02/19/2020 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Overview: Revenue from Alaska's Resources by the Department of Natural Resources & the Department of Revenue | |
| SB155 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 155 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 19, 2020
3:30 p.m.
MEMBERS PRESENT
Senator Peter Micciche, Chair
Senator John Coghill, Vice Chair
Senator Click Bishop
Senator Cathy Giessel
Senator Joshua Revak
Senator Scott Kawasaki
Senator Jesse Kiehl
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
PRESENTATION: REVENUE FROM ALASKA'S RESOURCES BY THE DEPARTMENT
OF NATURAL RESOURCES & THE DEPARTMENT OF REVENUE
- HEARD
SPONSOR SUBSTITUTE FOR SENATE BILL NO. 155
"An Act relating to exploration and mining rights; relating to
annual labor requirements with respect to mining claims and
related leases; relating to statements of annual labor; defining
'labor'; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 155
SHORT TITLE: EXPLORATION & MINING RIGHTS; ANNUAL LABOR
SPONSOR(s): SENATOR(s) BISHOP
01/21/20 (S) READ THE FIRST TIME - REFERRALS
01/21/20 (S) RES, FIN
02/03/20 (S) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS
02/03/20 (S) RES, FIN
02/05/20 (S) RES AT 3:30 PM BUTROVICH 205
02/05/20 (S) Heard & Held
02/05/20 (S) MINUTE(RES)
02/14/20 (S) RES AT 3:30 PM BUTROVICH 205
02/14/20 (S) Heard & Held
02/14/20 (S) MINUTE(RES)
02/19/20 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
COLLEEN GLOVER, Director
Tax Division
Alaska Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Participated in the overview of Alaska's
resources revenue.
DAN STICKEL, Chief Economist
Revenue Economic Research
Alaska Department of Revenue
Juneau, Alaska
POSITION STATEMENT: Participated in the overview of Alaska's
resources revenue.
DEANTHA CROCKETT, Executive Director
Alaska Miners Association
Anchorage, Alaska
POSITION STATEMENT: Answered questions regarding the state's
mining taxes.
SARA LONGAN, Deputy Commissioner
Alaska Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Participated in the overview of petroleum
revenue.
MARTY PARSONS, Director
Division of Mining, Land and Water
Alaska Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Participated in the overview of mining
revenue.
CHAD HUTCHINSON, Senate Majority Counsel
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Provided an explanation of the committee
substitute for SB 155.
BRENT GOODRUM, Deputy Commissioner
Alaska Department of Natural Resources
Anchorage, Alaska
POSITION STATEMENT: Discussed the fiscal note for SB 155.
DAVID WRIGHT, representing self
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of SB 155.
ACTION NARRATIVE
3:30:46 PM
CHAIR PETER MICCICHE called the Senate Resources Standing
Committee meeting to order at 3:30 p.m. Present at the call to
order were Senators Bishop, Kiehl, Revak, Giessel, Coghill,
Kawasaki, and Chair Micciche.
^OVERVIEW: Revenue from Alaska's Resources by the Department of
Natural Resources & the Department of Revenue
OVERVIEW: Revenue from Alaska's Resources by the Department of
Natural Resources & the Department of Revenue
3:31:26 PM
CHAIR MICCICHE announced that the first order of business would
be two presentations, the first by the Alaska Department of
Revenue (DOR), Tax Division, and the second by the Alaska
Department of Natural Resources (DNR).
He emphasized that "Resource development is what we do for a
living in Alaska." He said the presentations will address where
the state's revenues come from and how it all works. They are a
good way to start any future discussions the committee may have
the subject matter fits with what legislators have been dealing
with lately.
3:32:30 PM
COLLEEN GLOVER, Director, Tax Division, Alaska Department of
Revenue, Anchorage, Alaska, introduced herself and stated that
DOR was asked to give an update on revenues from mining, oil,
gas, and fishing industries.
3:33:06 PM
DAN STICKEL, Chief Economist, Revenue Economic Research, Alaska
Department of Revenue, Juneau, Alaska, introduced himself and
stated that DOR was asked to give a high-level overview of the
state's revenue sources from the different resource industries.
MR. STICKEL reviewed slide 2, Total State Revenue: Resources a
Primary Source:
• FY 2019 Total State Revenue by Source, $ millions
o Investment, $4,004
o Federal, $3,311
o Oil & Gas, $2,623
o Other Non-Petroleum, $962
o Fisheries, $89
o Mining, $72
• FY 2019 Unrestricted General Fund Revenue by Source, $
millions
o Investment, $2,816
o Oil & Gas, $2,047
o Other Non-Petroleum, $407
o Mining, $54
o Fisheries, $31
He pointed out that resources contribute one-quarter of the
total state revenue. He explained that unrestricted general fund
revenue is revenue that is available for general appropriation
with no spending restrictions. Most of the public and
legislative debate around the budget focuses on the unrestricted
general fund category.
MR. STICKEL detailed that investments are the largest source of
unrestricted general fund revenue, which is primarily the
percent of market value draw from the Alaska Permanent Fund
which came into being several years ago.
He noted that the resource industry contributes about 40 percent
of the unrestricted general fund revenue. Investment revenue
originally came primarily from resource extraction. Combined,
resource extraction and investments contribute over 90 percent
of the state's unrestricted general fund revenue.
3:35:16 PM
He reviewed slide 3, Types of Resource Revenue:
• Royalties
• Property Taxes
• Severance Taxes
o Fisheries Business Tax, Resource Landing Tax
o Oil and Gas Production Tax
o Mining License Tax
• Corporate Income Taxes Other Fees and Assessments
MR. STICKEL explained that royalties are what the state receives
from oil, gas, or minerals extracted from state land.
He detailed that property taxes are levied on all property in
the state and within the three-mile limit. The state levies
property tax on oil and gas property and municipalities levy
mining and fishing property taxes. He said this presentation
does not reflect mining and fishing taxes, but those resources
are important contributors to municipal revenue sources.
MR. STICKEL said severance tax is a broad term for any tax on
the taking of any resource within the state. The name of the tax
differs for each of the industries. For example, the Resource
Landing Tax applies to fisheries resources harvested outside the
three-mile limit but landed within the state. For oil and gas,
the tax is called the Production Tax, and the Mining License Tax
is the severance tax on minerals resources.
CHAIR MICCICHE asked if defining renewables in the severance tax
category is a recent change because it is a new concept to him.
He said there are taxes on renewable resources like fish and
timber, but the definition of a severance tax is that the
industry severs the material from the people of Alaska forever.
MR. STICKEL answered that he classified the fisheries taxes
strictly for this presentation.
3:37:39 PM
MR. STICKEL reviewed slide 4, Corporate Income Tax (CIT):
• Applies to C-Corporations
o Many but no all, companies in Alaska
• "Alaska Taxable Income" determined using an "apportionment
factor"
o Non-Petroleum - based on U.S. "water's edge" activity,
apportioned to Alaska based on Alaska's share of
property, payroll, and sales.
• Petroleum - based on worldwide activity, apportioned to
Alaska based on Alaska's share of property, production, and
sales/tariffs.
• 9.4 percent rate applies to taxable income above $222,000
MR. STICKEL said the Corporate Income Tax does not apply to
individuals or pass-through entities, as defined by the Internal
Revenue Service.
