Legislature(2017 - 2018)BUTROVICH 205

03/01/2017 03:30 PM RESOURCES

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 60 FISH & GAME: OFFENSES;LICENSES;PENALTIES TELECONFERENCED
Moved SB 60 Out of Committee
-- Public Testimony --
*+ SB 44 OIL & GAS TAX CREDIT REPORTING TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                         March 1, 2017                                                                                          
                           3:30 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Cathy Giessel, Chair                                                                                                    
Senator John Coghill, Vice Chair                                                                                                
Senator Natasha von Imhof                                                                                                       
Senator Bert Stedman                                                                                                            
Senator Shelley Hughes                                                                                                          
Senator Kevin Meyer                                                                                                             
Senator Bill Wielechowski                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 60                                                                                                              
"An  Act   relating  to  sport  fishing,   hunting,  or  trapping                                                               
licenses,  tags, or  permits; relating  to penalties  for certain                                                               
sport   fishing,  hunting,   and  trapping   license  violations;                                                               
relating  to  restrictions  on the  issuance  of  sport  fishing,                                                               
hunting, and trapping licenses;  creating violations and amending                                                               
fines  and  restitution  for  certain  fish  and  game  offenses;                                                               
creating  an exemption  from payment  of restitution  for certain                                                               
unlawful  takings of  big game  animals;  relating to  commercial                                                               
fishing  violations; allowing  lost federal  matching funds  from                                                               
the  Pittman  -  Robertson,  Dingell -  Johnson/Wallop  -  Breaux                                                               
programs  to be  included in  an order  of restitution;  adding a                                                               
definition of  'electronic form'; and providing  for an effective                                                               
date."                                                                                                                          
                                                                                                                                
     - MOVED  SB 60 OUT OF COMMITTEE                                                                                            
                                                                                                                                
SENATE BILL NO. 44                                                                                                              
"An Act  relating to  information concerning  oil and  gas taxes,                                                               
including information  about expenditures  that must  be provided                                                               
to  claim  an  oil  and  gas  production  tax  credit  for  those                                                               
expenditures;  relating to  the disclosure  of that  information;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB  60                                                                                                                  
SHORT TITLE: FISH & GAME: OFFENSES;LICENSES;PENALTIES                                                                           
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
02/15/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/15/17       (S)       RES, JUD, FIN                                                                                          
02/27/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/27/17       (S)       Heard & Held                                                                                           
02/27/17       (S)       MINUTE(RES)                                                                                            
03/01/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
BILL: SB  44                                                                                                                  
SHORT TITLE: OIL & GAS TAX CREDIT REPORTING                                                                                     
SPONSOR(s): GARDNER                                                                                                             
                                                                                                                                
02/01/17       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/01/17       (S)       RES, FIN                                                                                               
03/01/17       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DICK ROHRER, representing himself                                                                                               
Kodiak, Alaska                                                                                                                  
POSITION STATEMENT:  Supported SB 60.                                                                                         
                                                                                                                                
AL BARRETTE, representing himself                                                                                               
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Supported SB 60.                                                                                         
                                                                                                                                
BRUCE DALE, Director                                                                                                            
Division of Wildlife Conservation                                                                                               
Alaska Department of Fish and Game (ADF&G)                                                                                      
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Commented on SB 60.                                                                                      
                                                                                                                                
MAJOR BERNARD CHASTAIN, Deputy Director                                                                                         
Alaska Wildlife Troopers                                                                                                        
Alaska Department of Fish and Game (ADF&G)                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Commented during the discussion of SB 60.                                                                
                                                                                                                                
SENATOR GARDNER                                                                                                                 
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Sponsor of SB 44.                                                                                        
                                                                                                                                
SAMANTHA HARRIS, staff to Senator Gardner                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Commented on SB 44 for the sponsor.                                                                      
                                                                                                                                
EMILY NAUMAN, Legislative Attorney                                                                                              
Legislative Legal Services                                                                                                      
Legislative Affairs Agency                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Commented on SB 44.                                                                                      
                                                                                                                                
RANDALL HOFFBECK, Commissioner                                                                                                  
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Comment on SB 44.                                                                                        
                                                                                                                                
LENNIE DEES, Audit Master                                                                                                       
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Commented on SB 44.                                                                                      
                                                                                                                                
RICHARD RUGGIERO, Legislative Consultant                                                                                        
Castle Gap Advisors                                                                                                             
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Commented on SB 44.                                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
3:30:19 PM                                                                                                                    
CHAIR  CATHY   GIESSEL  called  the  Senate   Resources  Standing                                                             
Committee meeting  to order at 3:30  p.m. Present at the  call to                                                               
order were  Senators Coghill,  Stedman, Von  Imhof, Wielechowski,                                                               
Hughes,  and  Chair Giessel.  Senator  Meyer  joined the  meeting                                                               
shortly thereafter.                                                                                                             
                                                                                                                                
        SB  60-FISH & GAME: OFFENSES;LICENSES;PENALTIES                                                                     
                                                                                                                                
3:30:43 PM                                                                                                                    
CHAIR GIESSEL announced consideration of  SB 60 and opened public                                                               
testimony. She  said SB  60 was proposed  by the  State Troopers,                                                               
Fish and Wildlife Enforcement, and  Alaska Department of Fish and                                                               
Game. It would increase the fines for violations.                                                                               
                                                                                                                                
DICK ROHRER,  representing himself, Kodiak, Alaska,  supported SB                                                               
60. However he questioned if  a violation in other countries like                                                               
Mexico and Canada  should be included in section 2.  He liked the                                                               
opportunity in  section 3 for  someone to  be able to  show their                                                               
license  later  when  they  don't  have  it  on  them.  He  fully                                                               
supported the  increased fees  in section  17 and  especially the                                                               
qualifier in  section 18 where  if a  person makes a  mistake and                                                               
turns it in immediately they are not subject to those fines.                                                                    
                                                                                                                                
CHAIR GIESSEL  thanked him  and noted that  the bill  has another                                                               
referral to the  Judiciary Committee, and three  of those members                                                               
are on this committee and they will take his comments forward.                                                                  
                                                                                                                                
AL BARRETTE,  representing himself, Fairbanks,  Alaska, supported                                                               
SB 60,  adding that all of  his questions were answered  by Major                                                               
Chastain. However,  he asked the  committee to  consider removing                                                               
the taxidermy  license requirement on page  2, line 6. He  is not                                                               
opposed to  licenses, but he  is opposed to  redundant licensing.                                                               
He has a  business license for a  fur tannery and now  he is also                                                               
now being  required to  have this taxidermy  license, which  is a                                                               
duplicate of the ADF&G license and  costs $100 a year. He doesn't                                                               
know where that  money goes or what  it is used for.  He knows it                                                               
doesn't directly affect  any taxidermist or the  industry in this                                                               
state.  He  suggested  they contact  other  taxidermists  to  get                                                               
support for that amendment.                                                                                                     
                                                                                                                                
