Legislature(2023 - 2024)BUTROVICH 205
05/03/2024 03:30 PM Senate RESOURCES
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| HB50 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 50 | TELECONFERENCED | |
HB 50-CARBON STORAGE
3:32:06 PM
CO-CHAIR GIESSEL announced the consideration of CS FOR HOUSE
BILL NO. 50(FIN) "An Act relating to carbon storage on state
land; relating to the powers and duties of the Alaska Oil and
Gas Conservation Commission; relating to carbon storage
exploration licenses; relating to carbon storage leases;
relating to carbon storage operator permits; relating to
enhanced oil or gas recovery; relating to long-term monitoring
and maintenance of storage facilities; relating to carbon oxide
sequestration tax credits; relating to the duties of the
Department of Natural Resources; relating to carbon dioxide
pipelines; and providing for an effective date."
3:32:15 PM
CO-CHAIR GIESSEL solicited a motion.
3:32:18 PM
CO-CHAIR BISHOP moved to adopt the Senate committee substitute
(SCS) for CSHB 50, work order 33-GH1567\H, as the working
document.
3:32:39 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
3:32:56 PM
JULIA O CONNOR, Staff, Senator Cathy Giessel, Alaska State
Legislature, Juneau, Alaska, presented the explanation of
changes from Version D to H of HB 50:
[Original punctuation provided.]
Explanation of Changes
SENATE RESOURCES CS for House Bill 50
Version 33-GH1567\D to 33- GH1567\H
The Committee Substitute adopts the following changes:
• Updated Title
• Added Section 4:
• Requires Alaska Oil and Gas Conservation
Commission to prepare a report on each oil
and gas waste case at the start of each
regular session.
• Amended Section 6:
• Declares injection charges generated as
revenue to the state are considered a
royalty share for use of the state's mineral
resources.
• Amended Section 17:
• Adds minimum commercial terms that were
removed from version A of the bill.
• Sets a minimum of $20 an acre of carbon
storage exploration license fee and
injection fee of at least $2.50 a ton.
• Adds an increase to the commercial terms
every five years based on the Consumer Price
Index.
• Provides a mechanism by which the
commissioner can lower the minimum terms
upon a best interest finding that the
project would be otherwise uneconomic.
• Ensures the Department of Natural Resources'
public notice of interest in an exploratory
license is adequate to apprise entities who
may seek alternatives uses for the
underground lease area.
• Verifies DNR's duty and authority over
dismantlement and reclamation requirements
upon closure of a Carbon Capture Utilization
and Storage facility.
• Amended Section 35:
• Requires DNR to provide state-owned seismic
data to players in the energy sector.
• Added Sections 41-47:
• Adds to Regulatory Commission of Alaska's
(RCA) jurisdiction to include the regulation
of natural gas storage and liquified natural
gas storage, including facilities operated
by a pipeline carrier. RCA would have the
authority to regulate the cost of storage
service.
• RCA's storage regulation would exempt
pipeline carriers on the North Slope and for
liquified natural gas import facilities
under the jurisdiction of the Feral Energy
Regulatory Commission
• Ensures cost consideration for storing gas
or liquified natural gas in determining just
and reasonable rates.
• Addresses confidentiality of records related
to finances of gas storage facilities,
liquified natural gas storage facilities, or
public utilities providing natural gas
storage services.
3:33:19 PM
SENATOR KAUFMAN joined the meeting.
3:35:51 PM
CO-CHAIR GIESSEL removed her objection; she found no further
objection and SCS CSHB 50 was adopted.
3:36:15 PM
CO-CHAIR GIESSEL noted that Amendment 7 (D.36) was before the
committee.
3:36:17 PM
SENATOR WIELECHOWSKI said that he was withdrawing Amendment 7.
3:36:24 PM
CO-CHAIR GIESSEL found no objection and Amendment 7 was
withdrawn.
3:36:43 PM
At ease
3:37:06 PM
CO-CHAIR GIESSEL reconvened the meeting.
3:37:21 PM
CO-CHAIR GIESSEL solicited a motion.
3:37:24 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 8, work order 34-
GH1567\D.44.
[Note: Amendment 8 was drafted for HB 50, version D, and is
therefore a conceptual amendment, as the committee is
considering version H.]