He reviewed slide 6, Fisheries Revenues: Overview:
• General Fisheries Taxes
1. Fisheries Business Tax, AS 43.75
2. Fishery Resource Landing Tax, AS 43.77
3. Corporate Income Tax (attributable to fisheries), AS
43.20
• Self-Imposed Taxes and Assessments:
1. Common Property Fishery Assessment, AS 16.10.455
2. Dive Fishery Management Assessment, AS 43.76.150
3. Regional Seafood Development Tax, AS 43.76.350
4. Salmon Enhancement Tax, AS 43.76.001
5. Seafood Marketing Tax, AS 16.51.120
6. Commercial Fisheries Entry Commission Receipts, AS
16.43.160
He noted that the fisheries revenue in the overview strictly
refers to commercial fishing, not sportfishing.
MR. STICKEL explained that the Fisheries Business Tax is on
processing or export of fish from Alaska. The tax is based on
the price paid for the unprocessed resource or the fair market
value if the fish is marketed directly. It applies to any fish
caught within the three-mile limit. Fish caught outside the
three-mile limit and first landed in Alaska would not be subject
to the business tax, but the department would instead levy the
Fishery Resource Landing Tax. Fish caught outside the three-mile
limit and not landed in Alaska would not be subject to state
taxation at all. The Corporate Income Tax applies to any
corporations doing business in the state.
He said there are a variety self-imposed taxes and assessments.
DOR has the mechanisms in place to collect taxes on the fishing
industry so it will levy taxes and assessments on behalf of the
industry. DOR takes care of the administration and collection
and remits the taxes and fees back to various industry groups.
MR. STICKEL detailed that the Common Property Fishery Assessment
is a cost-recovery program for hatcheries. The Dive Fishery
Management Assessment is revenue shared with relevant dive
fishery associations. The Regional Seafood Development Tax and
the Salmon Enhancement Tax are revenues shared with associations
for specific fisheries. The Seafood Marketing Tax that is levied
on all seafood resources in the state, funds the Alaska Seafood
Marketing Institute. Receipts from the Commercial Fisheries
Entry Commission include any revenue from permits and licensing
activities.
3:41:54 PM
MR. STICKEL reviewed slide 7, Fisheries Revenues: Tax Rates:
• Fisheries Business Tax
o Established Species
square4 Floating: 5 percent
square4 Salmon Cannery: 4.5 percent
square4 Share-Based: 3 percent
square4 Direct Marketers: 3 percent
o Developing Species
square4 Floating: 3 percent
square4 Shore-Based: 1 percent
square4 Direct Marketers: 1 percent
• Fisheries Resource Landing Tax
o Established Species: 3 percent
o Developing Species: 1 percent
• Salmon Enhancement Tax
o Southern Southeast: 3 percent
o Cook Inlet: 2 percent
o Kodiak: 2 percent
o Yakutat: 2 percent
o Northern Southeast: 3 percent
o Prince William Sound: 2 percent
o Chignik: 2 percent
• Dive Fishery Management Assessment
o Geoduck: 7 percent
o Sea Cucumber: 3 percent
o Sea Urchin: 1 percent
• Corporate Income Tax:
o Taxable Income & Marginal Tax Rate:
square4 $0-$25,000/0.00 percent
square4 $25,000-$49,000/2.00 percent
square4 $49,000-$74,000/3.00 percent
square4 $74,000-$99,000/4.00 percent
square4 $99,000-$124,000/5.00 percent
square4 $124,000-$148,000/6.00 percent
square4 $148,000-$173,000/7.00 percent
square4 $173,000-$198,000/8.00 percent
square4 $198,000-$222,000/9.00 percent
square4 $222,000 +/9.40 percent
MR. STICKEL said the rates vary by species and locations for a
lot of the tax assessments. The most common tax rate for the
Fisheries Business Tax and the Fisheries Resource Landing Tax is
3 percent of gross value. There is a higher tax rate for certain
types of processors and lower tax rates for certain developing
species to encourage investment in those resources.
He noted that slide 7 also shows the bracketed rate structure
for the Corporate Income Tax, which is the same rate structure
that applies to all businesses in all industries.
CHAIR MICCICHE noted the 4.5 percent Salmon Cannery Tax and
asked if it is based on the net value or the gross value.
MR. STICKEL answered that the Fisheries Business Tax is based on
the unprocessed value of the fish, which is typically is the
value the fishermen get when they sell to the cannery. There is
an additional element of value-added when the fish goes from the
unprocessed to canned.
SENATOR KAWASAKI asked what year DOR created the current
Corporate Income TAX structure.
MR. STICKEL answered that DOR amended the bracket structure in
2013.
3:44:08 PM
MR. STICKEL reviewed slide 8, Fisheries Revenues: Historical and
Forecasted Revenues ($ millions):
• Unrestricted General Fund
o FY 2019 / FY 2020 / FY 2021
square4 Fisheries Business Tax
• 21.3 / 21.2 / 21.6
square4 Fishery Resource Landing Tax
• 6.5 / 5.4 / 5.5
square4 Corporate Income Tax (attributable to fisheries)
• 2.8 / 3.0 / 3.0
square4 Subtotal Unrestricted
• 30.6 / 29.6 / 30.1
• Designated General Fund
o FY 2019 / FY 2020 / FY 2021
square4 Fisheries Business Tax (Municipal Share)
• 24.1 / 25.0 / 24.1
square4 Fishery Resource Landing Tax (Municipal Share)
• 6.0 / 6.7 / 7.3
square4 Commercial Fisheries Entry Commission Receipts
• 6.9 / 6.9 / 6.9
square4 Subtotal Designated General Fund
• 37.0 / 38.6 / 38.3
• Other Restricted
o FY 2019 / FY 2020 / FY 2021
square4 Cost Recovery Fisheries Assessment
• 0.0 / 0.0 / 0.0
square4 Dive Fishery Management Assessment
• 0.8 / 0.8 / 0.8
square4 Salmon Enhancement Tax (Aquaculture Association
Share)
• 6.6 / 6.7 / 6.9
square4 Seafood Development Tax (qualifying regional
association)
• 3.6 / 3.7 / 3.8
square4 Seafood Marketing Assessment (seafood marketing
programs)
• 10.0 / 10.3 / 10.5
square4 Subtotal Other Restricted
• 21.0 / 21.5 / 22.0
• Total
o FY 2019 / FY 2020 / FY 2021
square4 $88.6 / $89.7 / $90.4
MR. STICKEL stated that the chart, which summarizes data from
the 2019 Fall Revenue Sources Book, shows all sources of
fisheries revenues for FY 2019 as well as DOR forecasts for FY
2020 and FY 2021.
MR. STICKEL explained that DOR sorts revenue into three
categories for purposes of the revenue forecast. Unrestricted
revenue is the state's share of the business. The landing tax as
well as other revenues are available for general appropriation.
MR. STICKEL said appropriations from the designated general fund
are typically for a specific purpose, but they are technically
available for legislative appropriation.
He said the other restricted revenues for fisheries are
basically the flow-through taxes that are self imposed by the
industry. The state collects the revenues and remits it to the
industry. If the state were to spend the other restricted monies
on something else, the industry would opt out of having the
taxes. Unrestricted fish revenue is relatively stable at $30
million per year and total fisheries revenue is around $90
million per year.
SENATOR KIEHL asked if the fisheries revenues in the chart
accounts for test fisheries where the state has common property
fish removed from the opportunity to harvest and sells it for
services that the state provides.
MR. STICKEL answered no; the chart does not include test
fisheries receipts.
CHAIR MICCICHE said he assumes that test fisheries would fall
under the revenue categories listed on slide 2 for other non-
petroleum, along with sportfishing licensing receipts and other
fish related income.
MR. STICKEL agreed and noted that test fisheries receipts
average between $1 million and $2 million per year.
