Legislature(2023 - 2024)BARNES 124
01/31/2024 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB276 | |
| HB223 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 276 | TELECONFERENCED | |
| *+ | HB 223 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 223-TAX & ROYALTY FOR CERTAIN GAS
2:29:33 PM
CHAIR MCKAY announced that the final order of business would be
HOUSE BILL NO. 223, "An Act relating to the production tax and
royalty rates on certain gas; and providing for an effective
date."
2:29:50 PM
REPRESENTATIVE RAUSCHER, as prime sponsor of HB 223, explained
that HB 223 is similar to HB 276 and therefore the background
provided by the Department of Natural Resources (DNR) on HB 276
serves for both bills. He paraphrased from the sponsor
statement [included in the committee packet], which read as
follows [original punctuation provided]:
House Bill No. 223 represents a crucial step in
revitalizing Alaska's natural gas industry,
particularly focusing on the Cook Inlet region. This
bill addresses a longstanding barrier to investment in
this sector: the current production tax and royalty
rates. By proposing strategic modifications to these
rates, HB 223 aims to elevate Alaska's competitiveness
and attractiveness for natural gas investments.
This legislation is crafted to stimulate economic
growth and ensure a stable natural gas supply for our
state. It introduces vital changes, such as allowing
more flexible royalty and leasing options, reducing
royalty rates for specific leases in the Cook Inlet
sedimentary basin, and implementing a tax cap for gas
production in the region. Additionally, it establishes
a zero-tax rate for new gas exploration efforts post-
June 5, 2023, with a focus on in-state utility
prioritization.
The impact of HB 223 extends beyond mere economic
metrics; it's about securing a prosperous future for
Alaska through a more robust and dynamic natural gas
industry. This bill specifically targets the revision
of tax and royalty rates for natural gas production in
the Cook Inlet basin, ensuring that the changes are
focused and effective, without altering other aspects
of the state's oil and gas laws.
REPRESENTATIVE RAUSCHER specified that HB 223 leverages gas that
may never be produced. He stressed that the bill's purpose
isn't to give away Alaska's resources to other countries, but
rather that these resources will be spent in-state where they
are needed in-stated. He added that 5 percent of something is
better than 100 percent of nothing. He specified that the high
price of gas isn't due to the amount of gas available in the
Cook Inlet, rather it is due to the availability of gas in the
inlet. Money coming into the state for renewable resource
projects says to the producers that they may be getting pushed
out of the picture which may make them not want to invest in oil
and gas. The producers, he opined, need to be enticed to find
more gas, and the gas needs to be kept at a special rate for the
utility companies that utilize the gas, and that is what HB 223
intends to do.
2:34:30 PM
CRAIG VALDES, Staff, Representative George Rauscher, provided
the sectional analysis of HB 223 on behalf of Representative
Rauscher, prime sponsor. He paraphrased from the sectional
analysis [in the committee packet], which read as follows
[original punctuation provided]:
Section 1: AS 38.05.180(f)
Page 1, lines 5,6
This section is amended to include "and (mm) of this
section" as an exception to when the commissioner may
issue oil and gas leases or leases for gas only on
state land.
Page 2, line 14
The word "no" is replaced with "not"
Section 2: AS 38.05.180
Page 8, lines 17-24
A new subsection, (mm), is added to discuss contracts
and royalty shares.
Section 3: AS 43.55.011(j)
Page 8, lines 26
This section is amended to include subsection (q) as
an exemption to the tax levied by (e) of this section.
Section 4: AS 43.55.011(p)
Page 9, line 15
This section is amended to include (q) as an exemption
for the allotted time following the commencement of
commercial production of oil or gas produced from
leases or properties in the state that are outside the
Cook Inlet sedimentary basin.
Section 5: AS 43.55.011
Page 9, lines 23-27
A new subsection, (q), is added that explains how the
levy of tax under (e) of this section may not exceed
zero for gas that was explored for only on or after
the 5th of June, 2023 and offered for sale to an in-
state electric or heating utility company before being
offered for sale to another person.
