SENATE BILL NO. 77 "An Act repealing the exception that applies to collection and payment of interest of $150 or less on royalty or net profit share underpayments and overpayments; and providing for an effective date." This was the first hearing for this bill in the Senate Finance Committee. DARWIN PETERSON, staff to Senator Torgerson, sponsor of the bill, read the sponsor statement into the record as follows. In 1998, the legislature enacted AS 38.05.135 (g), exempting the Department of Natural Resources from calculating interest on small over or under payments of royalty if the interest is $150 or less. The cost of calculating these small over/underpayments was more than the interest received or credit applied. Prior to 1998, Department of Natural Resources was calculating these small payments manually. For the 12 months prior to October 31, 2000, the State processed 1716 royalty filings where interest amounts were between a negative $150 and a positive $150. The net amount of these under/overpayments was a positive $4,096. The effort of calculating, processing and tracking interest for small under/overpayments was not cost effective for the oil companies or the State. With the advent of the State's new Oil and Gas Royalty Accounting System, all interest is calculated electronically. Also, most royalty payers are using mainframe computer systems and sending their royalty reports electronically. The failure to repeal AS 38.05.135 (g) would require the Department and royalty payers to reprogram their computer systems to not compute under or overpayments of less than $150. The sophisticated computer systems used by the royalty payers and the State are now able to quickly compute the interest owed on even the smallest under or overpayment. All the royalty payments are automatically summed together and one wire transfer is used for payment. The repeal of AS 38.05.135 (g) will solve the problem of the administrative burden on the part of the royalty payers and the State to manually track very small amounts of interest. It is an unnecessary expense to reprogram computer systems to handle separate interest calculations for these small interest amounts, especially when a much easier option is available. Senator Olson requested the amount of overpayments and underpayments. Mr. Peterson replied that the amount of money in question is minimal. He detailed that for the 12 months prior to October 31, 2000, the state processed 1,716 royalty filings where the interest amounts were between a negative $150 and a positive $150. He stated that the net amount results in a positive $4,096 for the state. MARK MYERS, Director, Division of Oil and Gas, testified via teleconference from Anchorage in strong support of the legislation. He noted that the existing statute has been made obsolete by the department's modernized and automated royalty accounting system. He stated that adopting of this legislation would result in a more accurate accounting procedure and would simply practices for both the state and the producers. He surmised that the producers also support the bill. He pointed out that no opposition had been raised to the bill and that it has no fiscal impact on the state or the producers. JIM STOUFFER testified via teleconference from Anchorage to reiterate Mr. Meyer's statements. Co-Chair Kelly chaired the remainder of the meeting. Co-Chair Donley offered a motion to report SB 77, 22-LS0519\A, from Committee with accompanying zero fiscal note from the Department of Natural Resources, Oil and Gas Development Budget Request Item (BRU). There was no objection and the bill MOVED from Committee. AT EASE 10:07 AM / 10:07 AM