33-GH1567\D.44
Dunmire
5/3/24
A M E N D M E N T 8
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSHB 50(FIN)
Page 1, line 5, following "credits;":
Insert "relating to the oil and gas production
tax;"
Page 32, following line 13:
Insert a new bill section to read:
"* Sec. 38. AS 43.55.165(e) is amended to read:
(e) For purposes of this section, lease
expenditures do not include
(1) depreciation, depletion, or
amortization;
(2) oil or gas royalty payments, production
payments, lease profit shares, or other payments or
distributions of a share of oil or gas production,
profit, or revenue, except that a producer's lease
expenditures applicable to oil and gas produced from a
lease issued under AS 38.05.180(f)(3)(B), (D), or (E)
include the share of net profit paid to the state
under that lease;
(3) taxes based on or measured by net
income;
(4) interest or other financing charges or
costs of raising equity or debt capital;
(5) acquisition costs for a lease or
property or exploration license;
(6) costs arising from fraud, wilful
misconduct, gross negligence, violation of law, or
failure to comply with an obligation under a lease,
permit, or license issued by the state or federal
government;
(7) fines or penalties imposed by law;
(8) costs of arbitration, litigation, or
other dispute resolution activities that involve the
state or concern the rights or obligations among
owners of interests in,
or rights to production from, one or more
leases or properties or a unit;
(9) costs incurred in organizing a
partnership, joint venture, or other business entity
or arrangement;
(10) amounts paid to indemnify the state;
the exclusion provided by this paragraph does not
apply to the costs of obtaining insurance or a surety
bond from a third-party insurer or surety;
(11) surcharges levied under AS 43.55.201
or 43.55.300;
(12) an expenditure otherwise deductible
under (b) of this section that is a result of an
internal transfer, a transaction with an affiliate, or
a transaction between related parties, or is otherwise
not an arm's length transaction, unless the producer
establishes to the satisfaction of the department that
the amount of the expenditure does not exceed the fair
market value of the expenditure;
(13) an expenditure incurred to purchase an
interest in any corporation, partnership, limited
liability company, business trust, or any other
business entity, whether or not the transaction is
treated as an asset sale for federal income tax
purposes;
(14) a tax levied under AS 43.55.011 or
43.55.014;
(15) costs incurred for dismantlement,
removal, surrender, or abandonment of a facility,
pipeline, well pad, platform, or other structure, or
for the restoration of a lease, field, unit, area,
tract of land, body of water, or right-of-way in
conjunction with dismantlement, removal, surrender, or
abandonment; a cost is not excluded under this
paragraph if the dismantlement, removal, surrender, or
abandonment for which the cost is incurred is
undertaken for the purpose of replacing, renovating,
or improving the facility, pipeline, well pad,
platform, or other structure;
(16) costs incurred for containment,
control, cleanup, or removal in connection with any
unpermitted release of oil or a hazardous substance
and any liability for damages imposed on the producer
or explorer for that unpermitted release; this
paragraph does not apply to the cost of developing and
maintaining an oil discharge prevention and
contingency plan under AS 46.04.030;
(17) costs incurred to satisfy a work
commitment under an exploration license under
AS 38.05.132;
(18) that portion of expenditures, that
would otherwise be qualified capital expenditures, as
defined in AS 43.55.023, incurred during a calendar
year that are less than the product of $0.30
multiplied by the total taxable production from each
lease or property, in BTU equivalent barrels, during
that calendar year, except that, when a portion of a
calendar year is subject to this provision, the
expenditures and volumes shall be prorated within that
calendar year;
(19) costs incurred for repair,
replacement, or deferred maintenance of a facility, a
pipeline, a structure, or equipment, other than a
well, that results in or is undertaken in response to
a failure, problem, or event that results in an
unscheduled interruption of, or reduction in the rate
of, oil or gas production; or costs incurred for
repair, replacement, or deferred maintenance of a
facility, a pipeline, a structure, or equipment, other
than a well, that is undertaken in response to, or is
otherwise associated with, an unpermitted release of a
hazardous substance or of gas; however, costs under
this paragraph that would otherwise constitute lease
expenditures under (a) and (b) of this section may be
treated as lease expenditures if the department
determines that the repair or replacement is solely
necessitated by an act of war, by an unanticipated
grave natural disaster or other natural phenomenon of
an exceptional, inevitable, and irresistible
character, the effects of which could not have been
prevented or avoided by the exercise of due care or
foresight, or by an intentional or negligent act or
omission of a third party, other than a party or its
agents in privity of contract with, or employed by,
the producer or an operator acting for the producer,
but only if the producer or operator, as applicable,
exercised due care in operating and maintaining the
facility, pipeline, structure, or equipment, and took
reasonable precautions against the act or omission of
the third party and against the consequences of the
act or omission; in this paragraph,
(A) "costs incurred for repair,
replacement, or deferred maintenance of a facility, a
pipeline, a structure, or equipment" includes costs to
dismantle and remove the facility, pipeline,
structure, or equipment that is being replaced;
(B) "hazardous substance" has the meaning
given in AS 46.03.826;
(C) "replacement" includes renovation or
improvement;
(20) costs incurred to construct, acquire,
or operate a refinery or crude oil topping plant,
regardless of whether the products of the refinery or
topping plant are used in oil or gas exploration,
development, or production operations; however, if a
producer owns a refinery or crude oil topping plant
that is located on or near the premises of the
producer's lease or property in the state and that
processes the producer's oil produced from that lease
or property into a product that the producer uses in
the operation of the lease or property in drilling for
or producing oil or gas, the producer's lease
expenditures include the amount calculated by
subtracting from the fair market value of the product
used the prevailing value, as determined under
AS 43.55.020(f), of the oil that is processed;
(21) costs of lobbying, public relations,
public relations advertising, or policy advocacy;
(22) costs incurred as part of a capital
expenditure or other action taken for a carbon
management purpose under AS 38.05.081 or a carbon
offset project under AS 38.95.400 - 38.95.499;
(23) costs incurred to become eligible for,
or that result in eligibility to claim, the carbon
oxide sequestration credit allowed as to federal taxes
under 26 U.S.C. 45Q (Internal Revenue Code), when the
costs are expended to construct, acquire, modify,
operate, dismantle, or remove a facility for carbon
capture, carbon utilization, or carbon storage,
including construction and modification of new or
existing infrastructure, as well as fees incurred
under AS 41.06.160, surcharges incurred under
AS 41.06.175, or costs associated with obtaining,
operating, or maintaining a license or lease under
AS 38.05.700 - 38.05.795."
