05/14/2025 01:00 PM House RESOURCES

                    HB 206-OIL AND GAS DATA                                                                                 
                                                                                                                                
3:03:29 PM                                                                                                                    
                                                                                                                                
CO-CHAIR DIBERT announced  that the next order  of business would                                                               
be HOUSE BILL NO. 206, "An  Act relating to disclosure of oil and                                                               
gas production tax information."                                                                                                
                                                                                                                                
3:03:57 PM                                                                                                                    
                                                                                                                                
                                                                                                                                
REPRESENTATIVE   MEARS,  Alaska   State  Legislature,   as  prime                                                               
sponsor, introduced HB 206 to  the committee.  She commented that                                                               
the most-asked question  in the building is, "Where  are we going                                                               
to  get the  money."   She pointed  out that  the state  is in  a                                                               
business relationship with the oil  industry, providing access to                                                               
resources owned by  the people of Alaska in exchange  for a share                                                               
of the  proceeds.  She explained  that it has been  over a decade                                                               
since the state comprehensively evaluated  the terms, and in that                                                               
time  a  lot  has  changed   including  fluctuating  oil  prices,                                                               
companies  changing hands,  and two  new big  developments.   She                                                               
pointed out  that the president  had targeted $50 per  barrel oil                                                               
while the state's  budget was based on $68 revenues.   She stated                                                               
that it  was time  to revisit whether  the policy  environment is                                                               
achieving the  goals set out,  and, related  to that, there  is a                                                               
responsibility  to  make  sure  the tax  system  is  working  for                                                               
Alaska.   She  emphasized that  both the  oil industry  and their                                                               
constituents  depend  on  the Legislature.    She  described  the                                                               
process her office used to craft the legislation.                                                                               
                                                                                                                                
3:06:11 PM                                                                                                                    
                                                                                                                                
COREY  ALT,  staff,  Representative  Donna Mears,  on  behalf  of                                                               
Representative  Mears, prime  sponsor, co-presented  a PowerPoint                                                               
regarding  HB 206  [hard copies  in  the committee  packet].   He                                                               
presented  slides  2 and  3,  both  titled "Our  Responsibility,"                                                               
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     "The  legislature shall  provide  for the  utilization,                                                                    
     development, and conservation  of all natural resources                                                                    
     belonging to the State, including  land and waters, for                                                                    
     the maximum benefit of its people."                                                                                        
     Article VIII, Sec. 2                                                                                                       
                                                                                                                                
     Utilization   and    development   requires   balancing                                                                    
     competing priorities:                                                                                                      
     1.  Providing  a   tax  environment  that  incentivizes                                                                    
     robust and competitive development; and                                                                                    
     2.  Collecting  taxes  and  royalties  to  provide  the                                                                    
     benefits of our resources to all Alaskans.                                                                                 
     The  legislature  facilitates  a  balance  between  the                                                                    
     needs of  industry and the  people of Alaska  using tax                                                                    
     and royalty policy.                                                                                                        
                                                                                                                                
3:07:26 PM                                                                                                                    
                                                                                                                                
MR. ALT described  a seminar presented by oil  and gas consultant                                                               
Rich Ruggiero regarding policy design for  oil and gas taxes.  An                                                               
important take-away  was that,  all numbers  aside, a  tax system                                                               
should be designed around what  outcomes it is trying to produce.                                                               
He showed  the 3, 4,  and 5,  titled "What's the  problem?" which                                                               
read as follows [original punctuation provided]:                                                                                
                                                                                                                                
     • What  resource development outcomes are  we trying to                                                                    
     achieve with our tax system?                                                                                               
     A competitive and  dynamic development environment that                                                                    
     brings:                                                                                                                    
          • Increased production                                                                                                
          • Increased competition                                                                                               
          • Increased investment                                                                                                
                                                                                                                                
     The Legislature  is unable  to judge  the effectiveness                                                                    
     of its tax policies                                                                                                        
          •   The  resource   development  environment   has                                                                    
     changed  significantly   since  SB21  (2013)   and  the                                                                    
     assumptions made at the time are not today's reality.                                                                      
          • Does our tax system  still meet its goals at $70                                                                    
     oil? $60?                                                                                                                  
          • Would we know if it didn't?                                                                                         
                                                                                                                                
