                                                 
                                                                                                                                
She said  that the abandonment  section was under  the subsection                                                               
where  the  producer  or  explorer  may not  take  a  tax  credit                                                               
[starting on  page 12,  line 7]  and read  [starting on  page 12,                                                               
line 22]:                                                                                                                       
                                                                                                                                
        (A) a pipeline facility, other assets or service                                                                        
          regulated as  to tariffs, fees, or  charges by the                                                                    
          Federal  Energy Regulatory  Commission, Regulatory                                                                    
          Commission  of  Alaska,  or a  similar  regulatory                                                                    
          body;  (Ms. Jackson said  concern had  been raised                                                                    
          that the term  "similar regulatory body" needed to                                                                    
          be  more specific  and  she was  working with  the                                                                    
          administration on that now.)                                                                                          
          (B) an asset in which the state, directly or                                                                          
          indirectly, holds  an ownership interest  equal to                                                                    
          or  greater than  5  percent; for  the purpose  of                                                                    
          making  a  determination   of  ownership  interest                                                                    
          under this subparagraph,  the state's ownership of                                                                    
          an  interest in  the land  on which  the asset  is                                                                    
          located shall be excluded.                                                                                            
                                                                                                                                
SENATOR STEDMAN asked if section (B) would be discussed further.                                                                
                                                                                                                                
CHAIR WAGONER responded  that the bill was  just being introduced                                                               
today and the administration would address it tomorrow.                                                                         
                                                                                                                                
SENATOR BEN STEVENS  asked if they could hear  who originated the                                                               
changes.                                                                                                                        
                                                                                                                                
MS. JACKSON  noted she  would do  that. She  continued explaining                                                               
the CS  saying language  on page  13 in  Section 17  replaced the                                                               
proposed   $73   million    allowance.   It   deleted   "testing,                                                               
stimulation, or completion" from  the old statute that authorized                                                               
exploration tax  credits. The new $73  million allowance provided                                                               
for  a  lot more  credits  for  exploration  and these  were  not                                                               
allowed in  the CS. However,  she said,  "If the new  proposal on                                                               
$73 million goes forward, this section will come out."                                                                          
                                                                                                                                
4:01:14 PM                                                                                                                    
SENATOR DYSON joined the committee via teleconference.                                                                          
                                                                                                                                
MS. JACKSON continued  explaining on pages 14 -  15, Sections 18,                                                               
19, and 20  were old Sections 13,  14 and 15 and  had no changes.                                                               
Section 21  was old Section 16  and it had some  changes in (ii).                                                               
She  didn't remember  the source,  but would  get that  for them.                                                               
Sections  22, 23,  24 were  old Sections  17, 18,  19. One  word,                                                               
"or",  was added  in  Section  24 (page  16,  line  26) and  some                                                               
concerns were raised  by the administration about  whether it was                                                               
needed since  it referenced  Subsection (a) and  (b) of  the same                                                               
statute had a slightly different set of constrictions.                                                                          
                                                                                                                                
Section 25 on  page 16 was old Section 20  and eliminated royalty                                                               
settlement agreements  as a method  of valuation. That  came from                                                               
Ms. Robson  and Mr. Eason, both  legislative consultants. Section                                                               
26 on page 17 was old Section  21 and its Subsection (a) had some                                                               
slight formatting changes done by the drafter.                                                                                  
                                                                                                                                
4:04:01 PM                                                                                                                    
MS. JACKSON continued explaining that  language on page 18, lines                                                               
2 and 20, now states  "one-forty-eighth" and previously it stated                                                               
"one-seventy-second".  This referenced  the claw  back provisions                                                               
that extended  back six years; now  it is four years.  Line 26 on                                                               
page 18  had the new  effective date of  April 1, 2006.  Page 19,                                                               
line 4, had a  typo. Page 19, lines 16 -  17, said "including the                                                               
operator or  a working-interest owner"  and AOGA asked for  it to                                                               
be revised to say: "include a  producer that is the operator". On                                                               
line 29,  the administration  recommended better  definitions for                                                               
capital  assets and  those were  forthcoming. The  administration                                                               
also recommended deleting "capital assets" on page 20, line 6.                                                                  
                                                                                                                                
