Legislature(1997 - 1998)
1998-02-17 Senate Journal
Full Journal pdf1998-02-17 Senate Journal Page 2544 SB 327 SENATE BILL NO. 327 BY THE SENATE RULES COMMITTEE BY REQUEST OF THE GOVERNOR, entitled: An Act relating to certain audits regarding oil and gas royalty and net profits and to audits regarding costs relating to exploration incentive credits and oil and gas exploration licenses; and providing for an effective date. was read the first time and referred to the Resources and Finance Committees. Fiscal notes published today from Department of Revenue, Department of Natural Resources (2). Governors transmittal letter dated February 16: 1998-02-17 Senate Journal Page 2545 SB 327 Dear President Miller: In the interest of improving efficiency within state government as well as between government and industry, I am transmitting this bill to transfer oil and gas royalty audit functions from the Department of Revenue (DOR) to the Department of Natural Resources (DNR). It makes sense to put the audit duties in the same department that administers, enforces, and is therefore most knowledgeable with, the oil and gas leasing program. Ironically, the audit functions used to rest with the DNR, but were switched to the DOR in 1980 based on a legislative audit report. The recommendation stated that cost savings would be achieved by having one staff of auditors review both tax and royalty compliance information. Since 1980, however, the state has entered into royalty settlements with the major North Slope producers and has made changes to its tax regulations. As a result, there is no longer as much overlap between royalty and tax audits. In addition, the separation of the DNR's duty to administer and enforce oil and gas contracts, agreements, and leases from the ability to conduct audits leading to possible enforcement actions, has resulted in inefficiencies and other problems. The bill specifically authorizes the DNR to audit reports and costs relating to exploration incentive credits and oil and gas licenses. It also grants the DNR audit powers commensurate to the DOR's current audit powers, including the right to subpoena information for audit purposes. The DNR and DOR would be allowed to exchange confidential information obtained in the course of their respective audits; a breach of confidentiality by any agency employee would be a misdemeanor offense. This bill makes a sensible step in how the state does business with the oil and gas industry. Sincerely, /s/ Tony Knowles Governor