CHAIR  GIESSEL thanked  him and  said she  hadn't heard  from any                                                               
other  taxidermists.  She  asked  Mr.  Dale  to  respond  to  the                                                               
comments about the taxidermy license.                                                                                           
                                                                                                                                
3:35:04 PM                                                                                                                    
BRUCE DALE,  Director, Division of Wildlife  Conservation, Alaska                                                               
Department  of Fish  and Game  (ADF&G), Palmer,  Alaska, answered                                                               
that they  did some research  on the taxidermy license  and found                                                               
that  the money  goes to  the general  fund and  is not  directly                                                               
returned  to   the  department  for  any   special  purpose.  The                                                               
licensing requirement provides a  statutory basis for regulations                                                               
relative  to  taxidermy  and taxidermists.  At  this  time  those                                                               
regulations say that  sale of game trophies  is illegal. However,                                                               
licensed taxidermists can  get a permit from the  department - if                                                               
they can show  they have tried to contact the  owner if he hasn't                                                               
paid  for it  or picked  it up  after six  months -  to sell  the                                                               
trophy which they otherwise wouldn't be  able to do. This type of                                                               
permit is used 9 or 10  times a year by licensed taxidermists and                                                               
involves a pretty insignificant amount of  time, about a day or a                                                               
day and a half.                                                                                                                 
                                                                                                                                
MR. DALE  said the  taxidermist license is  $200 every  two years                                                               
and the program  takes in about $13,000 annually  (to the general                                                               
fund). The amount of the licensing  is more than what it costs to                                                               
administer the  regulations. But the license  itself does provide                                                               
the  basis   by  which  the   board  or  commissioner   can  make                                                               
regulations for taxidermy.                                                                                                      
                                                                                                                                
CHAIR GIESSEL thanked him and  reiterated that the bill will move                                                               
to  the Judiciary  Committee where  the  chair, Senator  Coghill,                                                               
would address the issue.                                                                                                        
                                                                                                                                
SENATOR COGHILL said he would probably  look at it in the context                                                               
of what other  places have a permit or  licensing requirement and                                                               
still have to get a business license.                                                                                           
                                                                                                                                
CHAIR  GIESSEL,  finding  no   further  comments,  closed  public                                                               
testimony.                                                                                                                      
                                                                                                                                
SENATOR STEDMAN said  it seems like the double  increase in fines                                                               
might  be justified  by inflation  since  they were  last set  in                                                               
1988, but doubling  them will not stop  commercial fishermen from                                                               
violating. It  seems to be just  another penalty added to  a long                                                               
list of other  actions that can be taken against  them. He wanted                                                               
the Judiciary Committee  to look at the impact of  these fines on                                                               
everyone, especially commercial fishermen.                                                                                      
                                                                                                                                
CHAIR GIESSEL said  along with that issue, they  talked about the                                                               
discretion  given to  the prosecutor  in  terms of  the level  of                                                               
discipline. That is also a Judicial Committee issue.                                                                            
                                                                                                                                
MAJOR   BERNARD  CHASTAIN,   Deputy  Director,   Alaska  Wildlife                                                               
Troopers, Alaska Department of Fish  and Game (ADF&G), Anchorage,                                                               
Alaska,  said  he  would  be  happy  to  talk  to  the  Judiciary                                                               
Committee   about  the   commercial   fishing  strict   liability                                                               
penalties  and   with  Senator  Stedman  if   he  has  additional                                                               
questions.                                                                                                                      
                                                                                                                                
3:41:34 PM                                                                                                                    
SENATOR COGHILL moved to report  SB 60, version A, from committee                                                               
with  individual  recommendations  and attached  fiscal  note(s).                                                               
There were no objections and it was so ordered.                                                                                 
                                                                                                                                
3:41:45 PM                                                                                                                    
At ease                                                                                                                         
                                                                                                                                
             SB  44-OIL & GAS TAX CREDIT REPORTING                                                                          
                                                                                                                                
3:43:41 PM                                                                                                                    
CHAIR  GIESSEL announced  consideration  of SB  44, sponsored  by                                                               
Senator  Gardner. Since  the State  of Alaska  has been  offering                                                               
incentives  to  various  industries  there has  been  a  constant                                                               
tension between  the public's right  to know how public  money is                                                               
being  spent  and  the  need  for those  investments  to  not  be                                                               
compromised   by  undermining   the   competitiveness  of   those                                                               
decisions. She welcomed Senator Gardner.                                                                                        
                                                                                                                                
SENATOR  GARDNER, sponsor  of SB  44,  Alaska State  Legislature,                                                               
Juneau, Alaska,  said this measure  is about transparency  in how                                                               
state  funds are  used.  If they  want to  support  and ensure  a                                                               
continuing effort for the state  to participate in supporting and                                                               
promoting resource development  in oil and gas  fields, they have                                                               
to understand what the state's  investments have done in the past                                                               
and what  they are doing  now, where efforts are  being effective                                                               
and where money might just be  poured down a hole. The first step                                                               
is  to understand  which companies  are getting  how much  and in                                                               
broad strokes what  they are doing with it. She  did not want any                                                               
information  of a  competitive  nature or  for  people to  reveal                                                               
things  they don't  want other  companies to  know about.  She is                                                               
interested in  how much  money a company  claimed from  the state                                                               
for what they are doing and how it is being spent.                                                                              
                                                                                                                                
3:47:21 PM                                                                                                                    
SAMANTHA  HARRIS,   staff  to   Senator  Gardner,   Alaska  State                                                               
Legislature,  Juneau, Alaska,  began a  sectional analysis  of SB                                                               
44.                                                                                                                             
                                                                                                                                
Section  1  amends  statutes  dealing  with  confidentiality  and                                                               
exemptions of that confidentiality.  This section expands current                                                               
exemptions  to  provide  information  like a  description  of  an                                                               
expenditure, its  purpose, and  the lease  or property  for which                                                               
that expenditure was  incurred. It would allow  the Department of                                                               
Revenue (DOR) to collect that information and share it.                                                                         
                                                                                                                                
3:48:30 PM                                                                                                                    
Section 2 expands language that was  added last year under HB 247                                                               
that  requires  disclosure  of cash  credits.  It  requires  more                                                               
information regarding  non-cash credits like  credit certificates                                                               
purchased by the  department in the preceding  calendar year, the                                                               
name of  each person  or department  for which  a tax  credit was                                                               
issued,  the  aggregate amount  of  the  tax credit  certificates                                                               
purchased from  the person  in the  preceding calendar  year, and                                                               
information submitted during the previous calendar year.                                                                        
                                                                                                                                
