2016-07-11                     House Journal                      Page 3161
HB 5005                                                                                                                       
HOUSE BILL NO. 5005 by the House Rules Committee by request of                                                                  
the Governor, entitled:                                                                                                         
                                                                                                                                
     "An Act relating to the oil and gas production tax, tax payments,                                                          
     and credits; relating to oil and gas lease expenditures and                                                                
     production tax credits for municipal entities; relating to the                                                             
     interest applicable to delinquent tax; and providing for an effective                                                      
     date."                                                                                                                     
                                                                                                                                
was read the first time and referred to the Finance Committee.                                                                  
                                                                                                                                
The following fiscal note(s) apply:                                                                                             
                                                                                                                                
1.  Fiscal, Dept. of Revenue                                                                                                    
                                                                                                                                
The Governor's transmittal letter dated July 8, 2016, follows:                                                                  
                                                                                                                                
"Dear Speaker Chenault:                                                                                                         
                                                                                                                                
Under the authority of Article III, Section 18, of the Alaska                                                                   
Constitution, I am transmitting a bill relating to oil and gas production                                                       
taxes and tax credit reform.                                                                                                    
                                                                                                                                

2016-07-11                     House Journal                      Page 3162
This bill would build off the substantial work by this Legislature in                                                           
both regular and special session to put the State on a path for a                                                               
sustainable fiscal future. While I recognize that Chapter 4, 4SSLA                                                              
2016, represents hard won compromises, difficult choices, and                                                                   
significant steps towards a sustainable fiscal future, it is simply not                                                         
enough. More work must be done to correct the State's unsustainable                                                             
system of oil and gas production tax credits.                                                                                   
                                                                                                                                
First, in the recent and potentially future oil price climate, oil and gas                                                      
producers and explorers are incurring losses. This has resulted in large                                                        
tax credits for use against oil and gas production tax liability and hefty                                                      
requests for purchase from the oil and gas tax credit fund. This bill                                                           
would reduce, in 2017, the amount of tax credits available for a                                                                
company incurring a net operating loss for expenditures incurred north                                                          
of 68 degrees North latitude ("North Slope"). In 2018, the tax credit                                                           
would be eliminated for North Slope expenditures.                                                                               
                                                                                                                                
Second, the bill would increase the minimum tax amount for certain                                                              
oil and gas produced on the North Slope beginning in 2017. When the                                                             
price for North Slope oil is above $55, the bill would provide that the                                                         
minimum tax amount may not be less than five percent of the gross                                                               
value at the point of production.                                                                                               
                                                                                                                                
Third, the bill includes provisions designed to promote good                                                                    
governance practices. The bill would also enable the Department of                                                              
Natural Resources to release seismic data, obtained through oil and                                                             
gas tax credits, if a lease is terminated or relinquished. Finally, the bill                                                    
would institute reasonable and time sensitive changes to the interest                                                           
rate applicable to delinquent taxes.                                                                                            
                                                                                                                                
This bill builds on the Legislature's commendable work on Chapter 4,                                                            
4SSLA 2016. I do not lightly suggest these changes. But, the changes                                                            
in this bill, along with critical changes to the administration of the                                                          
Permanent Fund, would help protect the State's fiscal future from the                                                           
volatility of oil prices. I urge your prompt and favorable action on this                                                       
measure.                                                                                                                        
                                                                                                                                
Sincerely,                                                                                                                      
/s/                                                                                                                             
Bill Walker                                                                                                                     
Governor"