MS. JACKSON  explained that AOGA  requested "for oil and  gas" to                                                               
be  inserted before  "royalty payments"  on page  20, line  7. It                                                               
also asked for  new indemnification language starting  on line 22                                                               
that says:                                                                                                                      
                                                                                                                                
     (K) amounts paid to indemnify the state: the exclusion                                                                     
     provided by this paragraph does not apply to the costs                                                                     
      of obtaining insurance or a surety bond from a third-                                                                     
     party insurer or surety;                                                                                                   
                                                                                                                                
This language  was under the  definition of "direct  costs" which                                                               
does not include amounts paid to indemnify the state.                                                                           
                                                                                                                                
4:06:50 PM                                                                                                                    
SENATOR STEDMAN  said he  remembered earlier  conversations about                                                               
large producers  who are self-insured and  some smaller companies                                                               
that write a  check and the guy that writes  the check would like                                                               
that recognized as a legitimate expense of doing business.                                                                      
                                                                                                                                
CHAIR  WAGONER  remembered  that  the amount  of  one  check  was                                                               
$370,000 and it  came up in testimony  from smaller independents.                                                               
He thought this  was a large amount  of money to be  put up front                                                               
to not have any value given to it.                                                                                              
                                                                                                                                
SENATOR STEDMAN agreed and asked where that language came from.                                                                 
                                                                                                                                
MS.  JACKSON  replied that  suggestion  came  from AOGA  and  was                                                               
supported by  the administration.  She thought there  was another                                                               
answer to  his question, but she  wanted to make sure  before she                                                               
said anything.                                                                                                                  
                                                                                                                                
CHAIR  WAGONER suggested  considering other  options like  giving                                                               
credits or  setting up  a state  pool where  50 percent  could be                                                               
reimbursable, for instance.                                                                                                     
                                                                                                                                
4:08:33 PM                                                                                                                    
MS. JACKSON continued on to page  20, line 22, where new language                                                               
said:                                                                                                                           
                                                                                                                                
     (L) surcharges levied under AS 48.55.201 or 43.55.300;                                                                     
                                                                                                                                
Those  sections  referenced the  surcharges  for  the 470  Funds,                                                               
which were not  direct costs. Language on line  26 also indicated                                                               
that costs  of abandonment were  not direct costs. The  source of                                                               
(L) and  (N) were from Chair  Wagoner working with Mr.  Eason and                                                               
Ms. Robson.                                                                                                                     
                                                                                                                                
4:10:39 PM                                                                                                                    
Page 21,  line 8, (N)  and (O)  had new language  clarifying what                                                               
costs are and that came  from the tax consultant, Marvin Kirchner                                                               
of Greenberg and Traurig LLC. It said:                                                                                          
                                                                                                                                
     (N)  in  a transaction  that  is  not an  arm's  length                                                                    
     transaction,  amounts that  have not  been paid  to the                                                                    
     extent  that those  amounts exceed  fair market  value;                                                                    
     the  provisions  of (l)  of  this  section apply  to  a                                                                    
     determination under this subparagraph.                                                                                     
                                                                                                                                
4:11:18 PM                                                                                                                    
Language  on  page 21,  lines  16  -  25, had  slight  formatting                                                               
revisions.  Line 20  had  a  new subsection  (B)  and she  didn't                                                               
remember its source. It now said:                                                                                               
                                                                                                                                
      (e) A producer's lease expenditures must be adjusted                                                                      
       by subtracting any payment or credit the producers                                                                       
     receives for                                                                                                               
          (1) the use by another person or a production                                                                         
               facility                                                                                                         
               (A) in which the producer has an ownership                                                                       
                    interest; or                                                                                                
               (B) that is subject to a management                                                                              
                    agreement   that    provides   for   the                                                                    
                    producer  to  receive a  management  fee                                                                    
                    determined in  whole or  in part  on the                                                                    
                    income  or gross  revenue earned  by the                                                                    
                    production facility;                                                                                        
                                                                                                                                