Renumber the following bill sections accordingly.
Page 35, line 2:
Delete "Section 39"
Insert "Section 40"
3:37:29 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
3:37:33 PM
SENATOR WIELECHOWSKI said that Amendment 8 applies to the lease
expenditure portion of the law. He noted that Amendment 7 also
applied to this section and acknowledged that there were some
concerns about that amendment. He said that Amendment 8 is the
result of working with the Department of Natural Resources (DNR)
and the Department of Revenue (DOR). He directed attention to
Amendment 8, page 4, lines 17-25 and explained that lease
expenditures would not be deductible for those attempting to
become eligible for - or seeking to use the - 45Q tax credits.
He stated that carbon capture projects are extremely expensive
and would not be economically viable under ordinary terms. He
went on to say that large federal tax credits make these
projects more economic for the companies; however, the state
then pays for a large portion of the cost of building, due to
the state's current tax structure. He clarified that Amendment 8
allows companies to either deduct lease expenditures or take
advantage of the 45Q tax credits, and thus prevents "double-
dipping."
3:39:23 PM
SENATOR DUNBAR said that the primary challenge with Amendment 8
(as with the previous amendment), is differentiating the
legitimate oil recovery activity that may result from carbon
insertion from projects that are specifically focused on carbon
sequestration. He opined that Amendment 8 does a good job of
separating these. He noted that DOR previously indicated that
carbon capture, utilization, and storage (CCUS) projects would
not qualify as lease expenditures. He said that Amendment 8
provides additional support for DOR's policy.
3:40:31 PM
SENATOR KAUFMAN asked to hear from DNR.
3:41:28 PM
JOHN BOYLE, Commissioner, Department of Natural Resources (DNR),
said that DNR is still evaluating Amendment 8. He stated that
DNR's main concern with this amendment - which delves into the
realm of lease expenditures - is that HB 50 deals solely with
the regulation of the permanent storage of captured carbon and
does not address the question of allowing companies to include
carbon capture as a lease expenditure. He acknowledged that
there are concerns related to companies capturing carbon,
claiming 45Q tax credits, utilizing the captured carbon in
enhanced oil recovery and later deducting carbon capture costs.
He said that there is a federal tax component for captured
carbon that is utilized for EOR and an associated state credit.
He explained that, currently, if a company is interested in
capturing carbon and utilizing that carbon for enhanced oil
recovery (EOR), it would qualify for both federal and state tax
credits. He said that the federal tax credit has been in place
since 2008 - and surmised that this is also when the state
credit was put in place. The amounts for both credits were
increased in 2022 as part of the Inflation Reduction Act, in an
effort to further incentivize companies to capture carbon.
3:43:55 PM
COMMISSIONER BOYLE acknowledged that there is concern related to
companies capturing carbon, utilizing this carbon for EOR, and
then deducting the costs associated with capturing the carbon
from existing production tax liabilities. He pointed out that
DOR previously testified that the costs associated with captured
carbon would not qualify as an ordinary and necessary
expenditure for lease deductions. He reiterated that, while
companies would still be able to apply for the tax credits, they
would not be able to deduct CCUS costs under the current
regulatory structure. He stated that Amendment 8 addresses an
issue that DNR does not believe currently exists. He said that
DOR is willing to work to create a mechanism that would ensure
that this issue would not manifest negatively in the future;
however, he expressed concern with the language in Amendment 8
that address lease expenditures, which may inadvertently impact
currently allowable lease expenditures. He stated that DNR wants
to ensure that the scope of HB 50 does not exceed the original
intent.
3:47:50 PM
JOHN CROWTHER, Deputy Commissioner, Department of Natural
Resources (DNR), noted that DNR has not been able to complete
the necessary review of Amendment 8. He said that additional
time is needed to work with the Department of Law (DOL), DOR,
and the Senate on the language of the amendment and expressed a
willingness to do so.
3:48:37 PM
BRANDON SPANOS, Acting Tax Director, Tax Division, Department of
Revenue, Anchorage, Alaska, echoed the statements made by DNR.
He added that DOR would need to confer with the Department of
Law.
3:49:23 PM
SENATOR CLAMAN asked for confirmation of his understanding that
using carbon to increase oil production would be considered a
"cost of production."
3:49:48 PM
COMMISSIONER BOYLE shared his understanding that if a company
were to source CO2 for use in EOR, this would be an allowable
lease expenditure under current regulation. He deferred to DOR
to provide a more detailed answer.
3:50:26 PM
MR. SPANOS answered that, under current statute, an expense that
would enhance oil production that is also "ordinary and
necessary" would be an allowable EOR lease expenditure
deduction.
3:50:56 PM
SENATOR CLAMAN asked if companies would also receive federal 45Q
tax credit for using the CO2.
3:51:39 PM
MR. SPANOS replied that this is correct. He explained that the
federal income tax is separate from the Alaska Oil and Gas
Production tax. He said that companies would receive a credit on
their federal income tax 45Q calculation. He reiterated that
companies would also be able to take these as EOR lease
expenditure deductions on the Alaska Oil and Gas Production Tax,
provided they are "ordinary and necessary" and enhance oil
recovery.
