Legislature(2023 - 2024)BARNES 124
03/01/2024 01:00 PM House 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 | |
| HB359 | |
| SSCR11 | |
| SSCR3 | |
| SSCR9 | |
| SSCR1 | |
| HB222 | |
| HB223 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 222 | TELECONFERENCED | |
| *+ | HB 359 | TELECONFERENCED | |
| + | SSCR 1 | TELECONFERENCED | |
| + | SSCR 3 | TELECONFERENCED | |
| + | SSCR 9 | TELECONFERENCED | |
| + | SSCR11 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 223 | TELECONFERENCED | |
HB 223-TAX & ROYALTY FOR CERTAIN GAS
2:31:03 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." [Before the committee, adopted as a working document on
2/23/24, was the proposed committee substitute (CS) for HB 223,
Version 33-LS0886\S, Nauman, 2/10/24 ("Version S").]
2:32:18 PM
CHAIR MCKAY moved to adopt Amendment 1 to HB 223, Version S,
labeled 33-LS0886\S.9, Nauman 2/29/24, which read as follows:
Page 1, line 1, following "rates":
Insert "and payments"
Page 1, line 13, through page 9, line 31:
Delete all material and insert:
"* Sec. 2. AS 38.05.180 is amended by adding new
subsections to read:
(mm) Notwithstanding a requirement in the
leasing method chosen of a minimum fixed royalty
share, for leases issued in the Cook Inlet sedimentary
basin, the department shall accept, as complete
payment for royalties due to the state, zero in
royalties for qualified new gas and 50 percent of the
minimum fixed royalty share for qualified new oil,
unless payment is lower under another subsection of
this section. The royalty reduction in this subsection
applies until the earlier of either
(1) 10 years following the commencement of
commercial production that begins after July 1, 2024;
or
(2) the date on which a commercial quantity
of oil or gas produced from the Cook Inlet sedimentary
basin is shipped out of the state.
(nn) In (mm) of this section,
(1) "qualified new gas" means gas produced
from
(A) a field or pool that the commissioner
determines has not previously produced gas for
commercial sale before January 1, 2024;
(B) a field or pool that has previously
produced gas, but did not produce gas during calendar
year 2024;
(C) a well that did not exist on January 1,
2025, if the commissioner determines that production
of that gas from the field or pool from an existing
well was not economically feasible;
(2) "qualified new oil" means oil produced
from
(A) a field or pool that the commissioner
determines has not previously produced oil for
commercial sale before January 1, 2024;
(B) a field or pool that has previously
produced oil, but did not produce oil during calendar
year 2024;
(C) a well that did not exist on January 1,
2025, if the commissioner determines that production
of that oil from the field or pool from an existing
well was not economically feasible.
* Sec. 3. AS 31.05.030(i); AS 38.05.180(f)(5), and
38.05.180(dd) are repealed."
Renumber the following bill section accordingly.
2:32:23 PM
REPRESENTATIVE RAUSCHER objected for the purpose of discussion.
2:32:26 PM
ED KING, Staff, Representative Tom McKay, Alaska State
Legislature, on behalf of Representative McKay, explained that
Amendment 1 would repeal everything except the effective date
and the first section of the bill, thereby repealing AS
38.05.180(f)(5), which is the royalty relief provision. The
proposed amendment would also allow the state to accept less
than its full royalty and forego the deed for an amendment to
the lease rather than renegotiating the terms of the contract to
reduce the royalty. In addition, the definitions of "new gas"
and "new oil" in Version S would be limited to gas and oil sold
in state. Furthermore, in the event that a lease is eligible
for royalty relief under a different subsection, the lower rate
would prevail. He further noted that paragraph (2) on lines 15-
16 adds new language to reflect a sunset condition that says if
in the future, the state is exporting liquified natural gas
(LNG) again, the royalty relief would no longer be necessary.
Last, the definition of "qualified new oil" adds a subparagraph
that was missing in the previous version.
2:35:18 PM
REPRESENTATIVE SADDLER referred to paragraph (2) and asked
whether its fair to presume that if oil and gas were being
commercially delivered outside the state, it would be evidence
in itself that the royalty reduction is no longer necessary.
MR. KING answered, "That is correct."
2:35:52 PM
REPRESENTATIVE RAUSCHER asked to hear from the department on
Amendment 1.
2:36:23 PM
JOHN CROWTHER, Deputy Commissioner, Department of Natural
Resources, shared his understanding that Amendment 1 is a
"mechanical adjustment" to accomplish the same intent as the
committee substitute. He said DNR supports Amendment 1.
