04/22/2019 01:30 PM House FINANCE

HOUSE BILL NO. 87                                                                                                             
                                                                                                                                
     "An Act extending the liquefied natural gas storage                                                                        
     facility tax credit; and providing for an effective                                                                        
     date."                                                                                                                     
                                                                                                                                
1:38:53 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Johnston  MOVED   to  ADOPT  proposed  committee                                                                    
substitute  for  HB  87,  Work  Draft  31-LS0619\M  (Nauman,                                                                    
4/16/19) (copy on file).                                                                                                        
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
LYNN GATTIS,  STAFF, REPRESENTATIVE TAMMIE  WILSON, reviewed                                                                    
the changes to the bill in a prepared statement:                                                                                
                                                                                                                                
     Page 1, line 6:                                                                                                            
                                                                                                                                
          Delete: June 30, 2021                                                                                                 
                                                                                                                                
          Insert: January 1, 2020                                                                                               
                                                                                                                                
Ms. Gattis read from a new section, Section C:                                                                                  
                                                                                                                                
     that  would   commence  commercial   operation  between                                                                    
     January 2,  2020 to  January 30, 2021  and may  apply a                                                                    
     refundable credit  against a tax liability  that may be                                                                    
     imposed  on the  person under  this chapter  or receive                                                                    
     the amount of  credit in the form of a  payment for the                                                                    
     taxable  year  in  which   the  liquified  natural  gas                                                                    
     facility  commences   commercial  operation.   The  tax                                                                    
     credit  or payment  under this  section may  not exceed                                                                    
     the  lesser of  $7,500,000 or  50 percent  of the  cost                                                                    
     incurred to  establish or expand the  liquified natural                                                                    
     gas storage facility.                                                                                                      
                                                                                                                                
Representative Knopp needed to backup  to page 1, line 7. He                                                                    
was  confused about  the dates  Ms.  Gattis provided  versus                                                                    
what  the work  draft reflected.  Ms. Gattis  clarified that                                                                    
she was  speaking to Page  1, line 6 which deleted  June 30,                                                                    
2021, and added January 1, 2020 back in.                                                                                        
                                                                                                                                
Representative   Knopp  asked   about   the  version   being                                                                    
reviewed.  Co-Chair Wilson  relayed that  the committee  was                                                                    
looking  at version  M. Ms.  Gattis responded  that she  was                                                                    
referring to line 7. Co-Chair  Wilson further clarified that                                                                    
the original bill  asked for an extension of  $15 million in                                                                    
tax  credits.  The  work draft  would  allow  the  Fairbanks                                                                    
storage tank  to be taken  care of  by the original  date of                                                                    
January  1, 2020.  The  extension would  only  apply to  the                                                                    
other storage in the amount of $7.5 million.                                                                                    
                                                                                                                                
1:42:03 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:42:21 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Wilson  indicated there was  a typo on  the version                                                                    
and,  the  committee  would  take  up  the  bill  again  the                                                                    
following morning.                                                                                                              
                                                                                                                                
1:42:55 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:44:14 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Wilson  clarified that  the date  of June  30, 2021                                                                    
was correct  on Page 1.  She relayed that the  bill extended                                                                    
the program  but in a  different way.  She turned to  Page 2                                                                    
which explained there would be  2 opportunities for credits.                                                                    
A person or entity would  have to complete and commercialize                                                                    
a facility  by the end  of the  current year to  be eligible                                                                    
for  a tax  credit of  $15  million. They  could receive  an                                                                    
additional tax credit  of $7.5 million or 50  percent of the                                                                    
costs incurred  to establish or  expand another  gas storage                                                                    
tank after January 1, 2020.                                                                                                     
                                                                                                                                
REPRESENTATIVE  STEVE   THOMPSON,  BILL  SPONSOR,   was  not                                                                    
opposed to the committee  substitute. He thought the general                                                                    
manager of the Interior Gas  Utility in Fairbanks was online                                                                    
if anyone had any questions.                                                                                                    
                                                                                                                                
Co-Chair Wilson asked Mr. Britton  to comment on whether the                                                                    
utility  would  have   commercialization  completed  on  the                                                                    
original tank.  She reviewed  the purpose  of the  bill. She                                                                    
asked if the utility would be  able to meet the deadlines as                                                                    
outlined in the bill. She read a portion of the bill.                                                                           
                                                                                                                                