3:52:26 PM
SENATOR WIELECHOWSKI asked for clarification that companies can
currently use carbon for EOR on the North Slope and get a lease
expenditure reduction.
3:53:01 PM
MR. SPANOS noted that, as acting director, he is not an oil and
gas production tax expert. He said that, currently, if carbon
was captured and could economically be used for EOR - and the
costs were considered an "ordinary and necessary business
expense" (which is determined by DOR during the audit process) -
then this would be an allowed EOR lease expenditure deduction.
3:54:04 PM
SENATOR WIELECHOWSKI conveyed that he has heard conflicting
reports about whether these deductions are allowed - as well as
reports that it is not currently being done. He shared his
belief that a company likely could deduct these expenses and
that this is what the state is seeking to disallow. He explained
that carbon capture projects are very expensive and are only
made economical by the $60-$130 tax credits. He pointed out that
North Slope producers have projects of this type in other parts
of the world. He reiterated that Amendment 8 simply clarifies
that companies cannot utilize both the tax deduction and receive
the 45Q tax credit. He noted that no other state allows these
deductions. He said that, while it may never happen, it has the
potential to be extremely expensive for the state. He emphasized
that he is not intending to disallow any other EOR lease
expenditures, regardless of the costs. Rather, the intention is
to disallow companies from utilizing both the lease expenditures
and the 45Q tax credits simultaneously. He reiterated that when
companies receive both, it distorts project economics in a way
that is detrimental to the state budget. He expressed a
willingness to work with DOR and DNR going forward. He shared
his belief that it is important to include this change in HB 50
as it moves on to the Senate Finance Committee.
3:56:36 PM
CO-CHAIR GIESSEL confirmed that HB 50 will move next to the
Senate Finance Committee. She pointed out that Amendment 8 was
drafted for HB 50, version D, and is therefore a conceptual
amendment, as the committee is considering version H.
3:56:57 PM
CO-CHAIR BISHOP asked if the 45Q tax credit terminates in 2033.
3:57:18 PM
MR. SPANOS replied that he would need to look up this
information.
3:57:33 PM
CO-CHAIR BISHOP said that Mr. Spanos could follow up in the
Senate Finance Committee with this information. He commented
that no company is currently claiming the EOR credit - and the
credit may not be renewed when it expires in 2033. He asked if
Amendment 8 would inadvertently stop any standalone point source
carbon capture at a generation facility that was to be stored in
a Class 6 injection well.
3:58:29 PM
COMMISSIONER BOYLE answered that, to his knowledge, Amendment 8
would not impact those activities.
3:58:40 PM
SENATOR CLAMAN asked for clarification that Amendment 8 would
allow companies that capture carbon for EOR - but do not claim
the 45Q tax credit - to deduct those costs as lease
expenditures.
3:59:29 PM
MR. SPANOS replied that he would need to review the language of
Amendment 8.
3:59:49 PM
SENATOR KAUFMAN expressed concern that Amendment 8 could
potentially hamper oil and gas production and EOR. He indicated
a need to distinguish between carbon injection for storage
versus carbon injection for improved performance. He asked
whether it is possible to characterize the difference in
activities - or facilities - that would be used to do one versus
the other. He suggested that this may give a stronger sense of
separation that would exist between the two. He surmised that
some may envision a facility that is doing both and wondered
what the measuring and/or evaluation process would consist of -
and how this would ensure that companies are not "double-
dipping."
4:01:05 PM
COMMISSIONER BOYLE replied that DNR does not believe Amendment 8
would hamper North Slope oil production, insofar as it applies
to companies that capture carbon and collect 45Q credits being
prohibited from also claiming this as a lease deduction. He
offered a hypothetical situation involving permanent carbon
sequestration (which is not an allowable lease expenditure) and
explained how an oil company (that is also a producer) may be
incentivized to take on this project based on how much of the
45Q tax credit is available for that activity. He noted that
this would be independent of the state's existing lease
expenditure regulations. He said that a similar situation would
occur for an oil company (that is also a producer) considering
the direct air capture and permanent sequestration of carbon and
seeking the 45Q tax credit for that activity. He pointed out
that these expenses are not allowable lease expenditures under
the current production tax law. He added that a company that
captured carbon and later sold the CO2 to an oil company for
EOR, the company responsible for capturing the carbon would be
entitled to the 45Q tax credit - which he reiterated is not an
allowable lease expenditure. However, a company that is
capturing carbon for enhanced oil recovery - which is deemed
"ordinary and necessary" for facilitating the increased
production of oil - the company purchasing the CO2 could
potentially deduct this as a lease expenditure.
4:04:52 PM
CO-CHAIR BISHOP asked whether an approved class injection well
is required to be eligible to claim 45Q tax credits. He
commented that EOR credits apply to class 2 wells.
4:05:29 PM
MR. CROWTHER replied that pure storage operations, which receive
a higher 45Q credit amount, must have an approved class 6 well.
He explained that it is possible to inject CO2 via a class 2
well - and these can be permitted by the state. Any class 6 well
can be permitted by the EPA alone, without primacy. He clarified
that, while EOR-related activity can occur through a class 2
well, not all CO2 injection via a class 2 well is eligible for
45Q credits (as there are other requirements that must be met).
