Legislature(2011 - 2012)BUTROVICH 205

03/02/2012 03:30 PM RESOURCES


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03:34:51 PM Start
03:35:37 PM SB192
04:42:40 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 192 OIL AND GAS PRODUCTION TAX RATES TELECONFERENCED
Moved CSSB 192(RES) Out of Committee
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                         March 2, 2012                                                                                          
                           3:34 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Joe Paskvan, Co-Chair                                                                                                   
Senator Thomas Wagoner, Co-Chair                                                                                                
Senator Bill Wielechowski, Vice Chair                                                                                           
Senator Bert Stedman                                                                                                            
Senator Lesil McGuire                                                                                                           
Senator Hollis French                                                                                                           
Senator Gary Stevens                                                                                                            
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Senator Cathy Giessel                                                                                                           
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 192                                                                                                             
"An Act relating to the oil and gas production tax; and                                                                         
providing for an effective date."                                                                                               
                                                                                                                                
     - MOVED CSSB 192(RES) OUT OF COMMITTEE                                                                                     
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 192                                                                                                                  
SHORT TITLE: OIL AND GAS PRODUCTION TAX RATES                                                                                   
SPONSOR(s): RESOURCES                                                                                                           
                                                                                                                                
02/08/12       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/08/12       (S)       RES, FIN                                                                                               
02/10/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/10/12       (S)       Heard & Held                                                                                           
02/10/12       (S)       MINUTE(RES)                                                                                            
02/13/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/13/12       (S)       Heard & Held                                                                                           
02/13/12       (S)       MINUTE(RES)                                                                                            
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02/14/12       (S)       Heard & Held                                                                                           
02/14/12       (S)       MINUTE(RES)                                                                                            
02/15/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/15/12       (S)       Heard & Held                                                                                           
02/15/12       (S)       MINUTE(RES)                                                                                            
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02/16/12       (S)       Heard & Held                                                                                           
02/16/12       (S)       MINUTE(RES)                                                                                            
02/17/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/17/12       (S)       Heard & Held                                                                                           
02/17/12       (S)       MINUTE(RES)                                                                                            
02/21/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/21/12       (S)       Heard & Held                                                                                           
02/21/12       (S)       MINUTE(RES)                                                                                            
02/22/12       (S)       RES AT 1:30 PM BUTROVICH 205                                                                           
02/22/12       (S)       Heard & Held                                                                                           
02/22/12       (S)       MINUTE(RES)                                                                                            
02/22/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/22/12       (S)       Heard & Held                                                                                           
02/22/12       (S)       MINUTE(RES)                                                                                            
02/23/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/23/12       (S)       Heard & Held                                                                                           
02/23/12       (S)       MINUTE(RES)                                                                                            
02/24/12       (S)       RES AT 1:30 PM BUTROVICH 205                                                                           
02/24/12       (S)       -- MEETING CANCELED --                                                                                 
02/24/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/24/12       (S)       Heard & Held                                                                                           
02/24/12       (S)       MINUTE(RES)                                                                                            
02/25/12       (S)       RES AT 1:00 PM BUTROVICH 205                                                                           
02/25/12       (S)       Heard & Held                                                                                           
02/25/12       (S)       MINUTE(RES)                                                                                            
02/27/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/27/12       (S)       Heard & Held                                                                                           
02/27/12       (S)       MINUTE(RES)                                                                                            
02/28/12       (S)       RES AT 3:30 PM SENATE FINANCE 532                                                                      
02/28/12       (S)       Heard & Held                                                                                           
02/28/12       (S)       MINUTE(RES)                                                                                            
02/28/12       (S)       RES AT 6:00 PM SENATE FINANCE 532                                                                      
02/28/12       (S)       Heard & Held                                                                                           
02/28/12       (S)       MINUTE(RES)                                                                                            
02/29/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/29/12       (S)       Heard & Held                                                                                           
02/29/12       (S)       MINUTE(RES)                                                                                            
02/29/12       (S)       RES AT 6:00 PM BUTROVICH 205                                                                           
02/29/12       (S)       Heard & Held                                                                                           
02/29/12       (S)       MINUTE(RES)                                                                                            
03/01/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/01/12       (S)       Heard & Held                                                                                           
03/01/12       (S)       MINUTE(RES)                                                                                            
03/02/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JEFF STEPP, Staff                                                                                                               
Senator Joe Paskvan                                                                                                             
Aide                                                                                                                            
Senate Resources Standing Committee                                                                                             
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION  STATEMENT:  Explained  the changes  in  CSSB  192(RES),                                                             
version E.                                                                                                                      
                                                                                                                                
MIKE PAWLOWSKI, Staff                                                                                                           
Senator McGuire                                                                                                                 
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT: Answered questions  regarding an amendment to                                                             
CSSB 192(RES), version E.                                                                                                       
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:34:51 PM                                                                                                                    
CO-CHAIR  JOE  PASKVAN  called   the  Senate  Resources  Standing                                                             
Committee meeting  to order at 3:34  p.m. Present at the  call to                                                               
order  were  Senators  Stedman, McGuire,  Stevens,  Wielechowski,                                                               
French, Co-Chair Wagoner and Co-Chair Paskvan.                                                                                  
                                                                                                                                
            SB 192-OIL AND GAS PRODUCTION TAX RATES                                                                         
                                                                                                                                
3:35:37 PM                                                                                                                    
CO-CHAIR  PASKVAN   announced  consideration  of  SB   192  [CSSB                                                               
192(RES), labeled 27-LS1305\B was before the committee].                                                                        
                                                                                                                                
CO-CHAIR  WAGONER  moved  to adopt  CSSB  192(RES),  labeled  27-                                                               
LS1305\E.                                                                                                                       
                                                                                                                                
CO-CHAIR PASKVAN objected for discussion purposes.                                                                              
                                                                                                                                
He  also  noted  Senator  Geissel, Department  of  Revenue  (DOR)                                                               
Commissioner  Butcher, Deputy  Commissioner  Bruce Tangeman,  and                                                               
Chief Economist Stickle were in the audience.                                                                                   
                                                                                                                                
3:36:26 PM                                                                                                                    
JEFF STEPP,  staff to Senator  Paskvan, explained the  changes in                                                               
CSSB 192(RES)  version E.  He said in  addition to  retaining the                                                               
progressivity rates  and the progressivity  cap, the  CS contains                                                               
four  significant additions  to Alaska's  oil and  gas production                                                               
tax statutes as follows:                                                                                                        
- it rewards increased production as proposed in Amendment B.9                                                                  
- it establishes a gross minimum tax                                                                                            
- it creates an oil information system                                                                                          
- it  separates oil and  natural gas for purposes  of calculating                                                               
the progressivity portion of the production tax                                                                                 
                                                                                                                                
He explained  that the CS  lowers both the rate  of progressivity                                                               
and its  cap. It  retains the  original PTV  trigger of  $30, but                                                               
changes  the  progressivity  tax  rate from  .4  percent  to  .35                                                               
percent per  dollar increase up  to 50 percent  (or approximately                                                               
$101.43). At  50 percent, the  CS adds a second  trigger lowering                                                               
the .35  percent to  .1 percent up  to 60  percent (approximately                                                               
$201.43) of PTV.  Version E also reduces the maximum  tax rate of                                                               
75  percent to  60  percent. Initial  calculations  from the  DOR                                                               
indicate  that  this  reduction   in  progressivity  to  the  oil                                                               
companies  will result  in  decreased tax  revenue  to Alaska  of                                                               
approximately $200 million to $250  million annually. The goal is                                                               
to  return upside  potential to  industry at  high oil  prices to                                                               
incentivize more production.                                                                                                    
                                                                                                                                
3:40:31 PM                                                                                                                    
MR. STEPP said the next  component of the CS, rewarding increased                                                               
production, was advanced last week  as Amendment B.9. The purpose                                                               
is  to   reward  companies  that   increase  their   North  Slope                                                               
production levels from one year  to the next, helping to increase                                                               
the  flow through  TAPS. Companies  that achieve  this goal  will                                                               
earn a  $10 allowance on  new barrels  of oil they  produce above                                                               
the prior year.  However, the allowance for  incremental oil will                                                               
not  be applied  to  the PTV  calculation  for progressivity  per                                                               
Legislative Legal's advice.                                                                                                     
                                                                                                                                
He  said this  allowance  should  not be  confused  with the  tax                                                               
credit or  a lowering of tax  rates. It's a reduction  in the PTV                                                               
used to calculate production tax.  So, if a company produced, for                                                               
example, 100,000  barrels in 2012  and increased that  by 110,000                                                               
barrels in 2013, that company  would be eligible for an allowance                                                               
on the new  10,000 barrels. The allowance would  reduce their PTV                                                               
by $10 multiplied  by the number of barrels of  new oil produced.                                                               
He said  the allowance  would not influence  the tax  rate itself                                                               
and it would  not count as a lease expenditure  and isn't part of                                                               
the calculation that determines average profits per barrel.                                                                     
                                                                                                                                