DAN   BRITTON,  GENERAL   MANAGER,  INTERIOR   GAS  UTILITY,                                                                    
FAIRBANKS (via  teleconference), responded  that it  was the                                                                    
full  intention  of  the  utility   to  meet  the  deadlines                                                                    
particularly  with its  large storage  project. He  reported                                                                    
the project was  on schedule and anticipated it  would be in                                                                    
operation prior  to the existing  January 1,  2020 deadline.                                                                    
He reported that  the schedule continued to  advance for the                                                                    
facilities in  North Pole, however,  that project  would not                                                                    
likely be done by the  end of 2019. Therefore, the extension                                                                    
contemplated in  the committee substitute would  be helpful.                                                                    
He  felt  the  utility  could  work  within  the  parameters                                                                    
outlined in the committee substitute.                                                                                           
                                                                                                                                
Co-Chair Wilson asked  Mr. Britton if he was  aware that the                                                                    
money  would come  out  of the  oil and  gas  fund and,  the                                                                    
utility would be  in line with other companies  for the same                                                                    
funding. Mr. Britton responded affirmatively.                                                                                   
                                                                                                                                
Co-Chair Wilson  informed the committee  that there  were no                                                                    
unrestricted general  funds going  to the project.  She also                                                                    
clarified that if  someone else had a gas  storage tank that                                                                    
could  come on  line by  the specified  date, they  would be                                                                    
eligible  to  receive a  tax  credit.  In other  words,  the                                                                    
credit  did not  only  apply to  the  Interior Gas  Utility.                                                                    
Other  communities looking  to  apply for  the credit  would                                                                    
have to  commercialize before January  30, 2021.  They would                                                                    
also have to  wait for funds to be available  in the oil and                                                                    
gas fund to  receive payment for their  credits or purchased                                                                    
by another company  that was already making a  profit in the                                                                    
State of Alaska.                                                                                                                
                                                                                                                                
1:48:22 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz asked  if the  impact of  the bill  was to                                                                    
extend the tax credit program in  a limited way. He asked if                                                                    
there were other potential projects  that could use the bill                                                                    
to get their own  credits applied. Co-Chair Wilson responded                                                                    
in the negative.  She reiterated that the  bill only applied                                                                    
to gas storage tanks.                                                                                                           
                                                                                                                                
Representative  Knopp  asked  if   the  deadline  was  being                                                                    
shortened  by 6  months.  Representative Thompson  responded                                                                    
that  Representative Knopp  was  correct.  The Interior  Gas                                                                    
Utility felt that it would  meet the specified deadline. The                                                                    
bill also  clarified that the legislature  was not extending                                                                    
the  $15  million  credit;  it was  being  limited  to  $7.5                                                                    
million.                                                                                                                        
                                                                                                                                
Representative  Knopp   was  satisfied  with   limiting  the                                                                    
reimbursement rate.  However, he  expressed a  concern about                                                                    
shortening the  time by 6  months. He wondered why  the date                                                                    
in June could not stay the  same as in the original version.                                                                    
Co-Chair  Wilson responded  that  it was  an incentive.  She                                                                    
continued that  the legislature  was trying  to get  the tax                                                                    
credits off  the books.  She realized  that there  were high                                                                    
costs  of energy  in certain  parts of  Alaska and  hoped it                                                                    
would not  be an issue  in the  future. She also  noted that                                                                    
there was a  fund from which the tax credits  would be paid.                                                                    
However,  they  might not  be  paid  right away  because  of                                                                    
others being in line for the tax credits first.                                                                                 
                                                                                                                                
1:51:03 PM                                                                                                                    
                                                                                                                                
Representative  Knopp  had  not  scrutinized  the  bill.  He                                                                    
wondered if there was a  change in reimbursements based on a                                                                    
tax liability or  whether the credits were  cash credits. He                                                                    
thought  he had  seen language  allowing tax  credits to  be                                                                    
applied to  future tax liabilities.  He was aware  that non-                                                                    
profits  did  not  have  tax  liabilities.  Co-Chair  Wilson                                                                    
reported that the original language  was in the current bill                                                                    
and, the  credits were cashable tax  credits. Representative                                                                    
Knopp was correct  that a non-profit would have  to wait for                                                                    
available  funding  for  cash credits.  Alternatively,  they                                                                    
could sell  their tax  credits to a  party making  a profit.                                                                    
Representative Thompson  noted that  they were  cashable tax                                                                    
credits, not undesignated general funds.                                                                                        
                                                                                                                                
Co-Chair Wilson  would be setting  the bill aside  until the                                                                    
following morning  in anticipation  of receiving  the fiscal                                                                    
note.                                                                                                                           
                                                                                                                                
HB  87  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.