4:13:03 PM                                                                                                                    
Line  1 on  page 22  had the  new date,  April 1,  2006. Line  11                                                               
contained the new section on  transition expenditures, which were                                                               
limited to a  look back of three years instead  of six years that                                                               
were  laid out  in the  following way:  a 75  percent credit  for                                                               
expenditures  incurred on  or after  January 1,  2005 and  before                                                               
April 1,  2006; a 50  percent for expenses incurred  from January                                                               
1,  2004 to  January  1,  2005; and  a  25  percent for  expenses                                                               
incurred after January 1, 2003  through January 1, 2004 - payable                                                               
in four-year  terms. Subsection  (2) still  had the  $40-a barrel                                                               
limitation, which was in the original bill.                                                                                     
                                                                                                                                
4:14:26 PM                                                                                                                    
SENATOR STEDMAN  asked the  Chair if  he wanted  to bring  up the                                                               
other concept on this issue.                                                                                                    
                                                                                                                                
CHAIR WAGONER replied  that he had talked to Dr.  Van Meurs about                                                               
his  concept   that  rewards  current  producers   for  continued                                                               
investment in production  based on a formula  that allows credits                                                               
in  a look-back  format. It  would  stem the  current decline  in                                                               
production.                                                                                                                     
                                                                                                                                
SENATOR STEDMAN helped him explain  saying the issue was aimed at                                                               
doubling expenditures  by the  industry on  the North  Slope over                                                               
the next five years from $1 billion to $2 billion.                                                                              
                                                                                                                                
4:16:54 PM                                                                                                                    
MS. JACKSON continued  explaining that language on  page 22, line                                                               
27, was  the same as in  the original bill. Language  on page 23,                                                               
line 4 had "the" instead  of "such". The previous Subsection (i),                                                               
which was  the old $73  million standard deduction,  was deleted.                                                               
The new  (i) was the old  (k); the new  (j) was the old  (l); the                                                               
new (k) was the  old (m); and page 23, line  29, had new sections                                                               
(l), (m), and (n).                                                                                                              
                                                                                                                                
SENATOR BEN STEVENS asked to discuss the removal of Section (i).                                                                
                                                                                                                                
4:18:39 PM                                                                                                                    
CHAIR WAGONER explained that the  replacement for the $73 million                                                               
allowance allowed  a holiday season  for the first  4,000 barrels                                                               
of oil  produced each  day for  seven years  to be  exempted from                                                               
taxes.                                                                                                                          
                                                                                                                                
4:20:16 PM                                                                                                                    
SENATOR  BEN STEVENS  noted that  it applied  only to  new fields                                                               
brought  into  production after  the  effective  date and  had  a                                                               
seven-year sunset.                                                                                                              
                                                                                                                                
4:21:15 PM                                                                                                                    
MS.  JACKSON continued  on saying  the  new subsections  inserted                                                               
beginning  on page  23 came  from the  tax consultants  and dealt                                                               
with Internal Revenue  Code. New Section (o) was the  old (n) and                                                               
it had some  revisions that were requested by  AOGA and concurred                                                               
with by  the administration.  Sections 27 through  30 on  page 25                                                               
were requested by the Chairman and dealt with the surcharge.                                                                    
                                                                                                                                
4:24:20 PM                                                                                                                    
CHAIR WAGONER said that someone  from DEC requested this language                                                               
and before this  bill goes to the Finance Committee,  he wanted a                                                               
report on  how those funds  had been  used. People have  told him                                                               
they were being expended for items it wasn't intended for.                                                                      
                                                                                                                                
SENATOR BEN STEVENS  asked if Sections (l), (m), and  (n) on page                                                               
23 came from the tax consultants.                                                                                               
                                                                                                                                