3:42:04 PM                                                                                                                    
To accomplish  this, he  explained that  the DOR  would determine                                                               
the  average daily  state-wide production  for each  producer for                                                               
the  previous  tax  year.  This   figure  would  be  adjusted  by                                                               
eliminating  any day  or days  in which  there was  a significant                                                               
slowdown  in  North  Slope   production  or  transportation  (the                                                               
adjusted average).  This calculation  would also exclude  any new                                                               
oil  as a  result of  acquisition  or mergers.  For instance,  if                                                               
ConocoPhillips  bought  Pioneer  it  would  not  get  a  new  oil                                                               
allowance  for  the existing  production  at  Oooguruk unless  it                                                               
increased production levels above those achieved by Pioneer.                                                                    
                                                                                                                                
3:43:02 PM                                                                                                                    
MR. STEPP said  the next component of the CS  establishes a gross                                                               
minimum tax and  was presented as Amendment  B.13; it establishes                                                               
a production  tax floor of 10  percent of the gross  value of oil                                                               
at point  of production  for legacy fields  in Alaska.  The floor                                                               
would apply only  to fields that have already  produced 1 billion                                                               
barrels  of oil  and are  still producing  an average  of 100,000                                                               
barrels a day.  Prudhoe Bay and Kuparuk are the  only fields that                                                               
currently  meet that  definition. The  vast majority  of Alaska's                                                               
oil  production  comes  from these  fields  and  most  facilities                                                               
associated  with  them  were  fully  depreciated  long  ago.  The                                                               
amendment  does not  apply to  new  fields or  smaller fields  in                                                               
order  to  avoid  any  potential  that it  could  put  new  field                                                               
development or development of smaller reservoirs at risk.                                                                       
                                                                                                                                
He explained that ACES currently has  a production tax floor of 0                                                               
to  4 percent  depending on  the  price of  oil and  that can  be                                                               
brought  even  lower  by  credits. This  means  the  state  could                                                               
actually owe companies production tax  in a low price environment                                                               
(when  at  the same  time  it  has a  cash  flow  deficit and  is                                                               
struggling to  pay for the  most essential state  services). This                                                               
provision  is intended  to alleviate  those concerns  and doesn't                                                               
allow  legacy field  producers  to apply  tax  credits to  reduce                                                               
their production taxes below the 10  percent gross floor.  And at                                                               
$70 the  state may take in  more with the 10  percent gross floor                                                               
than it would with ACES.                                                                                                        
                                                                                                                                
Industry  has  said that  ACES  does  not  work  for them  in  an                                                               
extremely  high price  environment; conversely  it does  not work                                                               
for the state and is not  durable in a low price environment. Oil                                                               
prices won't  necessarily remain  above $100 forever,  as history                                                               
has shown them  to be extremely volatile, and the  new floor will                                                               
ensure that Alaskans  get some production tax for  their oil even                                                               
when prices are  below $50 per barrel. Just three  years ago this                                                               
month oil  was selling for  $47 per barrel.  Further, consultants                                                               
have  said ACES  needs to  be durable  in a  wide range  of price                                                               
environments and this provision helps achieve that goal.                                                                        
                                                                                                                                
3:45:07 PM                                                                                                                    
MR. STEPP moved  on to the oil information  system provision that                                                               
was advanced as Amendment B.16.  Much information is confidential                                                               
under  law, but  a considerable  amount is  public but  scattered                                                               
among  several agencies  and difficult  to  find. This  provision                                                               
begins  the  process  of making  information  more  available  to                                                               
policy makers,  the public and oil  and gas companies who  may be                                                               
seeking to do business in Alaska's oil fields.                                                                                  
                                                                                                                                
This  provision  requires the  Alaska  Oil  and Gas  Conservation                                                               
Commission   (AOGCC)   to   develop   an   electronic   petroleum                                                               
information   management   system   that  will   contain   public                                                               
information currently gathered  by the commission as  well as the                                                               
Departments  of   Revenue,  Natural   Resources  and   Labor  and                                                               
Workforce  Development.  The  system will  consolidate  available                                                               
public oil and gas information  that is currently scattered among                                                               
the   several  agencies   for  the   purpose  of   improving  the                                                               
administration  of  the  oil  and   gas  production  tax  and  to                                                               
facilitate  exploration, development  and production  of oil  and                                                               
gas resources. As more information  becomes publicly available it                                                               
can be incorporated into the information system.                                                                                
                                                                                                                                
He  said the  information list  in the  CS is  taken from  a 2007                                                               
Gaffney  Kline  report  that  provided an  overview  of  how  the                                                               
acquisition, distribution and publication  of oil company data is                                                               
handled in other  oil and gas producing  regimes. The legislation                                                               
directs  the  departments  that have  control  over  the  various                                                               
aspects of  the information to  provide what is  not confidential                                                               
to  the  commission  in  a form  suitable  for  distribution.  It                                                               
directs the AOGCC to develop and implement the system.                                                                          
                                                                                                                                
3:47:23 PM                                                                                                                    
MR.  STEPP  said  the  last  change  is  what  is  known  as  the                                                               
"decoupling" provision.  The legislature's consultant,  Pedro van                                                               
Meurs,  in  the  Joint  Senate Resources  and  Finance  Committee                                                               
hearings on  February 13 and  14, 2012 warned of  deficiencies in                                                               
the  current  ACES  system  and   one  was  that  the  barrel  of                                                               
equivalent  (BOE)  concept  results  in  "the  nonsensical  cross                                                               
subsidization  of gas"  and would  result  in massive  government                                                               
revenue losses  on oil production  if incremental gas were  to be                                                               
developed  at  the same  time.  That  would  in turn  impede  gas                                                               
project development. Dr. van Meurs  said it is essential that any                                                               
revision  of ACES  deals with  this problem  in advance  and this                                                               
provision would permit  adding gas terms to the  package later or                                                               
immediately without having to change oil terms again.                                                                           
                                                                                                                                
MR. STEPP  explained that  the CS separates  oil and  natural gas                                                               
for  purposes of  calculating the  progressivity  portion of  the                                                               
production  tax. The  progressivity  surcharges for  oil in  Cook                                                               
Inlet and in-state gas would  be calculated together but distinct                                                               
from export gas instead of  the current practice of combining oil                                                               
and gas. The  progressivity structure itself would  be changed to                                                               
conform to the rates set forth in the CS.                                                                                       
                                                                                                                                
3:49:50 PM                                                                                                                    
MR. STEPP  explained that  currently oil  and gas  are calculated                                                               
according to  the combined  British Thermal  Unit (BTU)  value of                                                               
oil, and  gas and oil  and gas can  and do have  vastly different                                                               
values on a BTU basis. Currently a  BTU of oil is worth much more                                                               
than a  BTU of gas.  Accordingly, once  a major gas  sale starts,                                                               
overlaying  the existing  oil  production the  BTU  value of  the                                                               
combined oil  and gas  would be  much lower than  it was  for oil                                                               
alone. This  has been  referred to as  the "dilution  effect" and                                                               
could cause a  significant reduction in oil taxes if  a major gas                                                               
sale  occurred. The  existing tax  structure in  conjunction with                                                               
the inherent  uncertainty of  future oil  and gas  prices exposes                                                               
the State  of Alaska to  significant financial risk were  a major                                                               
gas  to occur.  The structure  also creates  economic instability                                                               
for  entities  looking  to participate  in  the  development  and                                                               
financing of a natural gas pipeline project in Alaska.                                                                          
                                                                                                                                
MR. STEPP said that removing  the dilution effect will not result                                                               
in  any reduction  in oil  taxes from  a major  gas sale.  The CS                                                               
gives the  DOR authority to  adopt regulations to  allocate costs                                                               
between  oil and  gas with  the added  instruction that  a method                                                               
based  on  relative  BTU  barrel  of  oil  equivalent  should  be                                                               
considered. The effective date is January 1, 2013.                                                                              
                                                                                                                                
3:51:23 PM                                                                                                                    
SENATOR FRENCH asked where the decoupling provision came from.                                                                  
                                                                                                                                
MR. STEPP  answered that the  drafter, Mr. Bullock, was  asked to                                                               
incorporate HCS CSSB 305(FIN) from  the 26th Alaska legislature -                                                               
a bill that passed the Senate in 2010.                                                                                          
                                                                                                                                
CO-CHAIR PASKVAN withdrew  his objection and asked  if there were                                                               
any further objections.                                                                                                         
                                                                                                                                