3:49:10 PM                                                                                                                    
Section  3   amends  existing   statute  concerning   tax  return                                                               
information from  oil and  gas explorers  and producers  that are                                                               
producing oil and  gas, asking that they now report  to the DOR a                                                               
description of their  expenditure, and the purpose  for the lease                                                               
or property for which it was incurred.                                                                                          
                                                                                                                                
3:49:34 PM                                                                                                                    
Section 4  is very similar  to section  3 and amends  a different                                                               
area of  statute concerning oil  and gas producers  and explorers                                                               
that do  not produce  oil and  gas and asks  them to  provide the                                                               
same information in section 3.                                                                                                  
                                                                                                                                
3:49:52 PM                                                                                                                    
Section 5 concerns dates for reports  to be made available to the                                                               
legislature. There  could be a  date conflict here,  because it's                                                               
convenient for  the legislature to  receive a report early  on in                                                               
session.  But this  section asks  for  a report  to be  submitted                                                               
within 10  days of  a regular  legislature's convening  time, and                                                               
due to the nature of  tax information, that isn't available until                                                               
the end  of April.  So in  section 2,  April 30  is the  date for                                                               
information submitted  to the  department, but  it might  also be                                                               
more  practical  to  have  the same  date  for  the  legislature.                                                               
However, session might not still be  in then. So this issue is up                                                               
to the discretion of the committee.                                                                                             
                                                                                                                                
3:51:13 PM                                                                                                                    
Section 6  provides for an effective  date of July 1,  2017. This                                                               
means if they stick to the first  10 days of a session date, then                                                               
a report  won't be  available until January  2019. But  using the                                                               
April 30  date would allow  a partial  report to be  available by                                                               
April 2018.                                                                                                                     
                                                                                                                                
CHAIR GIESSEL  asked about  section 4 that  relates to  folks who                                                               
are  not producing  oil  or gas  at this  time,  but are  getting                                                               
credits that aren't cashable.                                                                                                   
                                                                                                                                
MS. HARRIS replied  that the bill only concerns  credits under AS                                                               
43.55.023  and  .025.  while section  4  addresses  credits  only                                                               
under .023.                                                                                                                     
                                                                                                                                
CHAIR GIESSEL  said her  question was  related to  explorers that                                                               
aren't yet  producing oil  or gas  from a  lease or  property and                                                               
asked what kind  of information they want  disclosure of, because                                                               
some of it could be proprietary.                                                                                                
                                                                                                                                
MS. HARRIS  replied that the  intent of the  bill is not  to gain                                                               
that  proprietary information,  but just  to understand  what the                                                               
public  funds do  to  increase  production of  oil  and gas.  The                                                               
sponsor  is  open  to  changes  to  make  sure  that  proprietary                                                               
information is not  being shared. The bill packet  has an example                                                               
on  how   Louisiana  collects  information  and   requires  their                                                               
disclosures in broad strokes.                                                                                                   
                                                                                                                                
SENATOR  VON  IMHOF asked  if  the  bill includes  different  tax                                                               
credits and net operating losses (NOL).                                                                                         
                                                                                                                                
MS. HARRIS answered yes.                                                                                                        
                                                                                                                                
3:55:45 PM                                                                                                                    
SENATOR VON  IMHOF asked if  the sponsor intends to  evaluate tax                                                               
credit effectiveness,  and what  additional information  they are                                                               
asking for to be able to evaluate that the credits are working.                                                                 
                                                                                                                                
MS.  HARRIS answered  that  the sponsor  feels  that gaining  the                                                               
description of the expenditure and  what it is going towards will                                                               
help in the assessment.                                                                                                         
                                                                                                                                
SENATOR VON IMHOF  said she suspects it might play  out this way:                                                               
If she  gets a $1,000 credit  in cash, she could  either spend it                                                               
on phone,  rent, gas, utilities,  whatever; she kind of  pools it                                                               
with  the  money she  already  has  to  spend on  her  collective                                                               
expenditures. She asked  how that is any different than  a rig, a                                                               
road, a payroll, permits, or  whatever it may be. These companies                                                               
can say  they have earmarked  the credit for  a rig or  that they                                                               
have used  the money  for all  the things they  need in  order to                                                               
explore this  new area.  It's hard to  sometimes qualify  and she                                                               
didn't know if they would get  exactly what the sponsor is asking                                                               
for.                                                                                                                            
                                                                                                                                
MS.  HARRIS said  the sponsor  understands the  concern, but  the                                                               
intent is that  the information is helpful, and this  is just one                                                               
way to approach it.                                                                                                             
                                                                                                                                
CHAIR  GIESSEL said  she would  invite  Commissioner Hoffbeck  to                                                               
comment it.                                                                                                                     
                                                                                                                                
SENATOR COGHILL asked,  since sections 3 and  4 are prescriptive,                                                               
why is  the language  on page  2, line 27,  - under  a regulation                                                               
adopted by the department - necessary.                                                                                          
                                                                                                                                
3:58:19 PM                                                                                                                    
EMILY NAUMAN,  Legislative Attorney, Legislative  Legal Services,                                                               
Legislative  Affairs Agency,  Alaska  State Legislature,  Juneau,                                                               
Alaska, answered that  the intent is to give  the department some                                                               
flexibility in the  type and nature of information  that would be                                                               
collected  under the  new and  expanded language,  but the  exact                                                               
intent of that language belongs with the sponsor.                                                                               
                                                                                                                                
SENATOR COGHILL recapped that the  bill is prescriptive and asked                                                               
what the department might use that flexibility for.                                                                             
                                                                                                                                
SENATOR WIELECHOWSKI said  when he does his taxes it's  a pain to                                                               
itemize  the deductions,  but he  doesn't have  to take  them. He                                                               
looks at this  the same way: if you don't  want to take advantage                                                               
of billions of dollars in tax  credits, you don't have to, but if                                                               
you do  want to take advantage  of billions of dollars  in public                                                               
money, you simply have to write down what you used it for.                                                                      
                                                                                                                                
4:00:27 PM                                                                                                                    
MS. HARRIS said  that is correct. The intent  of this legislation                                                               
is that because these are  public funds, the sponsor thinks there                                                               
should be some accountability.                                                                                                  
                                                                                                                                
4:00:52 PM                                                                                                                    
CHAIR GIESSEL commented  that no single company  gets billions in                                                               
a tax  credit; it's more like  millions and that is  small change                                                               
in these types of developments.                                                                                                 
                                                                                                                                
SENATOR WIELECHOWSKI asked  how much in net  operating losses are                                                               
being claimed in 2018.                                                                                                          
                                                                                                                                
MS. HARRIS said she didn't have that  on the top of her head, but                                                               
could look through her notes.                                                                                                   
                                                                                                                                
SENATOR  WIELECHOWSKI said  his  understanding is  that about  $8                                                               
billion in tax credits have been paid out in recent years.                                                                      
                                                                                                                                
MS. HARRIS said  that is the figure  she has as well,  and it was                                                               
provided  to members  in the  bill  packet on  page 29  of a  DOR                                                               
presentation.                                                                                                                   
                                                                                                                                
CHAIR  GIESSEL  asked  for  the  timeframe  involved  in  the  $8                                                               
billion.                                                                                                                        
                                                                                                                                
MS. HARRIS replied that figure is from FY2007-2016.                                                                             
                                                                                                                                
CHAIR GIESSEL asked if Ms. Harris  had the amount of revenue that                                                               
the State of Alaska appreciated during that same timeframe.                                                                     
                                                                                                                                
MS.  HARRIS  said  she  didn't   have  that  information  at  her                                                               
fingertips.                                                                                                                     
                                                                                                                                
4:02:35 PM                                                                                                                    
RANDALL  HOFFBECK, Commissioner,  Department of  Revenue, Juneau,                                                               
Alaska, said  the genesis of what  SB 60 is trying  to accomplish                                                               
is that  while the Department  of Revenue  (DOR) gets to  see the                                                               
data, it doesn't  have the ability to share it  with the decision                                                               
makers who have  to decide whether in fact  the tax/credit system                                                               
is  functioning, appropriate,  or  the most  efficient. The  bill                                                               
sponsor has  simply said it  makes sense for the  legislature and                                                               
the public to  have access to at least some  level of information                                                               
as it  makes these difficult  decisions, although it  would never                                                               
be the level of detail the department gets.                                                                                     
                                                                                                                                
SENATOR COGHILL agreed that they  should get the information, but                                                               
asked if this  regulation capacity is necessary in  order to make                                                               
those decisions.                                                                                                                
                                                                                                                                
COMMISSIONER  HOFFBECK   said  having  regulatory   authority  is                                                               
important because sideboards  are needed on some  things that may                                                               
not be  fully detailed  in the  legislation. The  difficulty that                                                               
Senator von Imhof  was referring to is in how  to determine which                                                               
piece of work  is causing the net operating loss.  This is not an                                                               
issue for  the non-producers, because  whatever they  are working                                                               
on is creating  their loss and they don't have  anything to write                                                               
that off  against. It becomes  more difficult when a  producer is                                                               
producing a  certain amount  of oil and  also maybe  developing a                                                               
field that  doesn't have production,  and how to parse  out which                                                               
piece of development is creating a loss.                                                                                        
                                                                                                                                
SENATOR COGHILL said language on page  3, line 10, for the credit                                                               
claim  is  pretty detailed  and  "down  to  the penny"  and  some                                                               
expenditures are  blended and  asked if that  was the  reason for                                                               
the  regulation or  if the  language  is explicit  enough to  say                                                               
"every expenditure blended or not."                                                                                             
                                                                                                                                
COMMISSIONER  HOFFBECK answered  that  it's not  intended to  get                                                               
down to the pennies; it's more  the idea of for instance spending                                                               
a billion dollars  in capex and opex, but only  generating a $100                                                               
million in  loss, and  what piece that  loss is  associated with.                                                               
So, you  don't have  to report everything  on the  entire billion                                                               
dollars, just on the piece that is a loss.                                                                                      
                                                                                                                                
SENATOR  COGHILL said  detailing every  expenditure looks  like a                                                               
lot of  work and asked if  that could be gotten  to a legislature                                                               
in the kind of timeframe outlined in the bill.                                                                                  
                                                                                                                                
4:08:20 PM                                                                                                                    
COMMISSIONER HOFFBECK said  that language is in section  5 and it                                                               
could  be removed,  because  an earlier  section  provides for  a                                                               
different deadline,  April, which  is doable.  Ten days  would be                                                               
very difficult and conflicts with the April language.                                                                           
                                                                                                                                
SENATOR WIELECHOWSKI  said he had  asked a question  before about                                                               
tax  credit subsidies  that went  to various  producers, and  the                                                               
chair corrected him saying that  various companies haven't gotten                                                               
billions.  He wanted  to ask  if the  commissioner could  get the                                                               
committee a  list of  how much  each producer  has gotten  in tax                                                               
credits and what the general purpose of those credits were for.                                                                 
                                                                                                                                
COMMISSIONER  HOFFBECK answered  that  he  couldn't provide  that                                                               
information, but that is the reason for this legislation.                                                                       
                                                                                                                                
SENATOR WIELECHOWSKI  commented: "You  mean to  tell me  that me,                                                               
sitting here  as a  policy maker,  have doled  out $8  billion in                                                               
public subsidies  and I can't  even see  what those -  that money                                                               
has gone to?"                                                                                                                   
                                                                                                                                
COMMISSIONER  HOFFBECK answered  that the  department has  strict                                                               
confidentiality  statutes  and  cannot release  that  information                                                               
because of them.                                                                                                                
                                                                                                                                
4:09:59 PM                                                                                                                    
SENATOR STEDMAN said he wanted  to put that into context, because                                                               
he  thought  the  bill was  written  to  target  company-specific                                                               
details. He  also had concerns  with the general  subject matter,                                                               
because  as policy  makers, legislators  get the  Revenue Sources                                                               
Book from the  DOR in the fall. It provides  insight into what is                                                               
going  on with  revenue  projections and  expenses  and what  the                                                               
department feels would be of  interest given the circumstances of                                                               
the year.  Without that they  would be totally lost.  The Revenue                                                               
Sources  Book  is  compiled  with   monthly  data  from  multiple                                                               
companies  and put  together  and  delivered as  a  one lump  sum                                                               
annual book  and legislators  don't have the  ability to  look at                                                               
all the  different components like from  the previous questioner:                                                               
what company got what credit.                                                                                                   
                                                                                                                                
One of the frustrating things  is that industry has in-depth data                                                               
on themselves per company in  multiple fields and the legislature                                                               
gets a  consolidated number. This  is what makes it  difficult to                                                               
set policy. We're talking billions  in credits, he said. He's not                                                               
interested  in particular  companies, but  in particular  fields,                                                               
and surmises  that the department  would be in a  better position                                                               
to tell them what is working and what isn't.                                                                                    
                                                                                                                                
For an  example, Point Thomson  where the 20 percent  capital tax                                                               
credit  was deleted  had billions  in development  costs and  was                                                               
critical to  the State of  Alaska to get  that field on  line and                                                               
expand the  infrastructure. The state  was able to the  first few                                                               
years of the tax credits  applicable to the development and could                                                               
see the credit  number for Point Thomson. Then a  couple of years                                                               
went by and that kind of  all got merged together into one credit                                                               
number for the  North Slope. Now the field is  up and running and                                                               
has a high  tariff because it's a long ways  away. But the policy                                                               
makers don't  know what it costs  the industry and how  well it's                                                               
working.                                                                                                                        
                                                                                                                                
SENATOR  STEDMAN said  he is  not interested  in the  credits BP,                                                               
ExxonMobil, or ConocoPhillips  got, but he is  interested in what                                                               
the industry got, so when he has  a better feel for what is good,                                                               
bad, or otherwise  policy. The DOR has the information  but it is                                                               
confidential. The  commissioner should be  able to tell him  if a                                                               
particular  policy works  for  the state  or not,  so  it can  be                                                               
fixed.                                                                                                                          
                                                                                                                                
4:16:47 PM                                                                                                                    
COMMISSIONER HOFFBECK said he concurred;  he thought sharing more                                                               
information  with the  legislature would  be in  everybody's best                                                               
interest. Going forward,  HB 247 gave the  department the ability                                                               
to report the name of a  company and how much they have collected                                                               
in credits,  but only on the  credits for which a  check has been                                                               
written (not certificates) and he couldn't go backwards.                                                                        
                                                                                                                                
4:18:20 PM                                                                                                                    
SENATOR MEYER said industry's concern  with transparency is maybe                                                               
tipping off the competition.                                                                                                    
                                                                                                                                
COMMISSIONER  HOFFBECK   said  that  was  true   and  legislative                                                               
consultant Mr. Ruggiero could talk  about how other jurisdictions                                                               
deal with transparency.                                                                                                         
                                                                                                                                
SENATOR MEYER said  these tax credits have quite  a history going                                                               
back to PPT. The 20 percent  credit was in ACES and other credits                                                               
have been  sprinkled in  along the  way. For  the most  part, the                                                               
credits had  two objectives: to  get smaller companies on  to the                                                               
North Slope and to get more  oil in the pipeline. Both objectives                                                               
have been  met. Small companies like  Caelus, Hilcorp, Armstrong,                                                               
Brooks Range, Great Bear and  a couple of Native corporations are                                                               
up there  and have some  discoveries. The big three  are actually                                                               
putting more oil  in the pipeline, as well. So,  wouldn't you say                                                               
that our tax credits are a success?                                                                                             
                                                                                                                                
COMMISSIONER  HOFFBECK replied  that a  lot of  things came  into                                                               
play with  the new discoveries,  and production and  credits were                                                               
part of that, but there may be  a more efficient way to apply the                                                               
credits  now. People  realize the  state has  a place  in helping                                                               
incentivize certain  activity, but  the limited resources  it has                                                               
have to be used as surgically as possible.                                                                                      
                                                                                                                                
SENATOR MEYER said  it gets kind of confusing  on the per-taxable                                                               
barrel credit  that bumped the base  rate of 25 percent  up to 35                                                               
percent, which in  itself would be the highest in  the world. But                                                               
then they  said since  they weren't  going to  have progressivity                                                               
anymore like  under ACES they would  use a sliding scale  so that                                                               
the higher  the price  the closer  to the 35  percent we  get. He                                                               
asked if  that is  a tax  credit or just  part of  the production                                                               
tax.                                                                                                                            
                                                                                                                                
COMMISSIONER HOFFBECK  replied that  the administration  has been                                                               
pretty consistent  in feeling  the per-barrel  credit is  part of                                                               
the tax system. It was felt that  35 percent was too high and the                                                               
credit was a way of offsetting that rate at lower oil prices.                                                                   
                                                                                                                                
SENATOR MEYER  stated that if people  try to add the  per taxable                                                               
barrel credit to the total  tax credits, that's not really apples                                                               
and apples.                                                                                                                     
                                                                                                                                
4:23:12 PM                                                                                                                    
COMMISSIONER  HOFFBECK  replied  that  their  presentations  have                                                               
parsed  that  credit out  from  the  rest  of  the credits  as  a                                                               
separate line item.                                                                                                             
                                                                                                                                
4:23:18 PM                                                                                                                    
SENATOR VON  IMHOF said  in retrospect  a more  robust evaluation                                                               
system and process  should have occurred many years  ago when the                                                               
tax credits  were rolled out. If  we are going to  be giving away                                                               
tax payers money,  there should be some level  of confidence that                                                               
it is being used  in the highest and best use.  But we didn't and                                                               
HB  247 attempted  to  address  that and  its  first report  will                                                               
happen in  April and  that should  be revealing  in what  kind of                                                               
information can be collected.                                                                                                   
                                                                                                                                
4:24:58 PM                                                                                                                    
COMMISSIONER  HOFFBECK remarked  that  the April  report will  be                                                               
enlightening to a  point, because it covers only  the credits the                                                               
department  has  written  checks  for and  it's  only  since  the                                                               
effective date of the bill. So  of the $700 or $800 million worth                                                               
of credits  they will see a  report on only about  $70 million of                                                               
them.                                                                                                                           
                                                                                                                                
CHAIR GIESSEL said having written  checks is somewhat constrained                                                               
by the Governor's veto of the monies to fund those checks.                                                                      
                                                                                                                                
COMMISSIONER  HOFFBECK responded  yes and  no: yes,  the Governor                                                               
did veto the $500 million worth  of credits last year down to the                                                               
statutory level  for the  credits, so it  depends on  whether the                                                               
statute was the driver or the appropriation process.                                                                            
                                                                                                                                
SENATOR COGHILL  said he was  concerned about the  phrase "unless                                                               
prohibited by  law" and that  from legislator's  perspective they                                                               
need  to know  what  that  actual hurdle  is  for the  unreported                                                               
things.                                                                                                                         
                                                                                                                                
COMMISSIONER HOFFBECK replied  they would make sure  that is part                                                               
of the report.                                                                                                                  
                                                                                                                                
CHAIR GIESSEL asked if any  federal laws constrain the disclosure                                                               
by publically traded companies.                                                                                                 
                                                                                                                                
COMMISSIOENER HOFFBECK replied that he was not aware of any.                                                                    
                                                                                                                                
4:28:48 PM                                                                                                                    
LENNIE  DEES, Audit  Master,  Department  of Revenue,  Anchorage,                                                               
Alaska,  added  that  he  didn't  know of  any  laws  that  would                                                               
prohibit   those  disclosures.     AS   43.55.890  is   what  the                                                               
commissioner referred to as the  disclosure law and the fact that                                                               
that information  has to be  aggregated in order to  disclose it.                                                               
That would be the law that would impact this section the most.                                                                  
                                                                                                                                
4:29:42 PM                                                                                                                    
CHAIR GIESSEL said her secondary  question was related to the net                                                               
operating  losses  and  if  there   are  any  federal  laws  that                                                               
regulated  publically  traded  companies and  the  disclosure  of                                                               
their tax information.                                                                                                          
                                                                                                                                
MR. DEES answered that he was not aware of any.                                                                                 
                                                                                                                                
4:30:03 PM                                                                                                                    
SENATOR WIELECHOWSKI said some new  committee members are unaware                                                               
of the  fact that the legislature  had tried to fix  this problem                                                               
several  times  with legislation,  but  the  bills often  haven't                                                               
gotten  a  hearing. So,  he  is  glad  it  is finally  getting  a                                                               
hearing.  He asked  to be  provided with  a detailed  analysis of                                                               
what  percentage  of  oil  in  the pipeline  is  related  to  tax                                                               
credits, a  detailed analysis  of the  projects' and  fields' net                                                               
present  values,  internal rates  of  return,  and how  they  are                                                               
impacted by the $8 billion in subsidies the state has provided.                                                                 
                                                                                                                                
4:30:57 PM                                                                                                                    
COMMISSIONER HOFFBECK replied  they would not be  able to provide                                                               
detailed information  on net  present value  and IRR;  that would                                                               
require providing  internal company information. In  all honesty,                                                               
they could make a  stab at how much oil is  based on the credits,                                                               
but regulatory issues  have occurred as well as  changes in other                                                               
portions  of the  tax regime:  credits and  oil prices  issues: a                                                               
multitude of  things all come  together to create  the production                                                               
the state has now. One thing is  pretty clear as far as what they                                                               
can report: they could not  report information on company income-                                                               
related   type  investment   before  it   was  reported   to  the                                                               
shareholders. So, they  have to wait until  the companies' annual                                                               
reports are filed to have access  to the data in the fashion they                                                               
could share.                                                                                                                    
                                                                                                                                
CHAIR GIESSEL thanked him for that very helpful information.                                                                    
                                                                                                                                
4:32:37 PM                                                                                                                    
SENATOR  STEDMAN  said Senator  Meyer  had  talked about  the  35                                                               
percent base  tax and  the per  barrel sliding  scale calculation                                                               
that basically puts the state  into a gross tax calculation (less                                                               
than $70/oil)  and the residual  issue is  a 35 percent  base tax                                                               
becomes an NOL deductible percentage  of opex and capex, which is                                                               
- everyone has  an opinion - exceptionally high.  In dealing with                                                               
that and even to say it's not  high will give the argument to the                                                               
folks that think it is a squared up good rate.                                                                                  
                                                                                                                                
It helps  in numerous  ways with the  longevity of  the pipeline,                                                               
the   state's  revenue   stream  and   jobs,  and   getting  into                                                               
developments like  Smith Bay  with maybe  300,000 barrels  a day.                                                               
But there  is a little thing  called cash flow between  today and                                                               
tomorrow,  and it  looks  like that  project  will have  billions                                                               
invested before first oil.                                                                                                      
                                                                                                                                
"How  do we  cash  flow 35  percent  of the  cost  of that  going                                                               
forward when we can't meet our  payroll today and it doesn't look                                                               
like  we're going  to meet  our payroll  tomorrow...?" With  that                                                               
being said, Senator  Stedman asked how a policy  maker knows what                                                               
is  a good  deal  for the  state  and industry  so  they are  not                                                               
changing  course all  the  time,  and will  that  project be  co-                                                               
mingled with the rest so he just gets one number?                                                                               
                                                                                                                                
COMMISSIONER  HOFFBECK replied  that Smith  Bay would  generate a                                                               
$3.5  billion NOL  credit, and  the state  could deal  with it  a                                                               
couple of ways.  One way was is  in HB 247 last  year that capped                                                               
the annual cash payment at $75  million, but because only half of                                                               
that was at 100  percent and half was at 75  percent it works out                                                               
to be  about $62 million-plus that  they could cash in  any given                                                               
year if they  are willing to take the haircut  on the second half                                                               
of  that $75  million. That  would reduce  the state's  liability                                                               
during  the  development  years.  But  there  would  be  multiple                                                               
partners who  could all claim  a piece of  the credit, so  it's a                                                               
little bit uncertain  about how big the liability  would be. It's                                                               
fairly  certain that  a good  share  of that  $3.5 billion  would                                                               
still be  unreimbursed credits  at the time  that the  field went                                                               
into  production.  Then those,  of  course,  would be  deductions                                                               
against tax liability until the credits were used up.                                                                           
                                                                                                                                
4:36:45 PM                                                                                                                    
Secondly, they would bump into  the current situation where there                                                               
is no  mandatory requirement to  cash out the credits  and making                                                               
it subject  to appropriation. And  if the state doesn't  have the                                                               
money to pay the credits it simply  would not be able to cash the                                                               
credits out.  That creates  a lot of  uncertainty for  those that                                                               
are  relying on  the  credits for  developing  their fields.  The                                                               
administration has  taken the position  that the state  is better                                                               
off  with a  credit  program that  it can  afford  and give  some                                                               
certainty rather  than a program that  may be higher than  it can                                                               
afford  that  creates uncertainty  before  the  fields come  into                                                               
development.                                                                                                                    
                                                                                                                                
For a field that  may already be in development that  may be in a                                                               
NOL situation -  which is essentially all they  are talking about                                                               
ultimately for  any big dollars  - because all credits  have been                                                               
repealed for  Cook Inlet effective  the end  of this FY18,  a few                                                               
credits are left  in Middle Earth and the NOL  is the only credit                                                               
left on the North Slope. If a  company has an NOL credit and they                                                               
report  it under  this new  language, they  would tell  you where                                                               
that loss was within the bigger construct of their company.                                                                     
                                                                                                                                
4:39:41 PM                                                                                                                    
SENATOR  STEDMAN said  there  could be  sizeable  shift in  field                                                               
economics with delayed payments while everyone wants stability.                                                                 
                                                                                                                                
COMMISSIONER  HOFFBECK said  the  department has  a robust  full-                                                               
cycle economic  model for showing  the impacts of  various credit                                                               
regimes and  when the  credits get  paid is a  big driver  in the                                                               
economics of the development.                                                                                                   
                                                                                                                                
SENATOR  COGHILL  said he  tended  to  agree  with some  of  that                                                               
assessment and  he struggles with  a couple of  mechanical things                                                               
in  the bill.  At  this point  he is  looking  at the  regulation                                                               
adopted by  on page 2, line  27. It had a  very prescriptive list                                                               
of 10  items that should be  reported on by March  31 under oath.                                                               
Now there are  10 things and of those number,  10 has three major                                                               
parts  to  it. The  language  that  bothers him  is  "information                                                               
required" and then the statute now  read 9 things. Now it will be                                                               
required under  a regulation, not  a law. How would  he interpret                                                               
that?"                                                                                                                          
                                                                                                                                
COMMISSIONER HOFFBECK asked if he could defer that answer.                                                                      
                                                                                                                                
CHAIR GIESSEL added  that was her concern as well.  She asked the                                                               
commissioner to speculate,  but did he have any sense  of how the                                                               
disclosures that  are proposed  in SB  44 might  affect companies                                                               
accessing  money from  lending  institutions.  Would the  lenders                                                               
have concerns  lending to  a company that  is disclosing  as much                                                               
information as proposed?                                                                                                        
                                                                                                                                
COMMISSIONER HOFFBECK asked if he  could defer that answer to Mr.                                                               
Ruggerio's expertise.                                                                                                           
                                                                                                                                
CHAIR GIESSEL  said a slide from  the tax director points  out $8                                                               
billion  in credits  over a  10-year  period and  asked how  much                                                               
revenue was realized in that time to the State of Alaska.                                                                       
                                                                                                                                
4:44:11 PM                                                                                                                    
COMMISSIONER HOFFBECK  said he would  have to bring that  back to                                                               
her.                                                                                                                            
                                                                                                                                
SENATOR STEDMAN said this comment  was geared more for the people                                                               
at home who are watching, but  when he has been talking about the                                                               
inability to  get data  and asking  revenue questions  they can't                                                               
answer,  sometimes  when  individual   companies  do  answer  the                                                               
question  in private.  He didn't  want  the public  to think  the                                                               
industry is  completely shutting the  policy makers out.  The Big                                                               
Three have been  good over the years and helpful  in letting them                                                               
know how the tax mechanism works.                                                                                               
                                                                                                                                
SENATOR HUGHES  remarked that the  commissioner said he  would be                                                               
taking a  stab in the dark  to try to figure  out what percentage                                                               
of oil  and pipeline resulted  from tax  credits, and yet  he has                                                               
all  the proprietary  information.  This bill  would provide  the                                                               
legislature with  less detailed information  and if it is  a stab                                                               
in the dark  for him, how would the legislature  having access to                                                               
less  information help  them determine  whether a  particular tax                                                               
credit is effective or not?                                                                                                     
                                                                                                                                
COMMISSIONER HOFFBECK  replied the  piece the  department doesn't                                                               
have is  they don't  sit in  the board room  and don't  know what                                                               
piece  triggered an  investment  decision. As  to  how much  more                                                               
legislators will be  able to parse out, they will  not be able to                                                               
parse out  precisely how much oil  is in the pipeline  due to the                                                               
credits, but  they will be  able to see which  companies received                                                               
the  credits and  how much  those companies  are producing.  That                                                               
will give them some idea of  whether or not the credits are being                                                               
efficiently  used. Probably  some of  the older  credits are  the                                                               
more egregious and those have been repealed.                                                                                    
                                                                                                                                
SENATOR  HUGHES said  she understands  that  Texas and  Louisiana                                                               
have collected  some of  this information and  asked if  that has                                                               
worked for them in figuring out what is effective.                                                                              
                                                                                                                                
COMMISSIONER  HOFFBECK again  deferred  to Mr.  Ruggiero on  that                                                               
question.                                                                                                                       
                                                                                                                                
CHAIR GIESSEL added  that he just illustrated why so  many of the                                                               
credits in ACES  were repealed - because they  were not resulting                                                               
in production.                                                                                                                  
                                                                                                                                
4:48:29 PM                                                                                                                    
SENATOR WIELECHOWSKI  asked if they  have no  idea if any  of the                                                               
tax credits  result in getting  more oil  or not, why  should the                                                               
state continue to offer tax credits at all.                                                                                     
                                                                                                                                
COMMISSIONER HOFFBECK  replied that they  can see in  their full-                                                               
cycle economic  modeling where a  field would be economic  with a                                                               
credit boost and where it would be uneconomic without it.                                                                       
                                                                                                                                
4:50:55 PM                                                                                                                    
CHAIR GIESSEL  thanked the commissioner for  his presentation and                                                               
noted that  Senator Gardner asked  to hear from  Richard Ruggiero                                                               
and welcomed him to the table.                                                                                                  
                                                                                                                                
4:51:07 PM                                                                                                                    
RICHARD  RUGGIERO, Legislative  Consultant, Castle  Gap Advisors,                                                               
Alaska State Legislature,  Juneau, Alaska, said 10  years ago, as                                                               
a  member of  the Gaffney  Cline  team he  wrote in  a memo  that                                                               
basically Alaska was  one of the most opaque  places with respect                                                               
to data  coming from the oil  companies for this body  to be able                                                               
to make its policy decisions. And  today it remains the same. The                                                               
state  is  actually  making  decisions  with  a  whole  lot  less                                                               
information  than  similar bodies  in  the  other governments  he                                                               
works for.  For members who don't  know him, he spent  decades as                                                               
big  oil, he  spent over  a decade  advising governments,  and he                                                               
spent almost  a decade with  a large  service company, so  he has                                                               
varied perspectives.                                                                                                            
                                                                                                                                
He  said  for legislators  to  make  good durable  decisions  and                                                               
understand how  well the  credits are  working they  need another                                                               
layer of  information and  detail. One  difference he  still sees                                                               
today  is  that  the  Tax  Division  is  the  one  talking  about                                                               
production and it  is bound by confidentiality of  the tax return                                                               
it gets.  But 90-plus percent of  the information that goes  on a                                                               
tax return is  basic oil field operating data that  all the other                                                               
regimes he works  for report to the equivalent of  the DNR or the                                                               
AOGCC here in  Alaska and openly report it. In  fact, he could go                                                               
on line  and show them  a field  in Norway that  has well-by-well                                                               
detail with a  30-year history of the capital that  was spent and                                                               
the  production that  resulted from  that capital,  as well  as a                                                               
five-year projection of work they  plan on doing, what plans have                                                               
been approved, and what the  expectations are for that country as                                                               
they move forward.                                                                                                              
                                                                                                                                
4:54:11 PM                                                                                                                    
Secondly, Mr.  Ruggiero, said with respect  to data transparency,                                                               
he  knows  they get  into  a  continual  discussion of  how  much                                                               
someone got  paid being confidential  tax payer  information, but                                                               
now there is a global  initiative called the "Extraction Industry                                                               
Transparency Initiative,"  which many governments have  signed on                                                               
to  including the  U.S. government.  The Securities  and Exchange                                                               
Commission  (SEC) is  going to  require anyone  who is  listed on                                                               
their  stock  exchange  to  publish,  if they  are  part  of  the                                                               
extraction industry,  the payments  they make to  governments and                                                               
disaggregate those into five or  six categories. That type of law                                                               
is already  in place in Europe.  He can show them  what every oil                                                               
company has paid to Norway  in terms of license bonuses, royalty,                                                               
petroleum  taxes, and  income  taxes.  He could  go  to the  U.K.                                                               
website and find  out how much a company that  operates in Alaska                                                               
actually paid the State of Alaska  as income tax, royalty, and as                                                               
license fees in 2015. There is also a 2014 report.                                                                              
                                                                                                                                