3:47:01 PM
MR. STICKEL reviewed slide 9, Fisheries Revenues: Revenue
Sharing Methodology:
• Within Eligible Municipality
o 50 percent municipality
o 50 percent State of Alaska
• Within Incorporated City
o 25 percent incorporated city
o 25 percent municipality
o 50 percent State of Alaska
• Outside of Eligible Municipality
o 50 percent distributed through the Department of
Commerce, Community and Economic Development (DCCED)
o 50 percent State of Alaska
MR. STICKEL noted that any tax credits on the fisheries taxes
generally comes out of the state's share. The one exception is
the DCCED quota credit which comes out of the municipality share
of the landing tax.
CHAIR MICCICHE asked him to provide a chart of the revenue
sharing payments broken out over the past three years to
organized boroughs, incorporated cities, and the State of
Alaska.
MR. STICKEL agreed to provide the chart.
MR. STICKEL reviewed slide 11, Mining Revenues: Overview:
• Mining License Tax, AS 43.65
• Corporate Income Tax (attributable to mining), AS 43.20
• Mining Rents and Royalties, AS 38.04.212
• Note: Miscellaneous mining revenues are not included in
this presentation. Some of these include fuel taxes,
penalty fees, filing fees, bid bonuses, and AIDEA
facilities use fees.
He detailed that the Mining License Tax is the state's severance
tax on mining that is based on net income of mining operations.
The Corporate Income Tax applies to all resource industries. DNR
administers mining and royalties on state lands.
3:49:16 PM
MR. STICKEL reviewed slide 12, Mining Revenues: License Tax
Calculation:
• Mining Net Income / Tax Rate
o $0 - $40,000 / No Tax
o $40,001 - $50,000 / $1,200 plus 3 percent over $40,000
o $50,001 - $100,000 / $1,500 plus 5 percent over
$50,000
o Over $100,000 / $4,000 plus 7 percent over $100,000
• Net Income = Gross Income - Allowable Deductions
o Gross Income
square4 Sales price or value received from mined material
square4 Royalties from property
square4 Production payments received
square4 Fair Market value of the material if it is not
sold but shipped out-of-state
o Allowable Deductions
square4 Depletion (available only to owner of mining
property)
• Cost Depletion (total development cost)
• Percentage Depletion (percentage of gross
income less royalties, dependent on mineral
mined)
square4 Direct Expenses
square4 Indirect Expenses
MR. STICKEL said the Mining License Tax is a progressive income
tax levied against the net income of all mining operations.
SENATOR KAWASAKI asked what year DOR published the net income
tax rates for mining.
MR. STICKEL answered that the rates have been in place for a
long time.
SENATOR KAWASAKI noted that the cost depletion deduction allows
a mine to base its deduction on the estimated life of the mine.
He asked who makes the estimate, where does the estimate come
from, and what happens when a mine annexes an adjacent property
that uses already built infrastructure.
MR. STICKEL answered that he will follow up with the
information.
CHAIR MICCICHE remarked that knowing when the state implemented
the mining tax rates would be interesting. He asked if Ms.
Crockett from the Alaska Miners Association knew when the state
established the mining rates.
3:52:11 PM
DEANTHA CROCKETT, Executive Director, Alaska Miners Association,
Anchorage, Alaska, answered that she did not know and will get
back to the committee with the information.
MR. STICKEL confirmed that Alaska established its mining net
income tax rate in 1955.
MR. STICKEL reviewed slide 13, Mining Revenues: Historical and
Forecasted Revenues ($ millions):
• Unrestricted
o FY 2019 / FY 2020 / FY 2021
square4 Mining License Tax
• 45.1 / 50.0 / 50.0
square4 Corporate Income Tax (attributable to mining)
• 6.9 / 12.9 / 11.9
square4 Mining Rents and Royalties
• 1.9 / 1.3 / 1.3
square4 Subtotal Unrestricted
• 53.9 / 64.2 / 63.2
• Designated General Fund
o FY 2019 / FY 2020 / FY 2021
square4 Mining Rents and Royalties
• 8.9 / 6.4 / 6.5
square4 Subtotal Restricted
• 8.9 / 6.4 / 6.5
• Other Restricted
o FY 2019 / FY 2020 / FY 2021
square4 Settlements to Constitutional Budget Reserve Fund
(non-petroleum Taxes)
• 2.9 / 0.0 / 0.0
square4 Mining Rents and Royalties
• 6.7 / 9.9 / 10.0
square4 Subtotal Other Restricted
• 9.6 / 9.9 / 10.0
• Total
o FY 2019 / FY 2020 / FY 2021
square4 $72.4 / $80.5 / $79.7
MR. STICKEL said the chart shows all sources of mining revenues
and forecasts. He noted that the designated general fund
category includes some royalties identified as program receipts.
He noted that the other restricted revenue category includes the
Permanent Fund and school fund's share of mining royalties as
well as any settlements of royalty and tax disputes that go to
the Constitutional Budget Reserve Fund.
MR. STICKEL pointed out that the mining revenue chart is
slightly different than what committee members will see when DNR
presents its mining revenue numbers. One of the key issues is
the Corporate Income Tax that DNR is reporting is from FY 2018,
which was an unusually high fiscal year for mining corporation
income tax collections.
3:54:28 PM
SENATOR BISHOP noted the last update for mining rents and
royalties was 20 years ago. He pointed out that recalculations
for the mining rents and royalties occurs every 10 years with a
tie-in to the Anchorage Consumer Price Index (CPI). He disclosed
that his lease payments to the state increased by 23 percent
after his recent 10-year lookback.
MR. STICKEL reviewed slide 15, Oil and Gas Revenues: Overview:
1. Royalties, AS 38.05.180
2. Petroleum Corporate Income Tax, AS 43.20.144
3. Petroleum Property Tax, AS 43.56
4. Oil and Gas Production Tax AS 43.55
He said royalties are based on the gross value of production of
oil and gas on state lands. The Petroleum Corporate Income Tax
applies to all the resource industries.
MR. STICKEL detailed that the Petroleum Property Tax is 20 mills
or 2 percent of the value of oil and gas property in the state.
Oil and gas property tax is 20 mills or 2 percent on oil and gas
property. Any municipal taxes on the property is available as a
credit to offset against the state paid. The majority of
petroleum property tax does go to the municipality even though
the state has a tax on that property.
He explained that the Oil and Gas Production Tax is the state's
severance tax on oil and gas.
3:56:19 PM
MR. STICKEL reviewed slide 16, Oil and Gas Revenues: Property
Tax:
• Based on value of oil and gas property
• State rate is 2 percent of assessed value
• Municipalities can levy property taxes at same rate it
taxes all non-oil and gas property
• Taxes paid to municipalities acts as credit towards tax due
to state
o Municipalities receive large majority of total revenue
CHAIR MICCICHE asked who does the assessments on oil and gas
properties that are outside of a municipality.
MR. STICKEL answered that DOR has a State Petroleum Property Tax
assessor within the department.
CHAIR MICCICHE asked if they assesses oil and gas properties
within municipalities as well or is it separately assessed.
MS. GLOVER answered that DOR issues state oil and gas property
assessments for the whole state and they coordinate with
municipalities on those assessments.