CO-CHAIR WAGONER objected  to say that on February  24 the Senate                                                               
Bipartisan Working  Group said  they wanted  three things  out of                                                               
this bill: increased  oil production, more jobs  for Alaskans and                                                               
sustainable state  revenue over  the long  term. He  didn't think                                                               
this bill did  any of them. This version\E was  sent out at 10:23                                                               
last night they  finally have decoupling language. No  one on the                                                               
committee  knew  about  this.  It  had  no  public  testimony  or                                                               
hearings  in the  last two  years. The  bill started  out as  two                                                               
pages and it's now 21 pages long.                                                                                               
                                                                                                                                
CO-CHAIR WAGONER continued that  legislators have publicly patted                                                               
themselves on the  back that an open and  transparent process has                                                               
taken place  as a result of  this bill, but that  isn't the case.                                                               
Some  amendments that  were conceptually  presented a  scant week                                                               
ago are included  and others weren't. The bill has  been heard in                                                               
committee 21  times; of that,  only one  time has there  been any                                                               
meaningful dialogue and that is what they are doing today.                                                                      
                                                                                                                                
3:54:50 PM                                                                                                                    
CO-CHAIR  WAGONER  said he  had  planned  to offer  an  amendment                                                               
dealing with the tax holiday and  received it today at 1:00 p.m.;                                                               
it was completed  by Legislative Legal at 10:56 p.m.  on March 1.                                                               
The  bill was  read  across February  8, and  20  days later  the                                                               
Senate  Resources  Committee finally  heard  from  the public  on                                                               
version  B. As  a result  of that  input according  to his  count                                                               
there  were 45  yeas,  96 nays  and  15 not  sures.  Some of  the                                                               
amendments  should  receive  modeling  before  moving  from  this                                                               
committee. He  finished by maintaining his  objection to adopting                                                               
version E.                                                                                                                      
                                                                                                                                
3:56:09 PM                                                                                                                    
At ease from 3:56:09 to 3:57:29 p.m.                                                                                            
                                                                                                                                
3:56:29 PM                                                                                                                    
CO-CHAIR PASKVAN  asked for a  roll call vote.  Senators Stedman,                                                               
Stevens,  Wielechowski, French  and Paskvan  voted yea;  Senators                                                               
McGuire and  Wagoner voted nay; therefore  CSSB 192(RES), labeled                                                               
27-LS1305\E, was before the committee.                                                                                          
                                                                                                                                
3:57:21 PM                                                                                                                    
SENATOR MCGUIRE moved Amendment 1, E.16 [old 27-LS1305\B.4].                                                                    
                                                                                                                                
                                                27-LS1305\E.16                                                                  
                                                Nauman/Bullock                                                                  
                       A M E N D M E N T                                                                                    
                                                                                                                                
     OFFERED IN THE SENATE                                                                                                      
     TO:  CSSB 192(RES), Draft Version "B"                                                                                      
                                                                                                                                
     Page 1, line 1:                                                                                                            
          Delete "oil and gas production tax"                                                                                 
          Insert "tax rates applicable to oil and gas                                                                         
     production when the average production  tax value for a                                                                  
     BTU equivalent barrel of oil and gas is more than $30"                                                                   
                                                                                                                                
     Page 1, line 3, through page 2, line 6:                                                                                    
          Delete all material and insert:                                                                                       
        "*  Section  1.   AS 43.55.011(g)  is  repealed  and                                                                
     reenacted to read:                                                                                                         
          (g)  For each month of the calendar year for                                                                          
     which  the producer's  average  monthly production  tax                                                                    
     value under AS 43.55.160(a)(2)  for each BTU equivalent                                                                    
     barrel of  the taxable  oil and gas  is more  than $30,                                                                    
     the  amount  of tax  for  purposes  of (e)(2)  of  this                                                                    
     section  is  determined   by  multiplying  the  monthly                                                                    
     production  tax  value  of  the  taxable  oil  and  gas                                                                    
     produced during  the month by the  following tax rates,                                                                    
     as applicable:                                                                                                             
               (1)    if   the  producer's  average  monthly                                                                    
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable  oil and  gas for  the month  is not  more than                                                                    
     $42.50, the tax  rate is 2.5 percent  of the difference                                                                    
     between that average monthly production  tax value of a                                                                    
     BTU equivalent barrel and $30;                                                                                             
               (2)    if   the  producer's  average  monthly                                                                    
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable oil and  gas for the month is  more than $42.50                                                                    
     but not more than $55, the tax rates are                                                                                   
               (A)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel that is greater than $30; and                                                                                       
               (B)   7.5 percent  of the  monthly production                                                                    
     tax  value  for  each  BTU equivalent  barrel  that  is                                                                    
     greater than $42.50;                                                                                                       
               (3)    if   the  producer's  average  monthly                                                                    
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable oil and gas for the  month is more than $55 but                                                                    
     not more than $67.50, the tax rates are                                                                                    
               (A)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (B)   7.5 percent  of the next  higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel; and                                                                                                     
               (C)   12.5 percent of the  monthly production                                                                    
     tax  value  for  each  BTU equivalent  barrel  that  is                                                                    
     greater than $55;                                                                                                          
               (4)    if   the  producer's  average  monthly                                                                    
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable oil and  gas for the month is  more than $67.50                                                                    
     but not more than $80, the tax rates are                                                                                   
               (A)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (B)   7.5 percent  of the next  higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (C)   12.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (D)   17.5 percent of the  monthly production                                                                    
     tax  value  for  each  BTU equivalent  barrel  that  is                                                                    
     greater than $67.50;                                                                                                       
               (5)    if   the  producer's  average  monthly                                                                    
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable oil and gas for the  month is more than $80 but                                                                    
     not more than $92.50, the tax rates are                                                                                    
               (A)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (B)   7.5 percent  of the next  higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (C)   12.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (D)   17.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel; and                                                                                                     
               (E)   22.5 percent of the  monthly production                                                                    
     tax  value  for  each  BTU equivalent  barrel  that  is                                                                    
     greater than $80;                                                                                                          
               (6)    if   the  producer's  average  monthly                                                                    
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable oil and  gas for the month is  more than $92.50                                                                    
     but not more than $105, the tax rates are                                                                                  
               (A)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (B)   7.5 percent  of the next  higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (C)   12.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (D)   17.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (E)   22.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel; and                                                                                                     
               (F)   25  percent of  the monthly  production                                                                    
     tax  value  for  each  BTU equivalent  barrel  that  is                                                                    
     greater than $92.50;                                                                                                       
               (7)    if   the  producer's  average  monthly                                                                    
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable oil  and gas  for the month  is more  than $105                                                                    
     but not more than $117.50, the tax rates are                                                                               
               (A)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (B)   7.5 percent  of the next  higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (C)   12.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (D)   17.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (E)   22.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (F)  25 percent of  the next higher $12.50 of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel; and                                                                                                                
               (G)   30  percent of  the monthly  production                                                                    
     tax  value  for  each  BTU equivalent  barrel  that  is                                                                    
     greater than $105;                                                                                                         
               (8)    if   the  producer's  average  monthly                                                                    
     production tax value of a  BTU equivalent barrel of the                                                                    
     taxable  oil  and  gas  for  the  month  is  more  than                                                                    
     $117.50, the tax rates are                                                                                                 
               (A)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (B)   7.5 percent  of the next  higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (C)   12.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (D)   17.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (E)   22.5 percent of the  next higher $12.50                                                                    
     of   monthly  production   tax  value   for  each   BTU                                                                    
     equivalent barrel;                                                                                                         
               (F)  25 percent of  the next higher $12.50 of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel;                                                                                                                    
               (G)  30 percent of  the next higher $12.50 of                                                                    
     monthly production  tax value  for each  BTU equivalent                                                                    
     barrel; and                                                                                                                
               (H)   35  percent of  the monthly  production                                                                    
     tax  value  for  each  BTU equivalent  barrel  that  is                                                                    
     greater than $117.50.                                                                                                      
        * Sec. 2. The uncodified  law of the State of Alaska                                                                  
     is amended by adding a new section to read:                                                                                
          APPLICABILITY. Section 1 of this Act applies to                                                                       
     oil and gas produced after December 31, 2012.                                                                              
        * Sec. 3. The uncodified  law of the State of Alaska                                                                  
     is amended by adding a new section to read:                                                                                
          TRANSITION:   REGULATIONS.   The   Department   of                                                                    
     Revenue may  adopt regulations  to implement  this Act.                                                                    
     The    regulations   take    effect   under    AS 44.62                                                                    
     (Administrative  Procedure  Act),  but not  before  the                                                                    
     effective   date  of   the   provision   of  this   Act                                                                    
     implemented by the regulation.                                                                                             
        *  Sec.  4.  Section  1 of  this  Act  takes  effect                                                                  
     January 1, 2013.                                                                                                           
        * Sec. 5. Except as provided  in sec. 4 of this Act,                                                                  
     this    Act    takes     effect    immediately    under                                                                    
     AS 01.10.070(c)."                                                                                                          
                                                                                                                                
CO-CHAIR PASKVAN objected for discussion purposes.                                                                              
                                                                                                                                