4:06:03 PM
CO-CHAIR BISHOP asked Mr. Crowther to repeat his last sentence.
4:06:05 PM
MR. CROWTHER restated that carbon can be injected through a
class 2 well; however, this does not mean that all carbon
injected through that well is eligible for 45Q credits, as there
are additional requirements to qualify.
4:06:28 PM
CO-CHAIR BISHOP asked for clarification regarding whether CO2
injected in a class 2 well would be eligible for 45Q credits.
4:06:34 PM
MR. CROWTHER clarified that it could be eligible, if it resulted
in EOR that involved disposition in the reservoir and if it
would otherwise be emitted. He noted that CO2 that is cycled on
the North Slope would not otherwise be emitted and is therefore
ineligible for 45Q credits.
4:06:57 PM
CO-CHAIR BISHOP commented that he would seek a more detailed
answer regarding 45Q tax credit eligibility in this scenario as
HB 50 moves on to the Senate Finance Committee.
4:07:17 PM
CO-CHAIR GIESSEL removed her objection; she found no further
objection and Amendment 8 was adopted.
4:07:44 PM
CO-CHAIR GIESSEL solicited a motion.
4:07:45 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 9, work order 33-
GH1567\D.45, to HB 50.
[Note: Amendment 9 is a conceptual amendment, as it was drafted
to version D of HB 50 and is not complete.]
33-GH1567\D.45
Dunmire
5/3/24
A M E N D M E N T 9
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: CSHB 50(FIN)
Page 1, line 5, following "credits;":
Insert "establishing an income tax on certain
entities producing or transporting oil or gas in the
state;"
Page 32, following line 9:
Insert a new bill section to read:
"* Sec. 37. AS 43.20 is amended by adding a new
section to read:
Sec. 43.20.019. Tax on income attributable to a
qualified entity; renewable energy and electrical grid
projects or upgrades fund. (a) If an entity has
qualified taxable income over $4,000,000 in a tax
year, the entity shall pay a tax of 9.4 percent on the
qualified taxable income over $4,000,000.
(b) The tax under this section does not apply to
a corporation paying tax under AS 43.20.011.
(c) The department shall aggregate the qualified
taxable income of two or more entities for the purpose
of determining the tax due under this section if the
department determines that, without the provisions of
this section, the qualified taxable income would
reasonably be expected to be attributed to a single
entity.
(d) The renewable energy and electrical grid
projects or upgrades fund is established in the
general fund. The Department of Administration shall
separately account for the tax collected under this
section and deposit the tax into the renewable energy
and electrical grid projects or upgrades fund.
(e) In this section,
(1) "entity" means a
(A) sole proprietorship;
(B) partnership; or
(C) entity that has elected to file federal
returns under 26 U.S.C. 1361 - 1379 (Internal Revenue
Code);
(2) "qualified taxable income" means income
from the production of oil or gas from a lease or
property in the state or from the transportation of
oil or gas by pipeline in the state before deductions
for
(A) dividends and gifts; and
(B) wages, salaries, bonuses, or other
similar payments to owners, partners, members, or
shareholders of the entity."
Renumber the following bill sections accordingly.
Page 34, following line 20:
Insert new bill sections to read:
"* Sec. 40. The uncodified law of the State of
Alaska is amended by adding a new section to read:
APPLICABILITY. Section 37 of this Act applies to
an entity with qualified taxable income over
$4,000,000 for a tax year beginning on or after
January 1, 2023.
* Sec. 41. The uncodified law of the State of
Alaska is amended by adding a new section to read:
TRANSITION: PAYMENT OF TAX. A person subject to
tax before the effective date of sec. 37 of this Act
under AS 43.20.019, added by sec. 37 of this Act,
shall pay the balance of the tax due for a tax year
ending before January 1, 2024, by January 1, 2025.
Until January 1, 2025, the Department of Revenue shall
waive interest that would otherwise accrue under
AS 43.05.225 and civil and criminal penalties accruing
under AS 43.05.220, 43.05.245, and 43.05.290 that are
a result of the retroactivity of this Act."
Renumber the following bill sections accordingly.
Page 35, line 2:
Delete all material and insert:
"* Sec. 44. The uncodified law of the State of
Alaska is amended by adding a new section to read:
RETROACTIVITY OF REGULATIONS. Notwithstanding a
contrary provision of AS 44.62.240, if the Department
of Revenue expressly designates in the regulation that
the regulation applies retroactively to a specific
date, a regulation adopted by the department to
implement, interpret, make specific, or otherwise
carry out sec. 37 of this Act applies retroactively to
that date.
* Sec. 45. The uncodified law of the State of
Alaska is amended by adding a new section to read:
RETROACTIVITY. Sections 37, 40, and 41 of this
Act are retroactive to January 1, 2023.
* Sec. 46. Sections 37, 40 - 42, 44, and 45 of this
Act take effect immediately under AS 01.10.070(c)."
4:07:48 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:07:51 PM
SENATOR WIELECHOWSKI said that Amendment 9 addresses an issue
that has been before the legislature for many years. He
explained that this amendment closes a loophole and puts North
Slope oil companies in parity tax status. He said that there is
an S-corporation provision allowing organizations to classify
under the IRS tax code rather than a C-corporation. He pointed
out that while the majority of North Slope oil companies are C-
corporations, one individual (who may be located outside of
Alaska) is incorporated as an S-corporation and therefore is not
paying corporate income taxes. He pointed out that Alaska is
heavily dependent on the revenue from resource development - and
oil is a non-renewable, finite resource. He noted that the state
constitution mandates that the legislature seek the maximum
benefit for these resources for Alaskans. He stated that
Amendment 9 would ensure that companies are not treated
differently because of the way they are incorporated, which he
added is fundamentally unfair. He noted that the Legislative
Finance Department has examined this issue and recommended
termination of the S-Corp exclusion. He said that a provision
was added on lines 22 and 23 which allows the tax revenue
collected to be used to fund renewable energy or electrical grid
projects. He estimated that the yearly amount received would be
$100-175 million.
4:11:56 PM
CO-CHAIR GIESSEL noted that Amendment 9 is a conceptual
amendment, as it was drafted to version D of HB 50 and is not
complete.
4:12:08 PM
SENATOR WIELECHOWSKI added that Amendment 9 is retroactive to
January 1, 2023.
4:12:21 PM
SENATOR KAUFMAN expressed opposition to Amendment 9. He said he
understands the desire, but believes it is heavy tax policy that
should be given full consideration as a bill rather than an
amendment.
4:12:57 PM
CO-CHAIR BISHOP expressed opposition to Amendment 9 until he is
able to consider it further.
4:13:11 PM
CO-CHAIR GIESSEL shared her understanding that the contents of
Amendment 9 are also contained in legislation currently before
the Senate Finance Committee. She said that the accompanying
fiscal note was derived from that legislation.
4:13:22 PM
CO-CHAIR BISHOP said that he would like to ask the Senate
Finance Committee about paragraphs 2 and 3 of the accompanying
fiscal note.
4:13:51 PM
CO-CHAIR GIESSEL read from paragraph 2 of the aforementioned
fiscal note, which indicated that DOR is uncertain of the
financial impact these changes would have.
4:14:15 PM
SENATOR CLAMAN expressed opposition to Amendment 9. He voiced
concern with removing the S-corporation tax exemption for a
single company. He acknowledged that the company in question has
a greater amount of tax liability than most but pointed out that
C-corporations do not have a minimum for corporate tax payments
(instead, all C-corporations pay corporate taxes). He opined
that, to remain equitable, the tax exemption should be removed
for all S-corporations.
4:15:01 PM
CO-CHAIR GIESSEL removed her objection.
4:15:04 PM
CO-CHAIR GIESSEL found further objection and asked for a roll
call vote.
4:15:10 PM
A roll call vote was taken. Senators Wielechowski, Kawasaki,
Dunbar, and Giessel voted in favor of Amendment 9 and Senators
Kaufman, Claman, and Bishop voted against it. The vote was 4:3.
4:15:33 PM
CO-CHAIR GIESSEL announced that [Amendment 9] was adopted on a
vote of 4 yeas and 3 nays.
4:15:55 PM
CO-CHAIR GIESSEL solicited a motion.
4:16:05 PM
SENATOR WIELECHOWSKI moved to adopt Amendment 10, work order 33-
GH1567\H.1, to HB 50.
33-GH1567\H.1
Dunmire
5/3/24
A M E N D M E N T 10
OFFERED IN THE SENATE BY SENATOR WIELECHOWSKI
TO: SCS CSHB 50(RES), Draft Version "H"
Page 1, line 11, following "pipelines;":
Insert "relating to state loans for oil and gas
development projects in the Cook Inlet sedimentary
basin; relating to the Alaska Industrial Development
and Export Authority; requiring the Alaska Industrial
Development and Export Authority to make certain
reports to the legislature; relating to the duties of
the Regulatory Commission of Alaska, the Department of
Revenue, and the Department of Natural Resources;"
Page 34, following line 31:
Insert a new subsection to read:
"(g) The commission shall, as required under
AS 44.88.850(b), determine whether the sale price in a
gas sales agreement for gas produced through a project
partially or fully funded by a loan under AS 44.88.850
constitutes a just and reasonable immediate delivery
price for gas."
Reletter the following subsections accordingly.
Page 35, line 8:
Delete "(g)"
Insert "(h)"
Page 37, following line 29:
Insert new bill sections to read:
"* Sec. 48. AS 44.25.020 is amended to read:
Sec. 44.25.020. Duties of department. The
Department of Revenue shall
(1) enforce the tax laws of the state;
(2) collect, account for, have custody of,
invest, and manage all state funds and all revenues of
the state except revenues incidental to a program of
licensing and regulation carried on by another state
department, funds managed and invested by the Alaska
Retirement Management Board, and as otherwise provided
by law;
(3) invest and manage the balance of the
power development fund in accordance with
AS 44.83.386;
(4) administer the surety bond program for
licensure as a fish processor or primary fish buyer;
(5) provide reasonable assistance to the
Alaska Industrial Development and Export Authority
under AS 44.88.850(c).
* Sec. 49. AS 44.37.020 is amended by adding a new
subsection to read:
(d) The Department of Natural Resources shall
provide reasonable assistance to the Alaska Industrial
Development and Export Authority under
AS 44.88.850(c).
* Sec. 50. AS 44.88 is amended by adding new
sections to read:
Article 10A. Cook Inlet Reserve-Based Lending.
