SB 228-TAX INCENTIVES FOR GAS-TO-LIQUID  5:16:44 PM CO-CHAIR MCGUIRE announced the next matter to come before the committee was SB 228. SENATOR FRENCH moved to adopt the proposed committee substitute to SB 228, labeled 26-LS1324\P, as the working document of the committee. There being no objection, version P was before the committee. MR. PAWLOWSKI explained changes were made to Section 1 of SB 228 [amending AS 43.20] after working with the Department of Revenue. On page 1, line 6 changes the name of the tax credit to clarify that this is a special investment incentive tax credit, specifically for gas, coal or biomass to liquids. Page 2, line 3 explicitly lists that the allowable credit for any one facility is $475 million. There was some concern in the first hearing that multiple investors could invest and accrue multiple credits. Given the size of the state's tax interest on these facilities, a single facility credit of $475 million seemed appropriate. On page 2, lines 13-14 state the incentive provided by SB 228 can never amount to more than 60 percent of a tax payer's tax bill; SB 228 only foregoes revenue rather than offering refundable tax credits. The applicability of the tax credit to the mining tax was completely eliminated from SB 228. On page two, Section 2 [amending AS 43.55.900(24)] and 3 [amending AS 43.500.900] of SB 228 were changed to move away from gas to liquids and towards a definition of manufacturing which does not include things like liquefaction, fractionation. SB 228 is intended to relate to manufacturing, not just changing the gas for transport. 5:19:33 PM SENATOR WAGONER asked if SB 228 precludes people like Tesoro and the North Pole refinery from an exemption for the gas they use in the manufacturing process. MR. PAWLOWSKI replied gas used as heat or fuel in relation to a manufacturing process qualifies. Fractionation is related to petroleum being refined in other products. SENATOR WAGONER said the North Pole refinery does not have gas but Tesoro does. He asked why we are allowing them that credit; it is part of the state's revenue stream. CO-CHAIR MCGUIRE said she could get more data on that. SB 228 is intended to get at gas to liquid facilities and to incentivize the manufacturing process that goes into gas to liquids. She needs to think further about whether or not the incentives are justified. SENATOR WAGONER suggested that Co-chair McGuire find out how many cubic feet of gas Tesoro uses in a year and see what the credit would amount to. CO-CHAIR MCGUIRE said the committee can decide to tailor SB 228 to gas to liquids alone. MR. PAWLOWSKI added that fractionation was put in so that the exemption would not apply to simple refining but requires an actual chemical transformation. His understanding is that gas used as heat or fuel to power that transformation might also apply but he would like the Department of Revenue to answer. CO-CHAIR MCGUIRE set SB 228 aside saying she would bring the Department of Revenue back to testify. SB 228-TAX INCENTIVES FOR GAS-TO-LIQUID  5:27:42 PM CO-CHAIR MCGUIRE returned to SB 228 and asked Mr. Metz to begin his presentation. PAUL METZ, Director, Mineral Industry Research Laboratory, University of Alaska Fairbanks, said he will extract a lot from the presentation as it is longer than 30 minutes. 5:28:37 PM SENATOR WAGONER said Mr. Metz' presentation is important. 5:28:59 PM CO-CHAIR MCGUIRE called an at ease from 5:28 p.m. until 5:30 p.m. 5:30:16 PM CO-CHAIR MCGUIRE called the meeting back to order and said the committee has agreed to recess to the call of the chair to allow Mr. Metz to give his presentation tomorrow. 5:31:16 PM CO-CHAIR MCGUIRE recessed the meeting to a call of the chair.