MS. JACKSON replied yes.                                                                                                        
                                                                                                                                
SENATOR BEN STEVENS asked if  all the sections they referenced in                                                               
terms  of the  arms length  transactions and  direct costs  under                                                               
(d)(2)(M)  and  (d)(2)(L) were  inserted  by  Mr. Eason  and  Ms.                                                               
Robson.                                                                                                                         
                                                                                                                                
4:27:07 PM                                                                                                                    
MS.  JACKSON  replied  that  she   would  double-check  that  and                                                               
identify the source of each change  for him. She went to pages 25                                                               
and 26 where  Sections 27 through 30 contained  the new surcharge                                                               
rates.  She explained that the  current surcharge rate is 3 cents                                                               
and 2 cents. This bill drops the  2 cents to 1 cent and increases                                                               
the 3 cents to  5 cents. The result is that  instead of a nickel,                                                               
it becomes 6 cents.                                                                                                             
                                                                                                                                
SENATOR STEDMAN asked what was the intended use of the 6 cents.                                                                 
                                                                                                                                
MS.  JACKSON replied  that  it was  intend for  each  of the  470                                                               
Funds.                                                                                                                          
                                                                                                                                
4:28:16 PM                                                                                                                    
SENATOR  SEEKINS said  he  wanted to  investigate  using some  of                                                               
those funds to reduce the cost  for small companies by not having                                                               
tremendous up-front insurance fees as  "sort of a defacto bonding                                                               
fund."                                                                                                                          
                                                                                                                                
CHAIR WAGONER continued  on and said that last year  he asked why                                                               
oil and  gas exploration  couldn't be separated  and he  was told                                                               
that it was  because companies didn't know which  they were going                                                               
to get when they were exploring.                                                                                                
                                                                                                                                
4:29:21 PM                                                                                                                    
MS.  JACKSON went  back to  surcharges and  pointed out  that the                                                               
original bill  allowed for the  470 surcharge  to be taken  as an                                                               
expense  and this  CS does  not allow  that. She  noted that  old                                                               
Section 29 was deleted. Section 31  on page 26 was old Section 30                                                               
and Section 32 on page 27 was  old Section 31 and had no changes.                                                               
On page 28, Section 33 was old  Section 32 and Section 34 was old                                                               
Section 33 and had no changes.  Section 35 was old Section 34 and                                                               
had several changes because the  repealer statutes had changed as                                                               
a result  of the CS.  Section 36 was  old Section 35  and changed                                                               
the date to April 1, 2006.  The rest was conforming language with                                                               
new  section  numbers.  Section  37  contained  the  transitional                                                               
provisions and had  the April 1, 2006 date change  on lines 6 and                                                               
7. Another date change was on line  17 and line 19 was changed to                                                               
nine months  of the  calendar year from  six months.  She thought                                                               
this related to the change in the true up.                                                                                      
                                                                                                                                
4:32:37 PM                                                                                                                    
SENATOR  ELTON mentioned  a correction  on page  29, line  17, to                                                               
April 1, 2006 instead of April, 2006.                                                                                           
                                                                                                                                
MS. JACKSON  thanked him for  that and  continued on to  page 29,                                                               
line 21,  that had  another date  change. Line  25 had  the nine-                                                               
month instead  of six-month time  frame and  (d) had the  April 1                                                               
time change again.  Section 38 on page 29 was  old Section 37 and                                                               
had no  changes. Section 39  contained the  revisor instructions,                                                               
which reflected the CS changes. On  the last page, Section 40 was                                                               
old  Section 39  with the  effective dates  of all  the sections.                                                               
Sections 41 and 42 were the effective dates.                                                                                    
                                                                                                                                
4:34:55 PM                                                                                                                    
SENATOR ELTON expressed his appreciation for the summary sheet.                                                                 
                                                                                                                                
There being  no further  business to  come before  the committee,                                                               
Chair Wagoner adjourned the meeting at 4:36:59 PM.                                                                            
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects