HOUSE BILL NO. 87 "An Act extending the liquefied natural gas storage facility tax credit; and providing for an effective date." 1:38:53 PM Vice-Chair Johnston MOVED to ADOPT proposed committee substitute for HB 87, Work Draft 31-LS0619\M (Nauman, 4/16/19) (copy on file). There being NO OBJECTION, it was so ordered. LYNN GATTIS, STAFF, REPRESENTATIVE TAMMIE WILSON, reviewed the changes to the bill in a prepared statement: Page 1, line 6: Delete: June 30, 2021 Insert: January 1, 2020 Ms. Gattis read from a new section, Section C: that would commence commercial operation between January 2, 2020 to January 30, 2021 and may apply a refundable credit against a tax liability that may be imposed on the person under this chapter or receive the amount of credit in the form of a payment for the taxable year in which the liquified natural gas facility commences commercial operation. The tax credit or payment under this section may not exceed the lesser of $7,500,000 or 50 percent of the cost incurred to establish or expand the liquified natural gas storage facility. Representative Knopp needed to backup to page 1, line 7. He was confused about the dates Ms. Gattis provided versus what the work draft reflected. Ms. Gattis clarified that she was speaking to Page 1, line 6 which deleted June 30, 2021, and added January 1, 2020 back in. Representative Knopp asked about the version being reviewed. Co-Chair Wilson relayed that the committee was looking at version M. Ms. Gattis responded that she was referring to line 7. Co-Chair Wilson further clarified that the original bill asked for an extension of $15 million in tax credits. The work draft would allow the Fairbanks storage tank to be taken care of by the original date of January 1, 2020. The extension would only apply to the other storage in the amount of $7.5 million. 1:42:03 PM AT EASE 1:42:21 PM RECONVENED Co-Chair Wilson indicated there was a typo on the version and, the committee would take up the bill again the following morning. 1:42:55 PM AT EASE 1:44:14 PM RECONVENED Co-Chair Wilson clarified that the date of June 30, 2021 was correct on Page 1. She relayed that the bill extended the program but in a different way. She turned to Page 2 which explained there would be 2 opportunities for credits. A person or entity would have to complete and commercialize a facility by the end of the current year to be eligible for a tax credit of $15 million. They could receive an additional tax credit of $7.5 million or 50 percent of the costs incurred to establish or expand another gas storage tank after January 1, 2020. REPRESENTATIVE STEVE THOMPSON, BILL SPONSOR, was not opposed to the committee substitute. He thought the general manager of the Interior Gas Utility in Fairbanks was online if anyone had any questions. Co-Chair Wilson asked Mr. Britton to comment on whether the utility would have commercialization completed on the original tank. She reviewed the purpose of the bill. She asked if the utility would be able to meet the deadlines as outlined in the bill. She read a portion of the bill. DAN BRITTON, GENERAL MANAGER, INTERIOR GAS UTILITY, FAIRBANKS (via teleconference), responded that it was the full intention of the utility to meet the deadlines particularly with its large storage project. He reported the project was on schedule and anticipated it would be in operation prior to the existing January 1, 2020 deadline. He reported that the schedule continued to advance for the facilities in North Pole, however, that project would not likely be done by the end of 2019. Therefore, the extension contemplated in the committee substitute would be helpful. He felt the utility could work within the parameters outlined in the committee substitute. Co-Chair Wilson asked Mr. Britton if he was aware that the money would come out of the oil and gas fund and, the utility would be in line with other companies for the same funding. Mr. Britton responded affirmatively. Co-Chair Wilson informed the committee that there were no unrestricted general funds going to the project. She also clarified that if someone else had a gas storage tank that could come on line by the specified date, they would be eligible to receive a tax credit. In other words, the credit did not only apply to the Interior Gas Utility. Other communities looking to apply for the credit would have to commercialize before January 30, 2021. They would also have to wait for funds to be available in the oil and gas fund to receive payment for their credits or purchased by another company that was already making a profit in the State of Alaska. 1:48:22 PM Vice-Chair Ortiz asked if the impact of the bill was to extend the tax credit program in a limited way. He asked if there were other potential projects that could use the bill to get their own credits applied. Co-Chair Wilson responded in the negative. She reiterated that the bill only applied to gas storage tanks. Representative Knopp asked if the deadline was being shortened by 6 months. Representative Thompson responded that Representative Knopp was correct. The Interior Gas Utility felt that it would meet the specified deadline. The bill also clarified that the legislature was not extending the $15 million credit; it was being limited to $7.5 million. Representative Knopp was satisfied with limiting the reimbursement rate. However, he expressed a concern about shortening the time by 6 months. He wondered why the date in June could not stay the same as in the original version. Co-Chair Wilson responded that it was an incentive. She continued that the legislature was trying to get the tax credits off the books. She realized that there were high costs of energy in certain parts of Alaska and hoped it would not be an issue in the future. She also noted that there was a fund from which the tax credits would be paid. However, they might not be paid right away because of others being in line for the tax credits first. 1:51:03 PM Representative Knopp had not scrutinized the bill. He wondered if there was a change in reimbursements based on a tax liability or whether the credits were cash credits. He thought he had seen language allowing tax credits to be applied to future tax liabilities. He was aware that non- profits did not have tax liabilities. Co-Chair Wilson reported that the original language was in the current bill and, the credits were cashable tax credits. Representative Knopp was correct that a non-profit would have to wait for available funding for cash credits. Alternatively, they could sell their tax credits to a party making a profit. Representative Thompson noted that they were cashable tax credits, not undesignated general funds. Co-Chair Wilson would be setting the bill aside until the following morning in anticipation of receiving the fiscal note. HB 87 was HEARD and HELD in committee for further consideration.