Sec. 44.88.850. Cook Inlet reserve-based lending
account. (a) The Cook Inlet reserve-based lending
account is established in the revolving fund. The
account consists of money or assets deposited into the
account by the authority and contributions from other
sources.
(b) The authority may use money in the account
to make one or more reserve-based loans to fund oil
and gas development projects the authority considers
necessary to increase oil and gas production from the
Cook Inlet sedimentary basin. The authority may, as a
term of the loan, accept an ownership share in the
project funded by the loan. If the authority accepts
an ownership share as a term of the loan, the
ownership share must be in the form of a carried
interest that does not obligate the authority to
contribute to the development costs of the project.
The authority may make a loan under this section only
(1) to a legal entity in compliance with
state and federal laws;
(2) if the loan applicant provides a
written waiver permitting the authority to access or
obtain copies of the loan applicant's confidential
records that are in possession of the Department of
Natural Resources or the Department of Revenue;
information provided to the authority under this
section shall be kept confidential by the authority
unless disclosure is authorized by the loan applicant
or borrower;
(3) if the authority obtains an independent
study performed by an experienced, qualified expert
that confirms the valuation of the loan security and
the capacity of the loan to support the oil and gas
development project and to cause or increase the
commercial production of oil or gas from the Cook
Inlet sedimentary basin;
(4) if the Regulatory Commission of Alaska
determines, under AS 42.05.141(g), that the sale price
in a gas sales agreement for gas produced through a
project partially or fully funded by a loan under this
section does not exceed a just and reasonable
immediate delivery price for gas;
(5) if the authority determines that the
sales price for oil and gas produced through a project
partially or fully funded by a loan under this section
is reasonable and in the best interests of residents
of the state.
(c) The authority may request assistance from
the Department of Revenue under AS 44.25.020(a)(5) or
the Department of Natural Resources under
AS 44.37.020(d) to execute this section.
(d) The authority may accept an overriding
royalty interest in a lease for which a loan has been
extended under (b) of this section if, as a term of
the loan, the overriding royalty interest is subject
to prior approval by the Department of Natural
Resources. The authority may only have the overriding
royalty interest transferred to the authority if the
borrower defaults.
Sec. 44.88.855. Cook Inlet oil and gas
development projects; report. (a) The authority shall
evaluate oil and gas development projects the
authority believes have reasonable potential to
increase oil and gas production from the Cook Inlet
sedimentary basin. Each year, the authority shall
prepare a report related to those oil and gas
development projects and shall, by the first day of
each regular session of the legislature, deliver the
report to the senate secretary and the chief clerk of
the house of representatives and notify the
legislature that the report is available. At the
request of a legislative committee, a representative
of the authority shall appear in that committee to
review the report. For each oil and gas development
project, the report must include
(1) a cost estimate for the project;
(2) the potential recoverable gas from the
project;
(3) the projected rate of return for the
project;
(4) if the authority recommends a reserve-
based loan for the project, the amount of funds
necessary for deposit into the Cook Inlet reserve-
based lending account to provide a loan for the
project and the recommended source of funds for the
deposit.
(b) Notwithstanding AS 44.88.215,
44.88.850(b)(2), or any other law, a borrower's
information shall be subject to the public reporting
requirements under this section. Each year, the
authority shall prepare a report related to Cook Inlet
reserve-based loans made under AS 44.88.850 and shall,
by the first day of each regular session of the
legislature, deliver the report to the senate
secretary and the chief clerk of the house of
representatives and notify the legislature that the
report is available. At the request of a legislative
committee, a representative of the authority shall
appear in that committee to review the report. The
report must
(1) identify each entity borrowing funds
under AS 44.88.850;
(2) list the amount borrowed by each
borrower and the date each loan was approved;
(3) include a summary of the terms of the
lending agreement with each borrower;
(4) summarize each project for which a loan
was made, including the status of the project and the
volume of oil and gas produced and expected to be
produced from the project;
(5) list the status of payments made on the
loan, including whether the loan is or ever was in
default.
* Sec. 51. AS 44.88.900 is amended by adding new
paragraphs to read:
(20) "oil and gas development project"
means a development project to produce proven oil or
gas reserves;
(21) "reserve-based loan" means a loan made
against and fully secured by an oil and gas field,
proven undeveloped or developed oil and gas reserves,
or other assets of the entity receiving the loan."
Renumber the following bill sections accordingly.
Page 40, line 19:
Delete "Section 51"
Insert "Section 55"
4:16:07 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:16:11 PM
SENATOR WIELECHOWSKI said that the idea for Amendment 10
generated from Representative McKay in the House Resources
Standing Committee. He explained that this amendment allows
Alaska Industrial Development and Export Authority (AIDEA) to
offer reserve-space lending. He said that companies in Cook
Inlet are facing tremendous capital constraint, in spite of a
desire to build and gas is abundant. He surmised that the amount
of gas would be enough to solve the state's gas issues for the
next ten years. He noted that he has worked with AIDEA, DNR,
DOR, Department of Law (DOL), and the governor's office to come
up with the language in Amendment 10. He shared his belief that
there is support for the amendment. He also noted that there is
little cost associated, as this would simply allow AIDEA to
offer reserve-space lending. He said that RCA would be required
to set just and reasonable gas rates.
