HB 294-GAS EXPLORATION\DEVELOPMENT TAX CREDIT 6:03:49 PM CHAIR KOHRING announced that the first order of business would be HOUSE BILL NO. 294, "An Act amending and extending the exploration and development incentive tax credit under the Alaska Net Income Tax Act for operators and working interest owners directly engaged in the exploration for and development of gas for delivery and sale from a lease or property in the state; providing for an effective date by amending the effective date for sec. 2, ch. 61, SLA 2003; and providing for an effective date." 6:04:52 PM CHAIR KOHRING inquired as to how the changed percentages [in HB 294] were derived. He asked, "Was there a reason that justified those particular numbers, or were they just hypothetically chosen?" 6:05:29 PM JOHN BARNES, Manager, Alaska Production Region, Marathon Oil Company, informed the committee that [the changed percentages] were designed to be a starting point for discussion. He recognized that the Department of Revenue (DOR) will need to complete [economic] modeling in order to provide the Alaska State Legislature with information which would assist it in adjusting the percentages fittingly. 6:06:02 PM CHAIR KOHRING commented that even though the State of Alaska would be giving up a "pretty good chunk of money," the net return over time would be "pretty substantial." He added that at a 4:1 ratio, for $1 that [the State of Alaska] would be giving up in extra taxes, granted in the form of credits, [the State of Alaska] would be generating $3 in revenue. 6:07:01 PM CHAIR KOHRING reminded the committee that [HB 294] was referred to additional committees, which allows for time to adjust the [percentages], if necessary. He expressed his comfort with the [percentages]. 6:07:55 PM REPRESENTATIVE ROKEBERG, in regard to the applicability of the credit to projects south of 68 degrees north latitude, announced his conceptual amendment prohibiting the delivery of Alaska North Slope (ANS) gas south of 68 degrees North latitude. CHAIR KOHRING noted that he shared Representative Rokeberg's concern. REPRESENTATIVE ROKEBERG opined that in light of "everything else" that's going on in [the 2006] legislative session, his conceptual amendment would help expedite [HB 294] as well as prevent it from becoming "co-mingled" with other legislation. 6:09:09 PM REPRESENTATIVE ROKEBERG asked Mr. Barnes if he would have an objection to an amendment [to HB 294] that would prohibit the use of the credit [south of 68 degrees North latitude] for ANS gas. MR. BARNES responded that he believed that the amendment would be consistent with the original intent of [HB 294]. 6:09:46 PM CHAIR KOHRING clarified that with the amendment, everything south of the Brooks Range would be included in [HB 294], while everything north of the Brooks Range would not be included. MR. BARNES confirmed that Chair Kohring was correct. CHAIR KOHRING surmised that Representative Rokeberg's concern is in regard to what will happen if a gas line is built because he wants to ensure that [HB 294] doesn't apply [to a new gas line]. 6:10:10 PM REPRESENTATIVE ROKEBERG [moved that the committee adopt] Conceptual Amendment 1, which would insert AS 43.20.043(f) with the underlined and bolded text such that it would read as follows: A taxpayer is not entitled to a credit under this section for expenditures that are made or incurred for the qualified capital investment or for qualified services made for exploration and development of gas that occur in the area of Alaska lying north of 68 degrees North latitude or that are made or incurred to transport gas from reserves located in the area of Alaska lying north of 68 degrees North latitude or for  the delivery of Alaska North Slope natural gas to  tidewater below 68 degrees North latitude. 6:11:10 PM There being no objection, Conceptual Amendment 1 was adopted. 6:11:32 PM REPRESENTATIVE ROKEBERG moved to report HB 294 as amended out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 294(O&G) was reported out of the House Special Committee on Oil and Gas.