3:57:35 PM
MR. STICKEL reviewed slide 17, Oil and Gas Revenues: Petroleum
Property Tax Distribution and local mill rates ($ millions), FY
2019:
• Taxing Jurisdiction
o Unorganized
square4 Gross Tax / Local Share / State Share
• 62.2 / 0.0 / 62.2
o North Slope Borough
square4 Gross Tax / Local Share / State Share
• 419.5 / 377.4 / 42.2
o Fairbanks North Star Borough
square4 Gross Tax / Local Share / State Share
• 14.3 / 12.2 / 2.2
o Municipality of Anchorage
square4 Gross Tax / Local Share / State Share
• 2.8 / 2.3 / 0.5
o Kenai Peninsula Borough
square4 Gross Tax / Local Share / State Share
• 31.3 / 15.5 / 15.8
o City of Valdez
square4 Gross Tax / Local Share / State Share
• 39.0 / 39.0 / 0.0
o Matanuska-Susitna Borough
square4 Gross Tax / Local Share / State Share
• 0.2 / 0.1 / 0.1
o City of Whittier
square4 Gross Tax / Local Share / State Share
• 0.0 / 0.0 / 0.0
o City of Cordova
square4 Gross Tax / Local Share / State Share
• 0.2 / 0.1 / 0.1
• Total FY 2019
square4 Gross Tax / Local Share / State Share
• 569.5 / 446.6 / 123.0
MR. STICKEL said slide 17 shows the total oil and gas property
tax collections for FY 2019 and the distribution between the
state and municipalities. He explained that the state's 20-mill
tax rate is reduced by the municipal credits, but it retains all
the revenue from any property in the Unorganized Borough,
including a portion of the Trans-Alaska Pipeline. He highlighted
that the state share for FY 2019 totaled $123 million and
municipal revenue totaled close to $450 million, with the
largest beneficiaries being the North Slope Borough and the City
of Valdez.
CHAIR MICCICHE highlighted that the state's share of petroleum
property taxes alone brings in more on an annual basis than the
combined taxes from mining and fishing. It shows the importance
of the oil and gas industry in the State of Alaska.
MR. STICKEL concurred.
3:59:09 PM
MR. STICKEL said slide 18, Oil and Gas Revenues: Production Tax,
illustrates a high-level overview of the calculation for the
North Slope Oil Production Tax. He noted that there are
different provisions in place for areas outside of the North
Slope as well as for gas.
He detailed that the first step is to determine the gross value
at the point of production (GVPP). In that calculation,
royalties and transportation costs are subtracted from total
production. The next step is to calculate the production tax
value (PTV), which essentially calculates net income. In that
calculation, the eligible lease costs are subtracted from the
gross value at point of production. He noted that there is no
depreciation requirement for capital expenditures so the
production companies are able to deduct all their expenditures
in the year they're incurred.
MR. STICKEL explained that the next step is to take the higher
of two calculations: 35 percent net tax based on PTV, and a 4
percent gross tax floor based on GVPP. The final calculation
applies credits to the higher of the two calculations. The
primary tax credit is the per-taxable-barrel credit, which for
most production cannot reduce the tax below the gross tax floor.
He reiterated that this is a high-level overview of the
production tax concept for the North Slope and the department
would follow up with more detail if the committee desires.
CHAIR MICCICHE asked if the break-over price point is in the $60
per barrel range.
MR. STICKEL replied the crossover point at which most companies
begin to pay the net tax instead of the gross tax is close to
$80 in the FY 2021 forecast. He said part of the reason that has
increased since last year is due to significantly higher
spending as well as somewhat lower production in the forecast.
CHAIR MICCICHE conceded that the state is likely looking at a
minimum tax world for some time.
MR. STICKEL answered correct.; DOR foresees companies paying at
the minimum tax rate throughout the forecast time horizon.
4:02:11 PM
MR. STICKEL reviewed slide 19, Oil and Gas Revenues: Historical
and Forecasted Revenues ($ millions):
• Unrestricted
o FY 2019 / FY 2020 / FY 2021
square4 Petroleum Property Tax
• 119.5 / 121.6 / 117.9
square4 Petroleum Corporate Income Tax
• 217.7 / 210.0 / 215.0
square4 Oil and Gas Production Tax
• 595.5 / 380.7 / 328.1
square4 Royalties (including Bonuses, Rents, and
Interest)
• 1,114.7 / 847.0 / 749.0
square4 Subtotal Unrestricted
• 2,047.3 / 1,559.4 / 1,410.0
• Other Restricted
o FY 2019 / FY 2020 / FY 2021
square4 Royalties, Bonuses, and Rents to the Alaska
Permanent Fund
• 374.8 / 380.3 / 337.6
square4 Royalties, Bonuses, and Rents to the Public
School Trust Fund
• 7.5 / 6.2 / 5.5
square4 Tax and Royalty Settlements to Constitutional
Budget Reserve Fund
• 181.2 / 200.0 / 75.0
square4 NPR-A Royalties, Rents, and Bonuses
• 12.3 / 11.3 / 9.5
square4 Subtotal Other Restricted
• 575.8 / 597.8 / 427.5
• Total
o FY 2019 / FY 2020 / FY 2021
square4 $2,623.2 / $2,157.2 / $1,837.6
MR. STICKEL said slide 19 shows all sources of oil and gas
revenue for FY 2019, FY 2020, and FY 2021. He noted that for oil
and gas, no revenue falls in the designated general fund
category. It is either unrestricted general fund or other
restricted revenue. The unrestricted revenues are property tax,
production tax, corporate income tax, and some of the royalties.
The restricted revenue is the Alaska Permanent Fund and the
Public School Trust Fund share of royalties as well as any
revenue from settlements on tax and royalty disputes, which go
to the Constitutional Budget Reserve Fund.
He detailed that the federal government shares 50 percent of any
royalties, rents, and bonuses received from activity in the
National Petroleum Reserve-Alaska (NPRA). The state considers
NPRA revenue as other restricted revenue in the budget.
MS. GLOVER said DOR will provide a higher-level view of resource
value to the economy instead of focusing on resource revenue to
the state.
4:04:01 PM
MS. GLOVER said slide 21, Fish Harvest and Gross Value, shows
the primary fish species and annual harvest amounts for the last
10 years. The primary fish species include: pollock, non-pollock
groundfish, black cod, halibut, herring, salmon, and shellfish.
She said most of the species have been stable over the last 10
years except for big swings in the gross value of salmon. The
gross value of the primary species fisheries is $2 billion per
year.
MS. GLOVER said slide 22, Minerals Prices, Production, and Gross
Value, focuses on gold, silver, lead, and zinc, which is about
$3 billion per year. She noted that zinc and gold were volatile
over the 10-year period compared to the more stable silver and
lead.
SENATOR KIEHL questioned whether the minerals and fish values
were an apples-to-apples comparison because the minerals value
shows the final price of the refined product which is not
comparable to the ex-vessel value of a fish. It's more
comparable to the plate value of a fish.
MR. STICKEL replied the observation is correct; the fish values
represent the unprocessed value of the fisheries paid to the
fishermen whereas the mineral values are the market value.
SENATOR KIEHL pointed out that no Alaskan miner is getting final
refined market value.
CHAIR MICCICHE summarized that the values comparison is ex-
vessel fish prices and initial mineral value.
MR. STICKEL explained that another caveat on the fisheries data
is it only includes those fisheries resources that are subject
to the state's business and landing tax. There is a portion of
the fishing industry that is not subject to the taxes for fish
caught outside of the 3-mile limit and not landed in Alaska. DOR
uses its own fisheries data and the minerals data comes from
DNR. He suggested that DNR can speak to the nuances in their
data set.
4:07:44 PM
MS. GLOVER turned to slide 23, Alaska North Slope (ANS) Prices,
Production, and Gross Value, and pointed out that the gross
value of ANS oil production has been very volatile for the last
10 years, from a high of $25 billion down to a low of $12
billion in 2016. She explained that the gross value is a
function of oil price and production volumes on an average per
year.
MS. GLOVER reviewed slide 24, Alaska North Slope Prices and
Production:
• Prices and production by fiscal year
o 2008
square4 Prices ($ per barrel): $95.51
square4 Production (thousand barrels per day): 715.4
o 2009
square4 Prices ($ per barrel): $68.34
square4 Production (thousand barrels per day): 692.8
o 2010
square4 Prices ($ per barrel): $74.90
square4 Production (thousand barrels per day): 642.6
o 2011
square4 Prices ($ per barrel): $94.49
square4 Production (thousand barrels per day): 599.9
o 2012
square4 Prices ($ per barrel): $112.65
square4 Production (thousand barrels per day): 579.4
o 2013
square4 Prices ($ per barrel): $107.57
square4 Production (thousand barrels per day): 531.6
o 2014
square4 Prices ($ per barrel): $107.57
square4 Production (thousand barrels per day): 530.4
o 2015
square4 Prices ($ per barrel): $72.58
square4 Production (thousand barrels per day): 501.0
o 2016
square4 Prices ($ per barrel): $43.18
square4 Production (thousand barrels per day): 514.7
o 2017
square4 Prices ($ per barrel): $49.43
square4 Production (thousand barrels per day): 526.40
o 2018
square4 Prices ($ per barrel): $63.61
square4 Production (thousand barrels per day): 518.5
MS. GLOVER pointed out that prices have been more unstable than
production. ANS oil production has steadily decreased, but
prices show significant change over the years.
4:08:49 PM
MS. GLOVER reviewed slide 25, Gross Value of Resource
Industries: Fisheries, Mining, and Oil and Gas:
• Calculated Gross Value ($ millions)
o 2008
square4 Fisheries (FY) $1,836
square4 Mining (CY) $2,260
square4 Oil and Gas (FY) $25,200
o 2009
square4 Fisheries (FY) $1,497
square4 Mining (CY) $2,318
square4 Oil and Gas (FY) $17,281
o 2010
square4 Fisheries (FY) $1,699
square4 Mining (CY) $2,899
square4 Oil and Gas (FY) $17,568
o 2011
square4 Fisheries (FY) $2,038
square4 Mining (CY) $3,372
square4 Oil and Gas (FY) $20,690
o 2012
square4 Fisheries (FY) $2,035
square4 Mining (CY) $3,295
square4 Oil and Gas (FY) $23,823
o 2013
square4 Fisheries (FY) $2,001
square4 Mining (CY) $3,275
square4 Oil and Gas (FY) $20,872
o 2014
square4 Fisheries (FY) $1,873
square4 Mining (CY) $3205
square4 Oil and Gas (FY) $20,825
o 2015
square4 Fisheries (FY) $1,754
square4 Mining (CY) $2,701
square4 Oil and Gas (FY) $13,272
o 2016
square4 Fisheries (FY) $1,720
square4 Mining (CY) $2,858
square4 Oil and Gas (FY) $8,112
o 2017
square4 Fisheries (FY) $2,046
square4 Mining (CY) $3,185
square4 Oil and Gas (FY) $9,497
o 2018
square4 Fisheries (FY) $1,955
square4 Mining (CY) $3,203
square4 Oil and Gas (FY) $12,039
MS. GLOVER pointed out that there is a significant difference in
the gross value of each of the three industries to the state.
4:09:11 PM
CHAIR MICCICHE asked if DOR could provide a comparison of the
tax value to the state for the three key resource industries.
MS. GLOVER answered yes.
SENATOR KIEHL pointed out that the gross values of the
industries in slide 25 is not an apples-to-apples comparison.
The mining industry has tremendous value and there is a lot of
income to individuals and municipal tax bases, but using the
metals price for the final refined metal and multiplying by the
tons of metal that comes out of Alaska overstates how much cash
is coming in. Revenue analysis should look at actual cash and
not an overstated number.
CHAIR MICCICHE agreed with Senator Kiehl and said the committee
would welcome an apples-to-apples comparison on the previous
revenue charts.
MR. STICKEL replied DOR will do its best to refine the data set.
CHAIR MICCICHE thanked the two DOR presenters.
He announced that DNR will conduct the next presentation on
resource revenue.
4:11:49 PM
SARA LONGAN, Deputy Commissioner, Alaska Department of Natural
Resources, Anchorage, Alaska, said she and Director Parson will
share an overview of the revenues received by the State of
Alaska from the oil and gas, and mining industries.
4:12:16 PM
MARTY PARSONS, Director, Division of Mining, Land and Water,
Alaska Department of Natural Resources, Anchorage, Alaska,
stated that mining has played a fairly significant role in the
development of the state from the AJ Mine in Juneau and the
goldfields in Nome to the present day income and job
opportunities from the Fort Knox Mine in Fairbanks and the Red
Dog Mine in the Northwest Arctic Borough.
MR. PARSONS reviewed slide 2, In 2018, Division of Mining, Land
and Water (DMLW) Examples from Resource Development:
• In 2018, Alaska's mining industry provided:
o 4,500 direct mining jobs in Alaska.
o 9,200 total direct and indirect jobs attributed to
Alaska mining industry.
o $715 million in total direct and indirect payroll.
o Some of Alaska's highest paying jobs with an estimated
average annual wage of $112,857, almost twice the
state average for all sectors of the economy.
o $34 million in local government revenue.
o $129 million in state government revenue through
mining licenses, rents, royalties, fees, taxes, and
other government-related payments.
o $358 million in payments to Alaska Native
corporations.
o Mostly year-round jobs for residents of more than 60
communities throughout Alaska, half of which are found
in rural Alaska where few other jobs are available.
4:14:47 PM
MR. PARSONS reviewed slide 3, Mining Revenues through Rentals,
Royalties, Fees and Taxes:
• Mining Claim Rentals (DNR) $ 7,192,888
o Annual Rentals (per acre)
square4 $0.88 (1-5 years)
square4 $1.75 (6-10 years)
square4 $4.25 (>10 years)
o Payment in lieu of Labor (DNR) $ 392,085
• Coal Lease Rentals (DNR) $ 231,159
• Mining & Coal Royalties (DNR) $ 4,444,557
• Miscellaneous Fees (DNR) $ 133,436
• Payment to Municipalities $34,282,140
• Taxes (DOR) $81,893,109
• Total: $128,569,374
MR. PARSONS reviewed slide 4, Alaska's Total Revenue from
Mineral Resource Development:
• Revenue Distribution from Fees and Royalties: $144,675,075
o Mining License Tax, Rents, and Royalties: $59,559,353
o Corporate Income Tax Collection: $34,595,545
o Payments to Municipalities: $34,282,140
o AIDEA for use of facilities: $9,081,619
o State material Sales, Misc. Fees, other taxes:
$7,157,418
MR. PARSONS noted that slide 4 considers material sales that
include gravel to build roads into mines and other
infrastructure necessary for mining. The slide includes fees
paid for the use of AIDEA roads like the road that goes from the
Red Dog Mine to the port.
4:16:27 PM
MR. PARSONS reviewed slide 5, Mineral Resource Development:
• Value of Alaska's Mineral Industry - $2,902,300,000
o Production - $2,428,100,000
o Development - $334,100,000
o Exploration - $140,100,000
He said slide 5 shows approximately $2 billion in expenditures
that comes into the state. These range from actual mining
activity to exploration and mining development. Income comes
through wages, subcontracts, and materials purchases.