So,  companies are  required to  provide information,  and if  he                                                               
could make a suggestion he would  say that elsewhere in the world                                                               
much  more information  changes hands  than in  Alaska, and  that                                                               
data  is available  to  the government  for  setting policy  with                                                               
respect to  what acreage  it makes available,  to what  data that                                                               
helps others come in, and data to inform making tax policy.                                                                     
                                                                                                                                
MR. RUGGIERO  said comments were  made with respect to  whether a                                                               
35  percent credit  too high  or too  low, and  the one  piece he                                                               
would make  is whether  the credit  in place  is a  net operating                                                               
loss (NOL) and if that was  not allowed that would move Alaska to                                                               
the  bottom  of the  competitive  rankings  in the  world.  Every                                                               
regime,   everywhere,   allows   companies  especially   with   a                                                               
development like  Smith Bay, to deduct  the cost of what  it took                                                               
to get that production from  the future revenues of that project.                                                               
To  deny that  would  really move  Alaska to  the  bottom of  the                                                               
competitive scale.                                                                                                              
                                                                                                                                
Now, various countries  around the world have  different means by                                                               
which  they treat  that NOL.  Some  give the  equivalent of  what                                                               
Alaska  has  -  the  qualifying  capital  expenditure.  In  other                                                               
places, because there are long  lead times between when the money                                                               
is spent and when the actual  production comes on they will offer                                                               
forms  of uplift  -  another way  of saying  interest  - as  it's                                                               
carried forward, so that way the  time value loss does not become                                                               
a big kicker to their economics.                                                                                                
                                                                                                                                
He could offer a whole lot  more information if he had more time.                                                               
He  could  show them  the  EITI  Initiative, standard  terms  for                                                               
production sharing  contracts that show Alaska  is competing more                                                               
against places  around the  world than the  Lower 48.  That would                                                               
show the  type of data  requirements that the oil  companies have                                                               
to  disclose and  what rights  the governments  have under  those                                                               
contracts to use that data for their purposes.                                                                                  
                                                                                                                                
SENATOR MEYER  asked why  he feels  Alaska's competition  is more                                                               
global versus  the Lower  48. And  he wanted  to know  how Alaska                                                               
competes globally  on a  competitive basis  with its  current tax                                                               
rate.                                                                                                                           
                                                                                                                                
4:58:03 PM                                                                                                                    
MR.  RUGGIERO answered  the reason  he said  Alaska is  competing                                                               
more globally  than in the U.S.  is that Alaska and  the Lower 48                                                               
are two  very different  businesses. Alaska  is a  large project,                                                               
long-lead times,  significant scale  on the  reserves, and  to an                                                               
extent a  slow steady decline.  Business in  the Lower 48  is buy                                                               
acreage today,  have a rig there  in a week, and  have production                                                               
on  line in  30 days.  But  it's production  that declines  60-80                                                               
percent in the first two years.  North Dakota had the same fiscal                                                               
system forever  until the production  picked up and that  was due                                                               
to the  shale technology. But  they drilled tens of  thousands of                                                               
wells. And  if you look at  North Dakota production today,  it is                                                               
falling off  faster than it  rose, because the rigs  have stopped                                                               
with the drop in the price of oil.                                                                                              
                                                                                                                                
SENATOR STEDMAN said he wanted to  hear more from Mr. Ruggiero on                                                               
some of  the newer changes  internationally that the  industry is                                                               
dealing with  as far as  disclosure. It would be  very beneficial                                                               
to keep up with what is going on around the planet.                                                                             
                                                                                                                                
CHAIR  GIESSEL held  SB 44  in committee,  adding that  she would                                                               
invite Mr. Ruggiero back.                                                                                                       
                                                                                                                                
5:00:54 PM                                                                                                                    
CHAIR GIESSEL  adjourned the  Senate Resources  Committee meeting                                                               
at 5:00 p.m.                                                                                                                    
                                                                                                                                

Document Name Date/Time Subjects
1. SB 44 Sponsor Statement.pdf SRES 3/1/2017 3:30:00 PM
SB 44
2. SB 44 Sectional Summary.pdf SRES 3/1/2017 3:30:00 PM
SB 44
3. SB 44 ver. O.PDF SRES 3/1/2017 3:30:00 PM
SB 44
4. SB 44 Supporting Documents- Press Release.pdf SRES 3/1/2017 3:30:00 PM
SB 44
5. SB 44 Supporting Documents- Leg Research Tax credit disclosures.pdf SRES 3/1/2017 3:30:00 PM
SB 44
6. SB 44 Supporting Documents- Select pages from DOR HRES Jan 30 2017 Presentation.pdf SRES 3/1/2017 3:30:00 PM
SB 44
7. SB 44 Supporting Documents- NCSL Summary of Tax Disclosures in other States.pdf SRES 3/1/2017 3:30:00 PM
SB 44
8. SB 44 Supporting Documents- LA Economic Development Program.pdf SRES 3/1/2017 3:30:00 PM
SB 44
9. SB 44 Supporting Documents- LA Quality Jobs Program.pdf SRES 3/1/2017 3:30:00 PM
SB 44
10. SB 44 Supporting Documents- LA Energy Advantages.pdf SRES 3/1/2017 3:30:00 PM
SB 44
11. SB 44 Supporting Documents- LA Halliburton facility.pdf SRES 3/1/2017 3:30:00 PM
SB 44
12. SB 44 Supporting Documents- Select pages from Louisiana Industrail Tax Exemption approval report 2015.pdf SRES 3/1/2017 3:30:00 PM
SB 44
13. SB 44 Supporting Documents- Texas Enterprise Fund overview.pdf SRES 3/1/2017 3:30:00 PM
SB 44
14. SB 44 Supporting Documents- Texas Tax Credit Review Process.pdf SRES 3/1/2017 3:30:00 PM
SB 44
15. SB 44 Supporting Documents- Texas Enterprise Fund Summary Report with oil & gas highlights 12-31-16.pdf SRES 3/1/2017 3:30:00 PM
SB 44
16. SB 44 Fiscal Note- DOR TAX -2-24-2017.pdf SRES 3/1/2017 3:30:00 PM
SB 44
17. SB 44-Opposition BlueCrest-3-1-17.pdf SRES 3/1/2017 3:30:00 PM
SB 44
18. SB 44 Opposition Hilcorp-3-1-17.pdf SRES 3/1/2017 3:30:00 PM
SB 44