SENATOR  MCGUIRE  explained  that this  amendment  is  "bracketed                                                               
progressivity" and adds two top  brackets - at $105.50 to $117.50                                                               
and $117.50  and up -  making it  slightly more favorable  to the                                                               
state's take.  Consultants have shown  them that  at particularly                                                               
high  cost development  economics  (what  you're largely  dealing                                                               
with in Alaska)  the CS doesn't move the needle  far enough. They                                                               
showed that SB 192  runs along the line of ACES  in the $70 range                                                               
of  the decline  curve  and there  isn't  any significant  change                                                               
until $140,  and that  is the  range in  which Alaska  is missing                                                               
development opportunities.                                                                                                      
                                                                                                                                
SENATOR MCGUIRE  said when she voted  for ACES she made  an error                                                               
and wishes  she would have  better understood  progressivity. The                                                               
25  percent base  rate was  thoroughly vetted  and she  was "very                                                               
comfortable" with  it, but she  did not understand just  how high                                                               
of  a  government  take  progressivity would  mean  at  high  oil                                                               
prices. Amendment  E.16 is designed to  reduce progressivity into                                                               
brackets much like  an individual IRS return; it  would equal out                                                               
the government take and industry profit.                                                                                        
                                                                                                                                
4:02:56 PM                                                                                                                    
She cited the spring 2007  forecast (the last one produced before                                                               
voting  on ACES)  in  which  the DOR  projected  Alaska would  be                                                               
producing  807,000 barrels  of oil/day  in 2012,  but today  it's                                                               
only producing 584,000 barrels.                                                                                                 
                                                                                                                                
Judge Gleason relied  on data prepared by [Dudley  Platt] and his                                                               
forecasting  is what  she was  citing  now. She  said she  didn't                                                               
believe in taxing our way to  prosperity, but she knows we are in                                                               
a decline  and that it's  an aging  field. But she  believed that                                                               
tax reductions  could incentivize development that  would lead to                                                               
production.  As  an example  two  years  ago,  SB  309 led  to  a                                                               
renaissance  in Cook  Inlet and  while they  hadn't seen  as much                                                               
government  take as  a result,  they  have seen  an injection  of                                                               
capital into the private sector.  She wanted to emphasize this as                                                               
the  state moves  forward; circulating  dollars into  the private                                                               
sector will be key to our recovery in the future.                                                                               
                                                                                                                                
4:05:54 PM                                                                                                                    
Further,  she  said this  progressivity  reduction  in E.16  does                                                               
something  else  Dr.  van  Meurs  talked  about  as  one  of  the                                                               
inefficiencies in the  current ACES system that  prices over $140                                                               
barrel (high  marginal tax rates)  leads to  irrational behavior.                                                               
Companies will  spend more money  in an  effort to try  to reduce                                                               
their overall tax  rate, which could lead to what  is referred to                                                               
as gold plating.                                                                                                                
                                                                                                                                
SENATOR  MCGUIRE  said  she  recognized  members  concerns  about                                                               
industry pledging  to invest $5  billion on the North  Slope, but                                                               
she  understands   their  limitations   in  their   unit  sharing                                                               
agreement and other things and thinks  they have made as strong a                                                               
statement as  they can. And  she is  prepared to trust  them. She                                                               
trusts that  like all  of Alaska  they want  to see  these fields                                                               
succeed and  these projects come on  line. They want to  argue in                                                               
the board rooms in Houston that  the system in Alaska is now more                                                               
competitive and as a result  that more capital should be invested                                                               
here.                                                                                                                           
                                                                                                                                
She used the  simile of how she  was taught to get out  of a tail                                                               
spin years ago  in flight school that applies here.  When she was                                                               
told  to go  into a  controlled  stall she  was terrified;  every                                                               
instinct  told  her she  didn't  want  to  do this.  The  teacher                                                               
explained despite  the urge to  pull up  that the very  thing you                                                               
have to  do is point your  nose down in order  to regain control.                                                               
To a certain extent the legislature  is on a parallel track. They                                                               
have seen production numbers decline  and their instinct has been                                                               
"to grab as much as we  can." Consultants have also said this tax                                                               
system is a harvest model.                                                                                                      
                                                                                                                                
4:10:02 PM                                                                                                                    
SENATOR WIELECHOWSKI agreed that  members have deep philosophical                                                               
differences  on these  issues. He  opposed this  amendment for  a                                                               
number of  reasons, one is that  it will cost the  state billions                                                               
of dollars  per year. He said,  "We're the board of  directors of                                                               
the State of Alaska. The  Constitution says we're responsible for                                                               
insuring we get maximum benefit for our resource..."                                                                            
                                                                                                                                
He explained that the state had  30 years of low taxation policy.                                                               
It  had a  system called  the  economic limit  factor (ELF)  that                                                               
allowed a 0  percent tax rate by  2006 on 15 out of  19 fields on                                                               
the  North Slope.  The legacy  fields paid  a gross  tax rate  of                                                               
around 12.5  percent. The philosophy  for 30 years was  low taxes                                                               
will lead to more production.                                                                                                   
                                                                                                                                
SENATOR WIELECHOWSKI reasoned, "Well  what happened to production                                                               
during the 30  years of this low taxation policy  we had? We went                                                               
from 2 million  barrels a day to 750,000 barrels  a day. This was                                                               
a  failed policy.  The policy  simply didn't  get us  the results                                                               
that we  want." So, he  strongly disagreed  with going back  to a                                                               
policy that had  been in place for 30 years  and failed, and cost                                                               
the state probably hundreds of billions of dollars.                                                                             
                                                                                                                                
SENATOR WIELECHOWSKI said during the  period of 2000 to 2006 when                                                               
ELF was in  place (a 0 percent tax rate),  production went down 8                                                               
percent  per  year;  jobs and  investment  declined,  too.  Since                                                               
passing ACES,  jobs on the  North Slope  are at an  all-time high                                                               
and there  aren't enough  beds to  accommodate all  the employees                                                               
that work up there (hot  sheeting). They actually pay people $125                                                               
per day  so that someone else  can sleep in their  bed while they                                                               
are out working. Unfortunately, a  high percentage of workers are                                                               
not Alaskans.  Investment is  at an  all-time high,  both capital                                                               
and operating.  Every single year  since passing ACES  there have                                                               
been all-time highs of investment.                                                                                              
                                                                                                                                
He  remarked that  people say  that  everyone is  going to  North                                                               
Dakota,  but the  number  of  companies on  the  North Slope  has                                                               
increased  by 250  percent since  passing ACES.  More exploratory                                                               
wells  are scheduled  this  year  than in  decades  on the  North                                                               
Slope.  He hears  that companies  are doing  terrible, that  they                                                               
can't make  money on the  North Slope any  more. But look  at the                                                               
companies' income statements. They've  had $30 billion in profits                                                               
on the North Slope in the  four years since ACES has been passed.                                                               
Senator  Wielechowski said  he is  happy they  are making  record                                                               
profits  in  Alaska,  but  as  someone  who  is  responsible  for                                                               
insuring  that   Alaska  gets  its   fair  share,  they   have  a                                                               
responsibility  as well.  He's thrilled  that the  companies made                                                               
$30 billion, but he can't see giving them billions more back.                                                                   
                                                                                                                                
4:13:45 PM                                                                                                                    
SENATOR WIELECHOWSKI  said they hear  people say Alaska is  not a                                                               
good place to do business. But  when they modeled rates of return                                                               
(IRR) under ACES they assumed that  capital costs would go up 300                                                               
percent, but that  didn't happen, and if you put  your money in a                                                               
bank today,  you're lucky if you  get 1 percent, but  the IRR for                                                               
infield drilling  at Prudhoe  Bay was  123 percent  on $80/barrel                                                               
oil according  to Gaffney and  Kline, the company that  was hired                                                               
by the governor.  He was happy they were making  those high rates                                                               
of  return, but  don't  come back  to Alaska  and  tell him  that                                                               
Alaska is not  profitable and you can't make money  here when all                                                               
the numbers, all the objective evidence, show just the opposite.                                                                
                                                                                                                                
The 2004  BP memo was shocking  he said, saying Alaska's  role in                                                               
the company  is to be  a "cash cow."  So they  can make a  lot of                                                               
money here and spend it to grow their business elsewhere.                                                                       
                                                                                                                                
4:15:02 PM                                                                                                                    
SENATOR WIELECHOWSKI recalled that  they just heard yesterday the                                                               
$5 billion in  commitments is no commitment. They  don't have all                                                               
the  agreements of  all  the  parties for  this  $5 billion.  And                                                               
breaking that  down, the $5 billion  commitment, pledge, whatever                                                               
- some  of the projects have  been in their plans  of development                                                               
for  five  years. He  said  he  had  asked  the director  of  the                                                               
Division  of  Oil and  Gas  to  name  a  single project  plan  or                                                               
development on  the North Slope  that is un-economic  under ACES,                                                               
and  he couldn't  name  a  single one.  He  has  been asking  for                                                               
modeling for over a year, but he  hasn't seen a single model of a                                                               
field  or  a  single  development  or  a  single  exploration  or                                                               
modeling of  anything that has  shown him  there is a  single un-                                                               
economic project  under ACES  that would be  made economic  by HB                                                               
110  or a  similar type  of bill.  He hasn't  seen any  data that                                                               
shows it.  He can't vote for  a bill that gives  back that amount                                                               
of money when he hasn't seen modeling that does it.                                                                             
                                                                                                                                
Further,  Senator Wielechowski  said, the  $5 billion  investment                                                               
could  be over  a 6  to  10 year  period; so  that's really  $500                                                               
million  a year.  But the  catch is  that the  state picks  up 60                                                               
percent of the costs. So they  are really getting $200 million of                                                               
investment and at the same time  the state is giving back roughly                                                               
$18 billion ($2 billion per year).  "Is there a CEO in the world,                                                               
is there  a businessman  in the  world, a  business woman  in the                                                               
world,  that would  accept that  deal...? They'd  get fired,"  he                                                               
said.                                                                                                                           
                                                                                                                                
CO-CHAIR WAGONER  added that it's  nice to have explorers  on the                                                               
North Slope and  he is the one  who did the legislation  10 or so                                                               
years ago in SB 186 that brought  a lot of them. At the same time                                                               
he  wasn't aware  of  what  was really  going  on.  It isn't  the                                                               
ability to  drill and produce  oil; it's  that not one  well that                                                               
has been  drilled this year  or was drilled  that year has  put a                                                               
drop  of  oil  into  the  pipeline.  We  have  zero  increase  in                                                               
production  in  areas outside  of  the  existing units  and  they                                                               
aren't going to get any. Wells are being drilled and if hydro-                                                                  
carbons are found, they are trying  to flip them and sell them to                                                               
someone  else and  not produce  them.  The mistake  was that  the                                                               
state  wasn't   requiring  them   to  come  to   production.  The                                                               
exploration that is  going on on the North Slope  is to hold onto                                                               
their leases, it's not about production.                                                                                        
                                                                                                                                
4:19:00 PM                                                                                                                    
SENATOR STEDMAN  commented that the amendment  was well intended,                                                               
but he opposed  it mainly because it moves too  much cash without                                                               
further  balancing the  system out.  The CS  has a  progressivity                                                               
adjustment  and it  might need  to  be adjusted  some more.  They                                                               
could tip it  to the other direction at high  oil prices, but the                                                               
time is not ripe for this amendment.                                                                                            
                                                                                                                                
SENATOR  MCGUIRE   said  she   appreciates  their   comments  and                                                               
reiterated  that  this  amendment  has two  higher  brackets  (as                                                               
opposed to  the governor's bill)  and it wouldn't take  them back                                                               
to ELF. It  still ensures a higher state take  than any other tax                                                               
regime the state has had. But  she agreed that more work needs to                                                               
be done.  She also  commented that  although it's  true a  lot of                                                               
workers are  on the  North Slope, they  are in  exploratory wells                                                               
and maintenance operations, but the state wants people up there                                                                 
working on production.                                                                                                          
                                                                                                                                
CO-CHAIR PASKVAN  maintained his objection  and asked for  a roll                                                               
call  vote.  Senators McGuire  and  Wagoner  voted yea;  Senators                                                               
Wielechowski,  French, Stevens,  Stedman and  Paskvan voted  nay;                                                               
therefore the amendment failed.                                                                                                 
                                                                                                                                
4:22:22 PM                                                                                                                    
SENATOR MCGUIRE moved E.17 [old B.7]                                                                                            
                                                                                                                                
                                                27-LS1305\E.17                                                                  
                                                      Bullock                                                                   
                       A M E N D M E N T                                                                                    
                                                                                                                                
     OFFERED IN THE SENATE                                                                                                      
     TO:  CSSB 192(RES), Draft Version "E"                                                                                      
                                                                                                                                
     Page 2, line 1, following "tax":                                                                                         
          Insert "rate; relating to oil and gas production                                                                  
     tax   credits,   including    qualified   credits   for                                                                  
     exploration, development and production"                                                                                 
                                                                                                                                
     Page 4, line 29, through page 5, line 9:                                                                                   
          Delete all material and insert:                                                                                       
        "*   Sec.  5.   AS 43.55.011(e)   is  repealed   and                                                                
     reenacted to read:                                                                                                         
          (e)  There is levied on the producer of oil or                                                                        
     gas a  tax for all  oil and gas produced  each calendar                                                                    
     year from  each lease  or property  in the  state, less                                                                    
     any  oil and  gas the  ownership or  right to  which is                                                                    
     exempt  from  taxation  or  constitutes  a  landowner's                                                                    
     royalty  interest. Except  as otherwise  provided under                                                                    
     (f),  (j), (k),  and (o)  of this  section, the  tax is                                                                    
     equal to the sum of  the annual production tax value of                                                                    
     the taxable oil and gas                                                                                                  
               (1)  produced from a lease or property not                                                                       
     described  in  (2)  of this  subsection  as  calculated                                                                    
     under AS 43.55.160(a)(1) multiplied  by 25 percent, and                                                                    
     the sum, over  all months of the calendar  year, of the                                                                    
     tax  amounts determined  under (g)(1)  and (p)  of this                                                                    
     section, as applicable; and                                                                                                
               (2)  produced during the first seven                                                                             
     consecutive   years  after   the  start   of  sustained                                                                    
     production  or produced  during the  first seven  years                                                                    
     after the effective date  of this subsection, whichever                                                                    
     is  later, from  a  lease or  property containing  land                                                                    
     that was not  or previously had not been  within a unit                                                                    
     or in  commercial production  as of  December 31, 2008,                                                                    
     as  calculated under  AS 43.55.160(a)(1) multiplied  by                                                                    
     15  percent,  and  the  sum, over  all  months  of  the                                                                    
     calendar  year, of  the  tax  amounts determined  under                                                                    
     (g)(2) and (p) of this  section, as applicable; in this                                                                    
     paragraph,  "sustained  production"   has  the  meaning                                                                    
     given in AS 43.55.025(l)."                                                                                                 
                                                                                                                                
     Page 5, line 28, through page 7, line 5:                                                                                   
          Delete all material and insert:                                                                                       
        "*   Sec.  7.   AS 43.55.011(g)   is  repealed   and                                                                
     reenacted to read:                                                                                                         
          (g)  For each month of the calendar year for                                                                          
     which  the producer's  average  monthly production  tax                                                                    
     value calculated  under AS 43.55.160(a)(2)(A) -  (E) of                                                                    
     a BTU equivalent barrel of  taxable oil produced during                                                                    
     the month, gas  produced during the month  from a lease                                                                    
     or property  in the  Cook Inlet sedimentary  basin, and                                                                    
     gas produced during the month  from a lease or property                                                                    
     outside the  Cook Inlet sedimentary  basin and  used in                                                                    
     the state  is more than  $30, the tax is  calculated as                                                                    
     follows:                                                                                                                   
               (1) the amount of tax for purposes of (e)(1)                                                                     
     of this section is  determined by multiplying the value                                                                    
     calculated  under AS 43.55.160(a)(2)(A)  -  (E) by  the                                                                    
     tax rate calculated as follows:                                                                                            
               (A)  if the producer's average monthly                                                                           
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     of the  taxable oil and gas  for the month is  not more                                                                    
     than $92.50, the tax rate  is 0.4 percent multiplied by                                                                    
     the number that represents  the difference between that                                                                    
     average  monthly   production  tax   value  of   a  BTU                                                                    
     equivalent barrel and $30; or                                                                                              
               (B)  if the producer's average monthly                                                                           
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     of the taxable  oil and gas for the month  is more than                                                                    
     $92.50, the tax  rate is the sum of 25  percent and the                                                                    
     product of  0.1 percent  multiplied by the  number that                                                                    
     represents the  difference between the  average monthly                                                                    
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     and $92.50,  except that the sum  determined under this                                                                    
     subparagraph may not exceed 50 percent;                                                                                    
               (2)    the  amount  of tax  for  purposes  of                                                                    
     (e)(2)  of this  section is  determined by  multiplying                                                                    
     the  monthly  production  tax  value  calculated  under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of the  taxable oil and gas                                                                    
     produced during  the month by the  following tax rates,                                                                    
     as applicable:                                                                                                             
               (A)    if   the  producer's  average  monthly                                                                    
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     of the  taxable oil and gas  for the month is  not more                                                                    
     than  $42.50,  the  tax  rate is  2.5  percent  of  the                                                                    
     difference between that  average monthly production tax                                                                    
     value of a BTU equivalent barrel and $30;                                                                                  
               (B)    if   the  producer's  average  monthly                                                                    
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     of the taxable  oil and gas for the month  is more than                                                                    
     $42.50 but not more than $55, the tax rates are                                                                            
               (i)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly   production   tax   value   calculated   under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel that is greater than $30; and                                                                                       
               (ii)   7.5 percent of the  monthly production                                                                    
     tax value calculated  under AS 43.55.160(a)(2)(A) - (E)                                                                    
     for  each BTU  equivalent barrel  that is  greater than                                                                    
     $42.50;                                                                                                                    
               (C)    if   the  producer's  average  monthly                                                                    
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     of the taxable  oil and gas for the month  is more than                                                                    
     $55 but not more than $67.50, the tax rates are                                                                            
               (i)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly   production   tax   value   calculated   under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (ii)   7.5 percent of the  next higher $12.50                                                                    
     of  monthly  production   tax  value  calculated  under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel; and                                                                                                                
               (iii)      12.5   percent  of   the   monthly                                                                    
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel that is greater than $55;                                                                                           
               (D)    if   the  producer's  average  monthly                                                                    
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     of the taxable  oil and gas for the month  is more than                                                                    
     $67.50 but not more than $80, the tax rates are                                                                            
               (i)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly   production   tax   value   calculated   under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (ii)   7.5 percent of the  next higher $12.50                                                                    
     of  monthly  production   tax  value  calculated  under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel;                                                                                                                    
               (iii)    12.5  percent  of  the  next  higher                                                                    
     $12.50  of  monthly  production  tax  value  calculated                                                                    
     under   AS 43.55.160(a)(2)(A)  -   (E)  for   each  BTU                                                                    
     equivalent barrel;                                                                                                         
               (iv)  17.5 percent  of the monthly production                                                                    
     tax value calculated  under AS 43.55.160(a)(2)(A) - (E)                                                                    
     for  each BTU  equivalent barrel  that is  greater than                                                                    
     $67.50;                                                                                                                    
               (E)    if   the  producer's  average  monthly                                                                    
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     of the taxable  oil and gas for the month  is more than                                                                    
     $80 but not more than $92.50, the tax rates are                                                                            
               (i)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly   production   tax   value   calculated   under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (ii)   7.5 percent of the  next higher $12.50                                                                    
     of  monthly  production   tax  value  calculated  under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel;                                                                                                                    
               (iii)    12.5  percent  of  the  next  higher                                                                    
     $12.50  of  monthly  production  tax  value  calculated                                                                    
     under   AS 43.55.160(a)(2)(A)  -   (E)  for   each  BTU                                                                    
     equivalent barrel;                                                                                                         
               (iv)  17.5 percent  of the next higher $12.50                                                                    
     of  monthly  production   tax  value  calculated  under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel; and                                                                                                                
               (v)   22.5 percent of the  monthly production                                                                    
     tax value calculated  under AS 43.55.160(a)(2)(A) - (E)                                                                    
     for  each BTU  equivalent barrel  that is  greater than                                                                    
     $80;                                                                                                                       
               (F)    if   the  producer's  average  monthly                                                                    
     production      tax     value      calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     of the taxable  oil and gas for the month  is more than                                                                    
     $92.50, the tax rates are                                                                                                  
               (i)    2.5 percent  on  the  first $12.50  of                                                                    
     monthly   production   tax   value   calculated   under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel that is greater than $30;                                                                                           
               (ii)   7.5 percent of the  next higher $12.50                                                                    
     of  monthly  production   tax  value  calculated  under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel;                                                                                                                    
               (iii)    12.5  percent  of  the  next  higher                                                                    
     $12.50  of  monthly  production  tax  value  calculated                                                                    
     under   AS 43.55.160(a)(2)(A)  -   (E)  for   each  BTU                                                                    
     equivalent barrel;                                                                                                         
               (iv)  17.5 percent  of the next higher $12.50                                                                    
     of  monthly  production   tax  value  calculated  under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel;                                                                                                                    
               (v)   22.5 percent of the  next higher $12.50                                                                    
     of  monthly  production   tax  value  calculated  under                                                                    
     AS 43.55.160(a)(2)(A)  - (E)  for  each BTU  equivalent                                                                    
     barrel; and                                                                                                                
               (vi)   25 percent  of the  monthly production                                                                    
     tax value calculated  under AS 43.55.160(a)(2)(A) - (E)                                                                    
     for  each BTU  equivalent barrel  that is  greater than                                                                    
     $92.50;                                                                                                                    
               (3)   for  purposes of  this subsection,  the                                                                    
     average monthly  production tax value  calculated under                                                                    
     AS 43.55.160(a)(2)(A) - (E) of  a BTU equivalent barrel                                                                    
     of taxable oil and gas is calculated by                                                                                    
               (A)   adding  all of  the monthly  production                                                                    
     tax     values      determined     calculated     under                                                                    
     AS 43.55.160(a)(2)(A) - (E); and                                                                                           
               (B)   dividing the  sum calculated  under (A)                                                                    
     of  this   paragraph  by  the  total   amount,  in  BTU                                                                    
     equivalent barrels, of                                                                                                     
               (i)   taxable  oil produced  by the  producer                                                                    
     during the month;                                                                                                          
               (ii)   taxable gas  produced by  the producer                                                                    
     during the month  from a lease or property  in the Cook                                                                    
     Inlet sedimentary basin; and                                                                                               
               (iii)   taxable gas produced by  the producer                                                                    
     during the month  from a lease or  property outside the                                                                    
     Cook Inlet sedimentary basin and used in the state."                                                                       
                                                                                                                                
     Page 8, line 19, following "percent":                                                                                      
          Insert ", or 15 percent, as applicable under                                                                          
     AS 43.55.011(e),"                                                                                                          
                                                                                                                                
     Page 8, line 20:                                                                                                           
          Delete "AS 43.55.011(g)"                                                                                              
          Insert "AS 43.55.011(g)(1) or (2), as applicable"                                                                     
                                                                                                                                
     Page 8, line 22, following "percent":                                                                                      
          Insert ", or 15 percent, as applicable under                                                                          
     AS 43.55.011(e),"                                                                                                          
                                                                                                                                
     Page 9, line 1, following "percent":                                                                                       
          Insert ", or 15 percent, as applicable under                                                                          
     AS 43.55.011(e),"                                                                                                          
                                                                                                                                
     Page 9, line 2:                                                                                                            
          Delete "AS 43.55.011(g)"                                                                                              
          Insert "AS 43.55.011(g)(1) or (2), as applicable"                                                                     
                                                                                                                                
     Page 9, line 4, following "percent":                                                                                       
          Insert ", or 15 percent, as applicable under                                                                          
     AS 43.55.011(e)"                                                                                                           
                                                                                                                                
     Page 9, line 10:                                                                                                           
          Following "percent":                                                                                                  
          Insert ", or 15 percent, as applicable under                                                                          
     AS 43.55.011(e),"                                                                                                          
          Delete "AS 43.55.011(g)"                                                                                              
          Insert "AS 43.55.011(g)(1) or (2), as applicable"                                                                   
                                                                                                                                
CO-CHAIR PASKVAN objected for purposes of discussion.                                                                           
                                                                                                                                
4:22:46 PM                                                                                                                    
At ease from 4:22 to 4:24 p.m.                                                                                                  
                                                                                                                                
4:24:13 PM                                                                                                                    
SENATOR MCGUIRE  explained that  this is  progressivity bracketed                                                               
(without  the two  higher brackets)  and it  applies only  to new                                                               
fields. Existing  production is  expected to decline  at 7  to 11                                                               
percent  annually  to  just  336,000 barrels  a  day  by  FY2017.                                                               
According to  the fall  2012 revenue  forecast Alaska  would then                                                               
need to bring on 200,000 barrels  a day of new production just to                                                               
maintain current production. She wanted  them to remember that as                                                               
they look at the system of incentives.                                                                                          
                                                                                                                                
Amendment  E.17 attacks  this problem  from a  slightly different                                                               
angle; it doesn't affect any  current production. She doesn't see                                                               
it  as a  give  back  to corporations,  but  as  a correction  to                                                               
something they over-reached  on. It reduces the base  tax rate to                                                               
15  for new  fields outside  existing units  for seven  years; it                                                               
adopts a  bracketed progressivity  system similar  to B.5  with a                                                               
top bracket of 25 percent for  the first seven years of sustained                                                               
production  and then  those fields  would revert  to the  regular                                                               
ACES regime.                                                                                                                    
                                                                                                                                
SENATOR  MCGUIRE  said  she  has heard  from  new  explorers,  in                                                               
particular,  who have  explained how  important changing  ACES is                                                               
for  them. One  company has  secured a  contract for  development                                                               
that would  lead to 1,400  new Alaskan jobs that  is specifically                                                               
contingent on passage of ACES.                                                                                                  
                                                                                                                                
She  was  president  of  a group  called  the  Pacific  Northwest                                                               
Economic Region during the same  time [2007] that Alberta adopted                                                               
a windfall profits tax. The net  effect of that was that industry                                                               
investment  declined  by  50  percent. Dr.  van  Meurs  said  the                                                               
experience of  Alberta which faces  a declining  conventional oil                                                               
production  like Alaska  indicates  that  designing lower  fiscal                                                               
terms  in the  50  to 60  percent range  of  government take  for                                                               
higher  cost   resources  is  a   viable  strategy   to  increase                                                               
production. Once Alberta  ratcheted back its tax  regime they got                                                               
back  the  business   they  had  lost  largely   to  places  like                                                               
Saskatchewan, which  had taken advantage  of the  opportunity and                                                               
incentivized  its  oil  industry.   Alberta  came  back  after  a                                                               
competitiveness  review  and modified  their  system  in 2009  to                                                               
2010; and  the changes resulted  in a rebound in  investment from                                                               
$10.6 billion  in 2008  to $16  billion by  2011 and  record land                                                               
sales that surpassed previous records by over $400 million.                                                                     
                                                                                                                                
SENATOR MCGUIRE said  that Dr. van Meurs used Alberta  as a model                                                               
and went on to say the 60  to 65 percent government take for more                                                               
costly new light  oil resources as proposed in HB  110 and HB 117                                                               
is  a   reasonable  level  from  an   international  perspective.                                                               
Amendment  E.17 adopts  this  level of  government  take for  new                                                               
undeveloped  fields outside  of existing  units. To  be fair,  he                                                               
said bracketed  progressivity was a complicated  approach and one                                                               
in  which they  wouldn't know  the full  effects. He  recommended                                                               
other approaches which have been  in amendments here and might be                                                               
discussed in the  Senate Finance Committee. She  hadn't seen them                                                               
modeled and  hadn't heard commitments  from industry, so  she was                                                               
going to rely on E.17 for now.                                                                                                  
                                                                                                                                
4:29:30 PM                                                                                                                    
SENATOR FRENCH asked why the amendment uses the date of 2008.                                                                   
                                                                                                                                
MIKE  PAWLOWSKI,   staff  to  Senator  McGuire,   explained  that                                                               
December  31,  2008 is  the  bright  line  that was  drawn  about                                                               
commercial production not within  an existing unit to distinguish                                                               
between what the amendment is attempting  to do, which is only to                                                               
affect projects outside of the existing units.                                                                                  
                                                                                                                                
SENATOR  FRENCH asked  if the  amendment would  apply to  Prudhoe                                                               
Bay, Kuparuk and Alpine.                                                                                                        
                                                                                                                                
MR. PAWLOWSKI answered no.                                                                                                      
                                                                                                                                
SENATOR FRENCH  said he would be  a no vote, but  it comes closer                                                               
than the previous  one did. This is what they  need to be focused                                                               
on, but  leaving out  Prudhoe Bay is  where a lot  of oil  can be                                                               
moved. It's  still one  of the biggest  reservoirs left  in North                                                               
America.  A 1  or 2  percent production  increase at  Prudhoe Bay                                                               
will  swamp a  lot  of  smaller new  fields.  He  liked the  idea                                                               
because they must  be focused on incentivizing new  oil no matter                                                               
where it comes from.                                                                                                            
                                                                                                                                
4:31:42 PM                                                                                                                    
SENATOR  STEDMAN said  he  would oppose  the  amendment. It's  on                                                               
point in working  on incremental production, but they  need to be                                                               
careful to  not make the system  too complex. The issue  is still                                                               
in the middle of the table.                                                                                                     
                                                                                                                                
CO-CHAIR PASKVAN  maintained his objection  and asked for  a roll                                                               
call  vote.  Senators McGuire  and  Wagoner  voted yea;  Senators                                                               
Stevens, Stedman,  Wielechowski, French,  and Paskvan  voted nay;                                                               
so the amendment failed.                                                                                                        
                                                                                                                                
4:33:17 PM                                                                                                                    
SENATOR WIELECHOWSKI offered Amendment E.10.                                                                                    
                                                                                                                                
                                                27-LS1305\E.10                                                                  
                                                Nauman/Bullock                                                                  
                       A M E N D M E N T                                                                                    
                                                                                                                                
     OFFERED IN THE SENATE                                                                                                      
     TO:  CSSB 192(RES), Draft Version "E"                                                                                      
                                                                                                                                
     Page 1, line 1, following "tax;":                                                                                        
          Insert "relating to oil and gas or gas only                                                                         
     leasing; requiring  that a  minimum work  commitment be                                                                  
     included in  each oil  and gas and  gas only  lease and                                                                  
     that a proposed  plan of development be  included in an                                                                  
     application for an oil and gas or gas only lease;"                                                                       
                                                                                                                                
     Page 4, following line 28:                                                                                                 
     Insert new bill sections to read:                                                                                          
        "* Sec. 5. AS 38.05.180(h) is amended to read:                                                                      
          (h)  The commissioner shall [MAY] include terms                                                                   
     in a [ANY] lease that  impose [IMPOSING] a minimum work                                                            
     commitment  on  the lessee  to  implement  the plan  of                                                                
     development submitted by  the lessee with a  bid for an                                                                
     oil  and  gas or  gas  only  lease.  The terms  of  the                                                                
     minimum work  commitment must [.  THESE TERMS  SHALL BE                                                                
     MADE  PUBLIC   BEFORE  THE   SALE,  AND   MAY]  include                                                                    
     appropriate penalty  provisions to  take effect  in the                                                                    
     event  the lessee  does not  fulfill  the minimum  work                                                                    
     commitment.  If it  is demonstrated  that  a lease  has                                                                    
     been proven  unproductive by actions of  adjacent lease                                                                    
     holders,  the   commissioner  may  set  aside   a  work                                                                    
     commitment.  The commissioner  may waive  for a  period                                                                    
     not  to  exceed  one  two-year period  any  term  of  a                                                                    
     minimum  work commitment  if the  commissioner makes  a                                                                    
     written  finding  either   that  conditions  preventing                                                                    
     drilling  or  exploration   were  beyond  the  lessee's                                                                    
     reasonable ability  to foresee  or control or  that the                                                                    
     lessee has  demonstrated through good faith  efforts an                                                                    
     intent  and  ability  to drill  or  develop  the  lease                                                                    
     during the term of the waiver.                                                                                             
        * Sec. 6. AS 38.05.180(x) is amended to read:                                                                         
          (x)  A lessee conducting or permitting any                                                                            
     exploration for,  or development or production  of, oil                                                                    
     or  gas on  state land  shall provide  the commissioner                                                                    
     access to  all noninterpretive data obtained  from that                                                                    
     lease;  shall provide  the commissioner  access to  all                                                                
     information necessary  to perform an  economic analysis                                                                
     under (ii)(2)  of this section, including  the capital,                                                                
     operating,  production, and  development  costs and  an                                                                
     estimate of  total reserves;  and shall  provide copies                                                                
     of that  data and information, as  the commissioner may                                                                
     request.    The     confidentiality    provisions    of                                                                    
     AS 38.05.035  apply to  the information  obtained under                                                                    
     this subsection.                                                                                                           
        *  Sec. 7.  AS 38.05.180  is amended  by adding  new                                                                  
     subsections to read:                                                                                                       
          (hh)  The commissioner shall require each bidder                                                                      
     for an  oil and gas  lease or  gas only lease  and each                                                                    
     lessee applying for  an extension or renewal  of an oil                                                                    
     and gas  lease or gas  only lease  to submit a  plan of                                                                    
     development  for exploring,  developing, and  producing                                                                    
     from the  lease within the  period of the lease  or the                                                                    
     extension  or renewal  of the  lease. The  commissioner                                                                    
     shall review each plan of  development and determine if                                                                    
     the   proposed  plan   of  development   is  reasonably                                                                    
     expected to develop  the lease in the  best interest of                                                                    
     the state.  The plan  of development shall  be included                                                                    
     in a lease  along with penalties for  failing to comply                                                                    
     with the  plan of  development and  other terms  of the                                                                    
     lease. A  bidder may  not be  a "qualified  bidder" for                                                                    
     the  purposes   of  (f)(1)  of  this   section  if  the                                                                    
     commissioner finds that the bidder  has not submitted a                                                                    
     proposed  plan  of  development that  is  in  the  best                                                                    
     interest  of   the  state  or  that   the  person  that                                                                    
     submitted  the plan  of development  is not  reasonably                                                                    
     capable of implementing the plan.                                                                                          
          (ii)  The commissioner shall                                                                                          
               (1)  review each oil and gas lease or gas                                                                        
     only  lease each  year for  the purpose  of determining                                                                    
     whether  a  lease  is  being   developed  in  the  best                                                                    
     interest of the state,  whether the lessee is complying                                                                    
     with the  plan of development applicable  to the lease,                                                                    
     and whether  revision of a development  plan, including                                                                    
     the  planned rate  of  development,  would provide  the                                                                    
     maximum benefit to the people of the state;                                                                                
               (2)  every five years, perform an economic                                                                       
     analysis  on  each  participating  area  and  determine                                                                    
     whether the participating area  is capable of increased                                                                    
     production in  paying quantities over the  current rate                                                                    
     of production or plan of development;                                                                                      
               (3)  enforce the terms of each oil and gas                                                                       
     lease  or  gas  only   lease,  including  imposing  any                                                                    
     applicable penalty  or other remedy  for noncompliance,                                                                    
     within a  reasonable time after  finding that  a lessee                                                                    
     is out of compliance with the terms of the lease;                                                                          
               (4)  submit a report to the legislature                                                                          
     before  the  first day  of  each  regular session  that                                                                    
     lists  each oil  and gas  or  gas only  lessee that  is                                                                    
     found to  be out  of compliance and  the action  by the                                                                    
     commissioner to  bring the lessee back  into compliance                                                                    
     or to terminate the lease.                                                                                                 
          (jj)  For the purposes of (hh) and (ii) of this                                                                       
     section,  a plan  of development  for a  cooperative or                                                                    
     unit  under  (p)  of  this   section  is  the  plan  of                                                                    
     development  for  a  lease within  the  cooperative  or                                                                    
     unit, except  where a different plan  of development is                                                                    
     established  for  a  lease within  the  cooperative  or                                                                    
     unit.                                                                                                                      
          (kk)  For purposes of (ii) of this section,                                                                           
               (1)  "participating area" means that part of                                                                     
     an oil and  gas lease unit area to  which production is                                                                    
     allocated in the manner described in a unit agreement;                                                                     
               (2)  "production in paying quantities" means                                                                     
     production in  quantities sufficient to yield  a return                                                                    
     in  excess  of  drilling,  development,  and  operating                                                                    
     costs."                                                                                                                    
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 21, line 8, following "APPLICABILITY.":                                                                               
          Insert "(a)"                                                                                                          
                                                                                                                                