Section 6: AS 43.55.020(a)
Page 17, lines 13, 14
A new subsection (H) was added to further discuss
installment payments of the estimated tax levied, that
included subsection (q).
Section 7: Sections 1 and 2 effective dates
Section 8:Effective Date
2:37:05 PM
CHAIR MCKAY noted that HB 276 addresses royalties only. He
asked whether he is correct that HB 223 addresses production tax
and royalties.
MR. VALDEZ confirmed that Chair McKay's understanding of both
bills is correct. Responding further, he explained that HB 223
affects the clause that talks [about production tax and
royalties] but the bill doesn't change the production tax.
CHAIR MCKAY qualified that his questions are friendly as he is
seeking to understand the bill.
2:38:37 PM
REPRESENTATIVE RAUSCHER advised that HB 223 was pre-filed in
response to communications last year between members of the
House Resources Standing Committee and producers, so the bill
likely has some redundancy with HB 276, and he open to perhaps
making the two bills into one.
2:39:58 PM
REPRESENTATIVE MEARS asked if she is correct in understanding
that the differences between HB 223 and HB 276 are that [HB 223]
applies in perpetuity for all Cook Inlet discovery while HB 276
has a 10-year timeline on the field production, and that under
[HB 223] the royalty is zero percent if gas is offered for in-
state utilities and otherwise reduced by 50 percent to 6.25
percent [while the royalty rate is 5 percent under HB 276].
REPRESENTATIVE RAUSCHER replied that those understandings are
correct. He added that the third difference is that HB 223 only
encompasses Cook Inlet while HB 276 encompasses a larger area.
REPRESENTATIVE MEARS asked about the geographic limit specified
in HB 276.
MR. VALDEZ responded that HB 276 specifies a geographic area
that is south of the North Slope, so Middle Earth as well as
Cook Inlet.
CHAIR MCKAY offered his belief that Middle Earth is somewhere
around Fairbanks.
2:42:14 PM
REPRESENTATIVE ARMSTRONG asked whether other incentives were
explored that would be helpful in incentivizing more production
or whether the sponsor chose this alternative because it seemed
the most incentivizing to Alaska's producers and operators.
REPRESENTATIVE RAUSCHER answered that, in his opinion, he must
do something that helps the parties, not just one entity. He
said he wants to reward the act of selling to utility companies
because they need it, and he wants to make it so [producers]
will want to go search for . This alternative would benefit the
ratepayers, the utility companies, and the producers producing
gas in the inlet, and no gas would be purchased from overseas.
2:44:40 PM
REPRESENTATIVE ARMSTRONG offered her appreciation for the zero
percent to incentivize the payment to utilities. She said it is
also compelling to provide help to industry when other things
come online, along with capturing more of the mining value
chain. So, she continued, it would be interesting to do a
hybrid of the two bills. She asked whether it is correct that
the royalty rate would be 6.25 percent if the gas wasn't offered
to a utility first.
MR. VALDEZ confirmed that that is correct.
2:45:18 PM
CHAIR MCKAY announced that HB 223 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 276 Transmittal Letter 01.16.2024.pdf |
HRES 1/31/2024 1:00:00 PM |
HB 276 |
| HB 276 Sectional Analysis version A 01.22.2024.pdf |
HRES 1/31/2024 1:00:00 PM |
HB 276 |
| HB 276 Fiscal Note DNR.pdf |
HRES 1/31/2024 1:00:00 PM |
HB 276 |
| HB 223 Sponsor Statement.pdf |
HRES 1/31/2024 1:00:00 PM |
HB 223 |
| HB 223 Sectional Analysis.pdf |
HRES 1/31/2024 1:00:00 PM |
HB 223 |
| HB 276 - DNR Briefing Paper.pdf |
HRES 1/31/2024 1:00:00 PM |
HB 276 |
| HB 276 - DNR Presentation 1.30.24.pdf |
HRES 1/31/2024 1:00:00 PM |
HB 276 |
| HB 223 Fiscal Note DNR.pdf |
HRES 1/31/2024 1:00:00 PM |
HB 223 |
| HB 223 Fiscal Note DOR.pdf |
HRES 1/31/2024 1:00:00 PM |
HB 223 |