MR. PARSONS displayed slide 6, Acreage of Mining Claims, and
remarked that the significant jump in acreage under claim from
2016-2018 is probably due to the price of gold being over $1,600
an ounce. He said gold is a prized mineral, but silver, lead,
and zinc also play an important part in providing steady numbers
that do not fluctuate. He advised that acreage claims will
continue to increase if the price of gold stays high.
SENATOR KAWASAKI asked if the acreage includes Mental Health
Trust and Native corporation lands.
MR. PARSONS answered that it includes Mental Health Trust land
but not Native corporation land.
4:18:47 PM
MR. PARSONS reviewed slide 7, Exploration, Development &
Production:
• Alaska's metal and coal reserves ranking to other countries
worldwide.
o Coal - 12 percent, second most in the world
o Zinc - 3.5 percent, seventh most in the world
o Gold - 3 percent, tenth most in the world
o Lead - 2 percent, eleventh most in the world
o Silver - 1.5 percent, rank not calculable
o Copper - 0.3 percent, rank not calculable
MR. PARSONS said Alaska has a plethora of mineral potential and
mineral combinations that make the state a very attractive place
for corporations to explore and develop mines.
SENATOR BISHOP asked how mineral reserves are calculated, if
they must be economically recoverable or explorations that have
been identified. He said his reason for asking is that a lot of
Alaska is far behind on exploration for knowing what it has for
resources.
MR. PARSONS concurred. He explained that DMLW identifies
reported reserves and types of exploration taking place. The
Alaska Division of Geological and Geophysical Surveys (DGGS)
would have more information on the unreported and estimated
reserves.
4:20:13 PM
MR. PARSONS reviewed slide 8, Exploration, Development &
Production:
• In 2018 Alaska was ranked 5th out of 83 worldwide
jurisdictions for overall investment attractiveness by
mining and exploration companies, which takes into account
geologic potential as well as government policy factors
that affect exploration investment. Alaska also ranked 3rd
for mineral potential assuming a "best practices" policy
regime.
• Mining Activity in Alaska
o Producing Mines
square4 Red Dog
square4 For Knox
square4 Pogo
square4 Usibelli
square4 Kensington
square4 Greens Creek
o Projects in Permitting
square4 Donlin Gold
square4 Pebble
o Advanced Exploration Projects
square4 Upper Kobuk
square4 Graphite Creek
square4 Livengood
square4 Palmer
CHAIR MICCICHE asked if there is a similar survey for oil and
gas potential. He imagined that Alaska ranks fifth worldwide in
investment attractiveness and third for mineral potential due to
the state's tax policy stability, permitting, and other issues.
He assumed that oil and gas would not rank as high.
MR. PARSONS replied DMLW will try to follow up with that
information.
4:22:02 PM
SARA LONGAN, Deputy Commissioner, Alaska Department of Natural
Resources, Anchorage, Alaska stated that she would provide an
overview of the revenue the state receives from oil and gas
production. She began the presentation paraphrasing the
information on slide 9, Petroleum Revenue, Overview:
• AK State Revenue Sources from Oil & Gas Production:
o Royalties
o Production Tax
o Property Tax
o Corporate Income Tax
• Revenue from oil and gas is unrestricted, except:
o 25 percent (before 1979) and 50 percent (after 1979)
of royalty revenue be deposited into the Alaska
Permanent Fund.
o Payments received from the federal government
representing a share of the bonuses, rents, and
royalties derived from federal oil and gas leases in
the NPR-A are deposited into an NPR-A special revenue
fund.
o Payments received from settlements of tax and royalty
disputes between the state and producers are deposited
into the Constitutional Budget Reserve Fund (CBRF),
after accounting for any applicable share of royalty
settlements deposited into the Permanent Fund and the
Public School Trust Fund.
MS. LONGAN reviewed slide 10, Total Petroleum Revenue - By
Restriction and Type, ($ millions), that show the following
breakdown between unrestricted and restricted petroleum revenue:
• Unrestricted Petroleum Revenue
o Royalties - 54 percent
square4 (including bonuses, rents, and interest)
square4 $1,114.7
o Taxes - 46 percent
square4 Oil and Gas Production Tax - 29 percent
• $595.5
square4 Petroleum Corporate Income Tax - 11 percent
• $217.7
square4 Petroleum Property Tax - 6 percent
• $119.5
o Total Unrestricted Petroleum Revenue
square4 $2,047.03
• Restricted Petroleum Revenue
o Royalties, Bonuses, and Rents to the Alaska Permanent
Fund - 65 percent
square4 $374.8
o Royalties, Bonuses, and Rents to the Public School
Trust Fund - 1 percent
square4 $7.5
o Tax and Royalty Settlements to Constitutional Budget
Reserve Fund - 32 percent
square4 $181.2
o NPR-A Royalties, Rents and Bonuses - 2 percent
square4 $12.3
o Total Restricted Petroleum Revenue
square4 $575.8
• Total Petroleum Revenue (FY 2019)
o $2,623.2 Million
4:25:12 PM
MS. LONGAN reviewed the following information on slide 11:
• Alaska State Revenue Sources from Oil and Gas (Millions of
Dollars, FY 2019)
o Royalties
square4 $1,509.3
o Production Tax
square4 $595.5
o Corporate Income Tax
square4 $217.7
o Tax and Royalty Settlements
square4 $181.2
o Property Tax
square4 $119.5
MS. LONGAN reviewed the following information from slide 12, FY
2019 Division of Oil and Gas Revenue - By Revenue Fund and Type,
Millions of Dollars:
• Unrestricted General Fund - $1,111.1
• Permanent Fund - $374.8
• School Trust Fund - $7.5
• Restricted General Fund - $7.2
• Constitutional Budget Reserve - $7.6
SENATOR REVAK asked for an explanation - for the listening
audience, of the difference between royalty in-value (RIV) and
royalty in-kind (RIK) and what additional value the royalty in-
kind has brought to the state.
MS. LONGAN explained that the Division of Oil and Gas,
commercial team, evaluates whether to receive barrels of oil as
RIV or RIK on a case-by-case basis depending on the
commerciality and the economic factors of the proposal. She
agreed to follow up with the numbers for both RIV and RIK
revenue for FY 2019.
4:27:30 PM
MS. LONGAN reviewed the following information from slide 13,
Division of Oil and Gas - Funds Distribution Overview:
• Royalty
o DL-1 Leases Before December 1979
square4 Permanent Fund - 25 percent
square4 General Fund - 74.5 percent
square4 School Fund - 0.5 percent
o NFC: New Form Leases After December 1979
square4 Permanent Fund - 50 percent
square4 General Fund - 49.5 percent
square4 School Fund - 0.5 percent
• Net Profit Share Leases
o Permanent Fund - 50 percent
o General Fund - 49.5 percent
o School Fund - 0.5 percent
MS. LONGAN said the amounts of revenues going to the various
funds differ based on the oil and gas lease type. She directed
attention to a map showing the Cook Inlet oil and gas leases
that identifies DL-1 and NFC lease tracks.
SENATOR KAWASAKI asked if leases are transferrable.
MS. LONGAN answered yes; the conditions are spelled out in the
terms and conditions for each of the leases which are updated
over time and reflected in the annual lease sales.
MS. LONGAN displayed the map on slide 14, Distribution of Leases
by December 1, 1979 Effective Date - North Slope. She pointed
out that the majority of leases are NFC.
MS. LONGAN reviewed the following information from slide 15,
Active NPSL lease on the North Slope:
• Active NPSL lease on the North Slope
o Colville River
o Duck Island
o Kuparuk River
o Milne Point
o Nikaitchuq
o Oooguruk
o Point Thomson
She explained that there are 24 active leases, 11 of which have
reached full payout. She said the net profit share rate for the
NPSL leases is mostly 30 percent or 40 percent with exceptions
in the Duck Island and Point Thomson units due to the higher
royalty rate of 20 percent versus 12.5 percent.