     Page 21, line 9:                                                                                                           
          Delete "sec. 13"                                                                                                      
          Insert "sec. 16"                                                                                                      
                                                                                                                                
     Page 21, following line 12:                                                                                                
     Insert a new subsection to read:                                                                                           
          "(b)       Section    5    of    this   Act    and                                                                    
     AS 38.085.180(hh),  enacted  by  sec. 7  of  this  Act,                                                                    
     apply  to a  proposed  lease sale  and  the renewal  or                                                                    
     extension of a lease on  or after the effective date of                                                                    
     secs. 5 and 7 of this Act."                                                                                                
                                                                                                                                
     Page 21, line 13:                                                                                                          
          Delete all material and insert:                                                                                       
        "* Sec. 21.  Sections 5 - 7 of this  Act take effect                                                                
     July 1, 2013.                                                                                                              
        * Sec.  22. Except  as provided in  sec. 21  of this                                                                  
     Act, this Act takes effect January 1, 2013."                                                                               
                                                                                                                                
                                                                                                                                
CO-CHAIR PASKVAN objected for discussion purposes.                                                                              
                                                                                                                                
SENATOR  WIELECHOWSKI said  this is  a pro  development amendment                                                               
and that he  is in alignment with Senator Wagoner  with the issue                                                               
that  one of  the  bigger  problems on  the  North  Slope is  the                                                               
leasing  structure.  This  amendment  requires  companies  before                                                               
submitting leases to submit a  minimum work plan. This avoids the                                                               
situation where companies  go out and bid on tracts  of land with                                                               
no intention or funding to actually  ever go ahead and explore on                                                               
it. Recently, a producer acquired 34  tracts of land on the North                                                               
Slope and next week the  Petroleum News reported they didn't have                                                               
any plan  to develop them; they  wanted to see what  would happen                                                               
with the ACES tax structure. That  is the wrong approach from his                                                               
perspective.                                                                                                                    
                                                                                                                                
When you bid on  a lease in the State of Alaska  you have a legal                                                               
obligation to explore and if you  find oil to develop it, Senator                                                               
Wielechowski said. Unfortunately that is  not the way the state's                                                               
leases are  being handled. They  are being handled as  options to                                                               
explore and  options to  develop. They  have learned  through the                                                               
short time of  this amendment's existence that 25  percent of the                                                               
state's  leases, hundreds,  having  nothing going  on with  them.                                                               
There  have  been  no seismic  studies,  no  permit  applications                                                               
nothing; they're idle.                                                                                                          
                                                                                                                                
4:35:13 PM                                                                                                                    
As  the  sovereign they  can  do  a  better job;  this  amendment                                                               
requires  minimum  work  commitments.  It says  if  you  want  to                                                               
acquire  a  lease  in  Alaska  you  have  to  have  some  minimum                                                               
standards, some  sort of  a plan  to come in  and not  simply use                                                               
this as an option.                                                                                                              
                                                                                                                                
The second thing  it does is require a review  of existing leases                                                               
and  plans  of developments.  The  goal  is  to see  whether  the                                                               
lessees are  complying with their  current plans  of developments                                                               
and  whether they  should be  revised. He  said the  Constitution                                                               
says they have  an obligation to get the maximum  benefit for the                                                               
resource and  this would  ensure that the  state's land  is being                                                               
developed.  It  also  requires  the  Department  of  Revenue  and                                                               
Department of  Natural Resources to perform  an economic analysis                                                               
on each participating area to  determine whether it is capable of                                                               
increased production.  Thirdly, it ensures the  terms of existing                                                               
leases are enforced.  He thought this measure would  get more oil                                                               
in the  pipeline with  more exploration  and drilling,  and would                                                               
better align the state with industry.                                                                                           
                                                                                                                                
SENATOR  WIELECHOWSKI said  he recognized  this amendment  didn't                                                               
have much  vetting and  needed more  work and  he was  hopeful it                                                               
would get a hearing. He withdrew the amendment.                                                                                 
                                                                                                                                
4:37:15 PM                                                                                                                    
SENATOR STEVENS  moved to report  CSSB 192(RES), version  E, from                                                               
committee  with individual  recommendations  and attached  fiscal                                                               
note(s) and forthcoming fiscal information.                                                                                     
                                                                                                                                
CO-CHAIR WAGONER objected.                                                                                                      
                                                                                                                                
4:38:08 PM                                                                                                                    
SENATOR FRENCH said he wanted to  speak to the objection. He said                                                               
it's  very  difficult  to  move  a bill  like  this  through  the                                                               
committee.  He   congratulated  the  chair  on   doing  that  and                                                               
balancing the  philosophical divisions and scheduling  issues. He                                                               
said the  committee had put hundreds  of hours of time  into this                                                               
both in the committee and in their offices.                                                                                     
                                                                                                                                
He  said this  bill makes  a  significant concession  to the  oil                                                               
industry in  terms of progressivity  and hundreds of  millions of                                                               
dollars. It hasn't  meant with much "industry love,"  but that is                                                               
a negotiating posture. "That is  what the oil industry does." So,                                                               
they are negotiating and the focus  of this bill is about new oil                                                               
and  every person  in this  room is  united around  that concept.                                                               
With that idea they can move forward.                                                                                           
                                                                                                                                
4:40:29 PM                                                                                                                    
CO-CHAIR WAGONER stated  that he talked to a lot  of people about                                                               
another  amendment, but  he decided  not to  offer it  because he                                                               
hadn't seen  the modeling  that goes with  the bill.  He expected                                                               
that to  be done in Finance,  but he thought the  tax holiday was                                                               
the way to  go. He said his  staff worked many hours  and days on                                                               
the  amendment,  but without  the  modeling  it's only  half  way                                                               
there.                                                                                                                          
                                                                                                                                
CO-CHAIR PASKVAN  noted the objection  and asked for a  roll call                                                               
vote.  Senators  McGuire  and  Wagoner  voted  nay  and  Senators                                                               
Stevens,  Wielechowski, French,  Stedman and  Paskvan voted  yea;                                                               
therefore,  CSSB  192(RES),  version  E, moved  from  the  Senate                                                               
Resources Standing Committee.                                                                                                   
                                                                                                                                
4:42:40 PM                                                                                                                    
Finding  no further  business to  come before  the committee  Co-                                                               
Chair Paskvan  adjourned the Senate Resources  Standing Committee                                                               
meeting at 4:42 p.m.                                                                                                            

Document Name Date/Time Subjects
SB192-DNR-DOG-2-10-12.pdf SRES 3/2/2012 3:30:00 PM
SB 192
SB192-DOR-TAX-02-09-12.pdf SRES 3/2/2012 3:30:00 PM
SB 192
CS SB 192_Version E_03-01-2012.pdf SRES 3/2/2012 3:30:00 PM
SB 192
Amendments to CS for SB 192_Version D.pdf SRES 3/2/2012 3:30:00 PM
SB 192