     What information do legislators need to know?                                                                              
     • Is Alaska an attractive  place to invest? How does it                                                                    
     compare to other jurisdictions?                                                                                            
     • How  does our tax system  impact different producers,                                                                    
     depending on their position in the market?                                                                                 
     •  Is  the  legislature fulfilling  its  obligation  to                                                                    
     provide the maximum benefit to Alaskans?                                                                                   
     • Has our system's effectiveness changed over time?                                                                        
     Legislators  are  currently prohibited  from  accessing                                                                    
     disaggregated  information about  producers that  would                                                                    
     provide answers to these questions.                                                                                        
                                                                                                                                
3:09:15 PM                                                                                                                    
                                                                                                                                
MR. ALT pointed  out that the legislature is unable  to judge the                                                               
effectiveness  of  its  tax  system   because  the  law  prevents                                                               
legislators and the  public from accessing that  information.  He                                                               
proceeded to  slide 7 titled  "Alaska's Unique  Structure," which                                                               
read as follows [original punctuation provided]:                                                                                
                                                                                                                                
     • Alaska has a net  tax systemcompanies  are only taxed                                                                    
     on their profits.                                                                                                          
     • Most  oil-producing statesTX,  OK, WY,  CO, NMhave  a                                                                    
     gross tax system.                                                                                                          
     • Under  a net tax,  the public has a  greater interest                                                                    
     in   transparency  because   of   the  higher   revenue                                                                    
     volatility inherent in the system.                                                                                         
                                                                                                                                
3:10:50 PM                                                                                                                    
                                                                                                                                
MR.  ALT drew  the  committee's attention  to  the chart  on                                                                    
slide 7, which showed  scenarios of production costs, taxes,                                                                    
and  profits and  compared the  taxes paid  and the  profits                                                                    
under a  gross tax  system and  a net tax  system.   He then                                                                    
moved to  slide 8, also titled  "Alaska's Unique Structure,"                                                                    
which read as follows [original punctuation provided]:                                                                          
                                                                                                                                
     Weakening Disclosures:                                                                                                     
     • In 2006, Alaska transitioned  from a gross (ELF) to a                                                                    
     net tax under the Petroleum Profits Tax (PPT)                                                                              
          •  It quickly  became  clear that  the PPT  system                                                                    
     lacked  sufficient disclosure,  both to  the Department                                                                    
     of Revenue and the public                                                                                                  
          • ACES  (2007) implemented the current  statute to                                                                    
     address   such  concerns,   requiring   that  data   be                                                                    
     aggregated among 3 producers in a unit.                                                                                    
     •   In  2016,   DOR  published   information  on   four                                                                    
     individual units. Today Prudhoe is the only one.                                                                           
                                                                                                                                
3:12:34 PM                                                                                                                    
                                                                                                                                
MR. ALT explained that under  Alaska's net tax system, volatility                                                               
was inherent  in the system.   As a result, the  profitability of                                                               
oil  producers  is of  much  greater  import  to the  state,  and                                                               
disclosure of  and access  to the  data is  in the  public's best                                                               
interest.   He compared levels  of disclosure, using Texas  as an                                                               
example where  tax returns of  producers were  public information                                                               
broken  down by  well  and by  month.   By  contrast, the  Alaska                                                               
Department of Revenue only published  total annual investments by                                                               
producers, and the  information was not readily  available to the                                                               
public.   With the exception  of Prudhoe  Bay, it was  not broken                                                               
down by unit or month.                                                                                                          
                                                                                                                                
3:14:20 PM                                                                                                                    
                                                                                                                                
CO-CHAIR DIBERT asked Rep Mears if she had final comments.                                                                      
                                                                                                                                
3:14:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MEARS  explained that  the purpose  of introducing                                                               
HB 206 to the committee was to start this important discussion.                                                                 
                                                                                                                                
3:15:09 PM                                                                                                                    
                                                                                                                                
[HB 206 was held over.]