4:30:54 PM
She addressed slide 16, Future North Slope Projects, as follows:
• CD5 2nd Expansion
o Status: January 2019
square4 Planned
o Status: January 2020
square4 Ongoing drilling Q1 2020
o Production Rate Estimates
square4 Adding over 10,000 barrels of oil per day to CD5
production.
• Greater Mooses Tooth #2 (GMT 2)
o Status: January 2019
square4 GMT2 sanctioned in October 2018
o Status: January 2020
square4 Under construction
square4 First oil expected in YE 2021.
o Production Rate Estimates
square4 Peak rate: 35,000 to 40,000 barrels of oil per
day.
• Pikka
o Status: January 2019
square4 Single phased development with first oil in 2023
o Status: January 2020
square4 Now planned for 2-phases; start of production
(Phase 1: 2022; Phase 2: 2024)
square4 To move to FEED after 15 percent divestment of
interests
o Production Rate Estimates
square4 Peak rate: 135,000 barrels of oil per day.
• Willow
o Status: January 2019
square4 Announced first oil date: Earliest 2023; 2024-
2025
o Status: January 2020
square4 Plan to submit Supplemental EIS.
square4 Record of decision expected Q$ 2020
square4 Announced first oil: 2025-2026
o Production Rate Estimates
square4 Peak rate: 130,000 barrels of oil per day.
• Liberty
o Status: January 2019
square4 Final EIS (August 2018). Record of Decision (Oct
2018). Start up in 2022.
o Status: January 2020
square4 Final EIS (August 2018).
square4 Record of Decision (October 2018).
square4 Start up in 2022.
square4 Pending litigation on Fed decision.
o Production Rate Estimates
square4 Peak rate: 60,000 to 70,000 barrels of oil per
day.
MS. LONGAN said the slide shows projects that can bring a
significant amount of new production to the state. The slide
does not include all projects. ConocoPhillips Alaska is
developing the CD5 and Willow projects, Oil Search Alaska is
developing the Pikka Project, and Hilcorp is developing the
Liberty Project. She noted that project timelines, schedules,
and peak production are the division's best guess. She added
that the peak rates almost never come online at full volume
right at the first start of production.
She summarized that all the projects mean additional production
in the future which means additional revenue and royalties.
4:34:51 PM
CHAIR MICCICHE thanked DOR and DNR for their presentations and
what they do to address the impacts on the general fund.
He commented that there is a tendency to focus on revenue from
resources and what it provides for services. There is also a
tendency to forget the employment and investment in local
communities from the companies as well as their employees;
specifically, the services they don't require from the state
because of their local investment. The result is a trickle-down
effect that has a much greater effect than the impact to the
general fund.
He said future presentations should bring the other economics
into the discussion. He admitted that the discussion crosses
over into finance, but committee members lose sight of the
important pieces that do not end up in the general fund, an
important discussion point.
SB 155-EXPLORATION & MINING RIGHTS; ANNUAL LABOR
4:36:26 PM
CHAIR MICCICHE announced that the final order of business would
be SPONSOR SUBSTITUTE FOR SENATE BILL NO. 155, "An Act relating
to exploration and mining rights; relating to annual labor
requirements with respect to mining claims and related leases;
relating to statements of annual labor; defining 'labor'; and
providing for an effective date."
He announced that there is a committee substitute (CS) before
the committee for SB 155.
4:36:59 PM
SENATOR COGHILL moved to adopt the CS, work order 31-LS1278/G.
CHAIR MICCICHE objected for purposes of discussion.
4:37:28 PM
CHAD HUTCHINSON, Senate Majority Counsel, Alaska State
Legislature, Juneau, Alaska, explained that the changes from the
CS came from the Alaska Miners Association working group in
congruence and consultation with DNR members. The themes to keep
in mind from the CS is "notice" and "due process;" the intent is
to provide miners with clarity on those two fronts.
He said the CS synchs the language related to all mining
statutes and eliminates redundancy, which the sponsor substitute
caught. The language in the bill uses terms and conditions that
miners use out in the field. The legislation is for the miners
and not the attorneys.
He addressed the changes for Committee Substitute for Sponsor
Substitute for Senate Bill 155 (CSSSSB 155(RES))-version G, as
follows:
1) On February 19, 2020 the Senate Resources Committee
adopted the following changes (via Committee Substitute
for Sponsor Substitute for Senate Bill 155):
a) In Section 3 (AS 38.05.190):
i) Further language clarified that written notice shall
be sent to the owner via certified mail with return
receipt requested to the most recent address on file
with the Department of Natural Resources. The
interest will be void if the unqualified person does
not cure the defect within 90 days. The department
may send an additional copy of the notice by regular
mail.
(1) The changes are found on page 2, lines 22-
26.
He paraphrased that Section 3 relates to qualifications for
exploration and mineral interests in Alaska. Attention to
notice and due process ensures that an unqualified person
receives written notice and an opportunity to cure, and the
department may send an additional notice document.
4:39:40 PM
He addressed Section 6 as follows:
b) In Section 6 (AS 38.05.210(a)):
i) Language about "common plan of development" was
changed to say, "including adjacent federal or
private mineral interests held in common." The
intent is to distinguish between terms used in the
oil and gas industry versus mining. This language
"better fit" commonly understood terms in the mining
industry.
(1) The changes are found on page 4, lines 13-
14.
ii) or mineral interest" was also added to better
encompass what one may encounter when adjacent
mining interests are held under common ownership.
(1) The changes are found on page 4, line 15.
MR. HUTCHINSON paraphrased that Section 6 has to do with
the annual labor performed to improve or develop the land.
The section changes language that frequently used and
better understood by miners out in the field. The section
adds the term, "or mineral interest," and synchs with
terminology used in the mining statutes.
He addressed Section 7 as follows:
c) In Section 7 (AS 38.05.210(b):
i) In (7)(C) "equal to" was removed. "Applied toward"
replaced "equal to."
(1) So, now a statement of annual labor must
include "any cash payment to the state applied
toward the value of the labor required under (a)
of this section.
(a) Why?
(i) The existing statute at AS 38.05.210(a)
provides that labor may be satisfied by work
performed in the current year, excess value
of work performed in prior years, and cash
paid equal to the value of the labor
required. While this language gives the
miner the opportunity to use one of the
three methods to the exclusion of the
others, there is no obligation that such
labor satisfaction method must be exclusive
to the others. In fact, existing practice by
some miners is to use portions of all three.
Thus, a miner may use a cash payment toward
the labor requirement to top off the work
performed or value of work from prior years.
Any cash payments must be made before the
end of the assessment year on Sept 1 and
generally before the labor affidavit is
filed, so referring to the payment in the
past tense on the affidavit is appropriate.
(2) The changes are found on page 5, line 25.
4:41:58 PM
MR. HUTCHINSON explained Section 8 as follows:
d) In Section 8 (AS 38.05.210(c)):
i) A statement of annual labor can be corrected or
amended before the 90-day period after notice was
sent under AS 38.05.210(g).
(1) The intent is to synch the 90 days cure
provisions, throughout the statutes.
(2) The changes are found on page 6, lines 10-
11.
ii) "A corrected statement following notice of
deficiency under (g) of this section shall be
recorded within 90 days after the notice is sent[.]"
was eliminated. The sentence was redundant. The
sentence previously existed on Version K, page 6,
lines 15-16.
