05/07/1997 08:45 AM Senate FIN

                                                                               
       CS FOR HOUSE BILL NO. 63(2d RLS)                                        
                                                                               
       "An Act amending  the definition of `motor  fuel' under                 
  the  state's motor  fuel tax to  add, as a  part of the  tax                 
  exemption      set out  in that  definition, exemption  from                 
  the tax for fuel    sold for use  in jet propulsion aircraft                 
  operating in flights     that    continue    from    foreign                 
  countries, subject to termination  of the exemption for that                 
  fuel if a refiner operating a      refinery  at   which  the                 
  fuel was produced fails to comply with  terms of a voluntary                 
  agreement entered into by the refiner to     use      Alaska                 
  residents, contractors, and suppliers to provide  goods  and                 
  services when the refinery's capacity is expanded,     t   o                 
  add exemption from the tax for certain number 6 `residual                    
  fuel oil,' also known as bunker fuel, and to delete the                      
  exemption from the  tax for fuel that is at least 10 percent                 
       alcohol by volume; and repealing ch. 42, SLA  1994, the                 
  Act  providing for the imposition of a different tax levy                    
  on   residual fuel  oil used  in and  on certain  watercraft                 
  until June     30, 1998;  and  providing  for  an  effective                 
  date."                                                                       
                                                                               
  Nancy Kelly,  staff to  Representative Gene Therriault,  was                 
  invited  to  join  the  committee.   She  read  the  sponsor                 
  statement  into   the  record  and  explained   the  federal                 
  definition of "federal flights".                                             
                                                                               
                                                                               
  Jeff Cook, MAPCO,  was invited  to join the  committee.   He                 
  said this was a pro-Alaska bill and urged its passage.                       
                                                                               
  Bob Bartholomew, Assistant Director, Division of Income  and                 
  Excise Audit, Department of Revenue, was invited to join the                 
  committee.  He  said it  was appropriate to  change the  tax                 
  schedule.  "Bunker Fuel" is very low grade  and there is not                 
  a  lot  of  consumption  in  Alaska.    The   department  is                 
  comfortable  with  no tax  on "bunker  fuel".   In  1994 EPA                 
  required Anchorage and  Fairbanks to burn clean fuel.  Motor                 
  fuel  tax  should be  applicable  to everyone  and therefore                 
  there should be a motor fuel tax base.                                       
                                                                               
  After a brief  at ease, Senator Parnell  explained amendment                 
  Mr.  Bartholomew  responded  regarding  amendment  #2.    It                 
  referred to section 2(a)(1).  Senator Parnell said the title                 
  was  too tight to  delete section 2(a)(1).   Mr. Bartholomew                 
  said he had  no concerns regarding  amendment #2.   Co-chair                 
  Sharp explained his understanding of (f), page 4.                            
                                                                               
  Senator  Donley  voiced  his  concern  that  only  Anchorage                 
  residents  would  be  hit with  the  motor  fuel  tax.   The                 
  Department of Revenue had not taken the time to  discern the                 
  impact in Anchorage.  Co-chair Sharp  referred to the fiscal                 
  note.  He  said it was not  up to the department  to control                 
  retail dealers.   He  asked Mr. Bartholomew  to provide  the                 
  requested information.                                                       
                                                                               
  Kim  Ross,  Executive  Director,  Alaska  Air  Carriers  was                 
  invited  to join  the committee.   She said  the association                 
  opposed HB 63 and  she read their opposition statement  into                 
  the  record.   The  bill  would  have an  adverse  effect on                 
  domestic  industry.   This industry provided  mail, freight,                 
  transportation, passenger, medivac to rural as well as urban                 
  Alaska.  She provided direct quotes from MAPCO press release                 
  and  the  Anchorage Daily  News.    It was  not  accurate to                 
  compare jet and  motor fuel.  Many  questions concerning the                 
  bill have gone unanswered.   In response to Co-chair  Sharp,                 
  Ms. Ross  said she  had been  with the  association for  ten                 
  years.                                                                       
                                                                               
  Co-chair  Sharp  advised he  would hold  HB 63  in committee                 
  until tomorrow at 8:00 a.m.                                                  
                                                                               
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  Co-chair Sharp adjourned  the committee at 11:10  a.m. until                 
  8:00 a.m. tomorrow.