4:18:08 PM
CO-CHAIR BISHOP commented that an explanation of "reserve-space
lending" may be helpful for those who are unfamiliar.
4:18:59 PM
FADIL LIMANI, Deputy Commissioner, Department of Revenue (DOR),
Anchorage, Alaska, said that DOR has not been engaged in
discussions on Amendment 10 or in conversations related to
reserve-space lending.
4:19:26 PM
CO-CHAIR GIESSEL asked if DOR has any information on reserve-
based lending.
4:19:33 PM
MR. LIMANI replied no. He added that the department has limited
information on this topic.
4:19:45 PM
SENATOR WIELECHOWSKI expressed surprise and said that he spoke
with DNR and DOR several times regarding Amendment 10. He
pointed out that "reserve-based loan" is defined in Section 51,
line 31 of the amendment. He explained that a prospect with a
large degree of gas would be able to pledge their reserves as
collateral in order to receive a loan through [Alaska Industrial
Development and Export Authority (AIDEA)]. He explained how this
would protect [AIDEA's] interests.
4:20:51 PM
CO-CHAIR GIESSEL recalled a Joint Resources committee meeting in
which a representative from the Cosmopolitan Oil and Gas Field
said that his organization had not approached AIDEA for
financial assistance. She stated that Amendment 11 would open
the door for this.
4:21:32 PM
SENATOR WIELECHOWSKI acknowledged that there are concerns about
AIDEA's investments. He opined that there is no better
investment than this. He pointed out that there is a crisis in
Cook Inlet and said that this provides an opportunity to use the
money in AIDEA for something that would benefit at least 70
percent of Alaskans - particularly those who live along the
railbelt and utilize natural gas. He emphasized the potential
benefit for the economy, residential consumers, and the business
community. He reiterated that this is the best investment option
and would help the state avoid taking out questionable loans.
4:22:27 PM
SENATOR DUNBAR opined that 100 percent of Alaskans would
benefit.
4:22:51 PM
CO-CHAIR GIESSEL removed her objection; she found no further
objection and Amendment 10 was adopted.
4:23:15 PM
CO-CHAIR GIESSEL solicited a motion.
4:23:17 PM
SENATOR CLAMAN moved to adopt Amendment 11, work order 33-
GH1567\H.3, to HB 50.
33-GH1567\H.3
Dunmire
5/3/24
A M E N D M E N T 11
OFFERED IN THE SENATE
TO: SCS CSHB 50(RES), Draft Version "H"
Page 1, line 11, following "pipelines;":
Insert "relating to an audit of carbon storage
leases conducted by the legislative audit division;"
Page 40, following line 13:
Insert a new bill section to read:
"* Sec. 52. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LEGISLATIVE AUDIT DIVISION REPORT TO THE
LEGISLATURE. The legislative audit division shall
conduct an audit of carbon storage leases in the state
under AS 38.05.700 - 38.05.795 and submit the audit to
the senate secretary and the chief clerk of the house
of representatives on or before January 1, 2033, and
notify the legislature that the audit is available;
the audit must include detailed fiscal information
from each fiscal year, beginning with the fiscal year
ending June 30, 2025, total revenues and costs to the
state associated with carbon storage leases in each
fiscal year, and recommendations to improve the carbon
storage program."
Renumber the following bill sections accordingly.
Page 35, line 2:
Delete "Section 51"
Insert "Section 52"
4:23:19 PM
CO-CHAIR GIESSEL objected for purposes of discussion.
4:23:23 PM
SENATOR CLAMAN said that Amendment 11 is a follow up to the
sunset provision in Amendment 2. He explained that this
amendment requires an audit in 2033 and an accompanying report
to the legislature. The report would include any recommendation
for the carbon storage program and would provide input from the
Legislative Audit Division about how the program is working. He
added that if the legislature decided to make changes to the
program in the future, this would provide substantive analysis
to aid in making those changes.
4:24:12 PM
CO-CHAIR GIESSEL wondered if it is realistic to add additional
audits to the Legislative Audit Division's workload.
4:24:38 PM
SENATOR CLAMAN replied that this is a single audit in 2033,
rather than an annual audit. He surmised that, given the length
of time before the audit date, the Legislative Audit Division
would comply.
4:25:16 PM
CO-CHAIR GIESSEL removed her objection; she found no further
objection and Amendment 11 was adopted.
4:25:33 PM
CO-CHAIR GIESSEL solicited the will of the committee.
4:25:40 PM
CO-CHAIR BISHOP moved to report SCS CSHB 50, work order 33-
GH1567\H, as amended, from committee with individual
recommendations and attached fiscal note(s).
4:26:07 PM
CO-CHAIR GIESSEL found no objection and SCS CSHB 50(RES) was
reported from the Senate Resources Standing Committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 50 Public Testimony Rec'd as of 5.2.24.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |
| HB 50 CS Workdraft Version H.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |
| HB 50 Explanation of Changes Ver. D to Ver. H.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |
| HB 50 Amendment #D.45 Backup.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |
| HB 50 Amendment #D.44.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |
| HB 50 Amendment #D.45.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |
| HB 50 Amendment #H.1.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |
| HB 50 Amendment #H.3.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |
| HB 50 Conceptual Amendment #1.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |
| HB 50 Amendment #D.36.pdf |
SRES 5/3/2024 3:30:00 PM |
HB 50 |