He paraphrased that Section 8 addresses the annual labor
statement that provides due process and the ability to
cure. The section synchs language with other mining
statutes where the 90-day threshold appears and eliminates
redundancy.
He explained Section 9 as follows:
e) In Section 9 (AS 38.05.210):
i) "Shall" was changed to "may." On Version G, page 6,
line 26. The word "may" synchs with Section 3 (which
changed AS 38.05.190).
ii) Text was added to protect miners against third
party litigation during the cure period.
(1) The changes are found on page 7, lines 3-4.
iii) Section (j) from version K was deleted as it was
duplicative of the new added language in AS
38.05.283 (Section 14 in Version G).
He paraphrased that the section synchs annual labor notice
language, protects miners during the cure period, and does
not compel the department to go back in files to find
inaccuracies or typos.
4:44:29 PM
MR. HUTCHINSON explained Section 10 as follows:
f) In Section 10 (AS 38.05.240):
i) "Prospecting" was replaced with "exploring" to
provide more consistency throughout the statutes.
(1) The change is found on Version G, page 7,
line 14.
ii) The words "in support of prospecting for,
developing, or producing minerals" were deleted in
AS 38.05.240(1) because the text was redundant when
read with the rest of the statutory language.
(1) The removed language previously existed in
Version K, on page 7, lines 18-19.
He paraphrased that the section defines labor to synch with
statutes and eliminates redundancy.
He explained Section 12 as follows:
g) In Section 12 (AS 38.05.270):
i) "Evidence of" was included at the beginning of the
statutory language. One can record evidence of a
transaction, but not the act itself.
(1) The change is found on page 9, line 18.
ii) The language involving "heirs and assigns" was
eliminated. Given existing property law, the
language did not add much value. This request for
removal came from the Department of Nature Resources
(DNR). There was no objection from the Alaska Miners
Association (AMA) working group.
(1) The "heirs and assigns" language previously
existed under Version K, page 9, lines 25-26.
He paraphrased that the section deals with transfers to
unqualified and qualified interested parties. The section
focuses on mining by eliminating language involving heirs
because the process already exists throughout Alaska law.
He addressed Section 14 as follows:
h) A new Section 14 has been added (AS 38.05.283):
i) The section emphasizes, broadly, that the Department
is not required to go back and review for compliance
to these mining laws.
ii) This language was recommended by DNR. AMA does
not object. AMA does not expect DNR to review
notices or affidavits/statements.
(1) See Version G, page 10, lines 10-13.
4:47:34 PM
MR. HUTCHINSON detailed Section 15 as follows:
i) Section 15 Applicability:
i) Language was added for a clear understanding of
applicability:
(1) It now reads:
(a) "APPLICABLITY. (a) AS 38.05.210(a), as
amended by sec. 8 of this Act, and AS
38.05.210(e)-(i), enacted by sec. 9 of this
Act, apply to statements of annual labor filed
before, on, or after the effective date of this
Act, if, before the effective date of this Act,
a final decision or judgment has not been
entered invalidating the mineral interest and,
after the final decision or judgment, a claim
has not been located or a leasehold granted on
the affected land."
(b) See Version G, page 10, lines 16-21.
ii) In (b), the effective date of section 13 is now
"effective the date of this Act" instead of "July 1,
2020.
(1) See Version G, page 10, line 23.
SENATOR KAWASAKI said the changes from the CS are good. He
pointed out that the CS specifies that the 90-day cure for an
annual labor statement starts when the department sends the
notice. He asked if starting the 90-day cure would make more
sense when the miner receives notice via certified mail.
MR. HUTCHINSON agreed that starting the 90-day cure period when
the department mails the notice is not necessarily fair to the
miners. The court system deals with statutes based on sent out
versus actual receipt. In the grand scheme of things, proper
notice should be when received, something for future
consideration.
4:49:44 PM
SENATOR KIEHL asked what prompts the department to send a
noncompliance notice if the departmental review language
specifies that the department is not determining whether there
is someone out of compliance.
MR. HUTCHINSON answered third parties. He reiterated that the
emphasis is on not compelling the department to look for typos
or noncompliance if there is nothing else that gives probable
cause that there is some sort of problem.
SENATOR KIEHL agreed that there is no need for the department to
go through every file for the last hundred years of mining. He
said he is not clear on the language where the department
decides whether there is a problem when a third party brings an
issue to their attention.
MR. HUTCHINSON answered that Senator Kiehl's instincts are
correct. He said the vision is the department does have to
review the issue and respond accordingly if there is probable
cause. He explained that the emphasis is not requiring the
department to go back unilaterally if nothing exists.
CHAIR MICCICHE asked if there were comments on the fiscal note.
He said he might have some questions before the next meeting.
4:51:40 PM
He removed his objection and announced that the committee
adopted the working document, version G for SB 155.
He said the fiscal note does not apply to the CS and that is why
he asked if there were questions.
MR. HUTCHINSON stated that he believes the new fiscal note does
apply to the CS.
CHAIR MICCICHE asked Deputy Commissioner Goodrum if the new
fiscal note applies to the CS.
4:52:13 PM
BRENT GOODRUM, Deputy Commissioner, Alaska Department of Natural
Resources, Anchorage, Alaska, confirmed that the department
revised the fiscal note to synch with the CS for SB 155. The
department submitted the new fiscal note for the current
meeting.
CHAIR MICCICHE asked that the department review the fiscal note
and explain the changes to confirm that the committee is looking
at the right fiscal note.
DEPUTY COMMISSIONER GOODRUM explained that the modified fiscal
note reflects the departmental requirement to reduce three
fulltime positions to two positions. Money would also come from
designated general funds that the mining section generates.
CHAIR MICCICHE asked what the net reduction is.
DEPUTY COMMISSIONER GOODRUM replied that the reduction is about
$120,000 from the original fiscal note.
4:54:02 PM
CHAIR MICCICHE noted that public testimony remains open for SB
155.
4:54:38 PM
DAVID WRIGHT, representing self, Fairbanks, Alaska, testified in
support of the CS for SB 155. He said he and his partners own a
small mining operation in its fifteenth year. He disclosed that
DNR required the company to re-stake its mining claim. DNR and
the mining company incurred costs to address the problem. He
added that the re-staking also reset the rent clock to the start
so there was a loss of revenue to the state.
4:55:51 PM
CHAIR MICCICHE closed public testimony on SB 155.
4:56:02 PM
CHAIR MICCICHE held SB 155 in committee.
He commented that Alaskans live in an incredible place blessed
with an enormous amount of natural resources.
4:57:08 PM
There being no further business to come before the committee,
Chair Micciche adjourned the Senate Resources Standing Committee
meeting at 4:57 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 155 SS Written Testimony Larry Barsukoff 02.14.2020.pdf |
SRES 2/19/2020 3:30:00 PM |
SB 155 |
| SB 155 SS Draft CS ver. G 02.18.2020.pdf |
SRES 2/19/2020 3:30:00 PM |
SB 155 |
| SB 155 SS Explanation of Changes ver. K to Draft CS ver. G 02.18.2020.pdf |
SRES 2/19/2020 3:30:00 PM |
SB 155 |
| DNR SRES Presentation MLW DOG Revenue 02.19.2020.pdf |
SRES 2/19/2020 3:30:00 PM |
DNR Presentation to Sen. Res. 02.19.2020 |
| DOR SRES Presentation - Resource Revenues Presentation 02.19.2020.pdf |
SRES 2/19/2020 3:30:00 PM |
Dept. of Revenue Presetnation to Senate Resources 02.19.2020 |