2:37:33 PM
REPRESENTATIVE RAUSCHER removed his objection to Amendment 1.
There being no further objection, Amendment 1 was adopted.
2:37:53 PM
The committee took a brief at-ease at 2:37 p.m.
2:38:35 PM
REPRESENTATIVE MEARS moved to adopt Amendment 2 to HB 223,
Version S, labeled 33-LS0886\S.7, Nauman, 2/20/24, which read as
follows:
Page 8, line 30, following "production":
Insert "that begins on or before December 31,
2033,"
2:38:55 PM
REPRESENTATIVE RAUSCHER objected for the purpose of discussion.
REPRESENTATIVE MEARS explained that Amendment 2 would add a
sunset date to avoid losing potential revenue.
2:40:16 PM
REPRESENTATIVE RAUSCHER asked to hear from the department on
Amendment 2.
MR. CROWTHER said DNR does not support Amendment 2 but
understands if the committee wishes to adopt different
timeframes that it deems appropriate.
2:41:28 PM
CHAIR MCKAY explained that as the gas well ages, the royalty
would increase; however, wells never increase in production at
the end of their life. In addition, tax stability is always
being emphasized. For those two reasons, he voiced his
opposition to Amendment 2.
REPRESENTATIVE SADDLER observed that Version S has a 10-year
limit. He shared his belief that contrary to Representative
Mears's assertion that the date of the reduced royalties could
extend indefinitely into the future, the legislature could
change that in statute. He spoke against the insertion of a
hard deadline and said he is disinclined to support Amendment 2.
CHAIR MCKAY said citizens would pay more for gas than what the
state would make in revenue from the declining gas wells.
Consequently, he opined that the benefit of having low-cost gas
energy coming from the Cook Inlet Region far outweighs any
revenue that would be gained by a small royalty rate.
2:44:06 PM
REPRESENTATIVE ARMSTRONG clarified that the bill was expanded to
include both oil and gas, so the timeline would impact both.
CHAIR MCKAY said the problem is that wells often produce both
oil and gas together; consequently, he asked how a well would be
taxed for both commodities.
2:45:31 PM
REPRESENTATIVE MEARS clarified that as written, royalties would
be collected on declining oil production after the first 10
years of a well. In response to Representative Saddler, she
said there would be a potential for royalty relief to continue
for the next 20 years, as Amendment 2 would place a sunset on
wells drilled 11 years from now. She pointed out that if
current wells stop producing in 10 years, there is 70 billion
cubic feet (Bcf) of gas being produced in the Cook Inlet to meet
demand, which is $80 million per year at 12.5 percent in royalty
relief that's unrealized by the state. The bill would support
Hilcorp with 20 Bcf per year amounting to $23 million in gas
that they would have produced over the next decade regardless
[of the royalty relief].
CHAIR MCKAY reiterated that the goal is to produce low-cost gas
from the Cook Inlet to save residents of the Railbelt a
significant amount of money that would otherwise go to imported
LNG.
2:48:50 PM
REPRESENTATIVE RAUSCHER maintained his objection.
2:49:22 PM
A roll call vote was taken. Representatives Mears and Armstrong
voted in favor of adopting Amendment 2. Representatives McCabe,
Baker, Rauscher, Saddler, and McKay voted against it.
Therefore, Amendment 2 failed to be adopted by a vote of 2-5.
2:50:09 PM
REPRESENTATIVE MEARS moved to adopt Amendment 3 to HB 223,
Version S, labeled 33-LS0886\S.3, Nauman, 2/20/24, which read as
follows:
Page 1, line 1, following "gas;":
Insert "relating to transferable oil and gas
production tax credit certificates;"
Page 9, following line 24:
Insert a new bill section to read:
"* Sec. 5. AS 43.55.028 is amended by adding a new
subsection to read:
(t) The percentage of a transferable tax credit
certificate issued under AS 43.55.023(d) or former
AS 43.55.023(m) or a production tax credit certificate
issued under AS 43.55.025(f) purchased by the
department may not exceed the percentage of resident
workers in the applicant's workforce in the state in
the preceding calendar year, including workers
employed by the applicant's contractors. An amount of
a credit not purchased because of application of this
subsection may be applied against the applicant's tax
liability under this chapter. In this subsection,
"resident worker" has the meaning given in
AS 43.40.092(b)."
Renumber the following bill sections accordingly.
2:50:42 PM
REPRESENTATIVE RAUSCHER objected for the purpose of discussion.
2:50:50 PM
REPRESENTATIVE MEARS explained that Amendment 3 makes a title
change to the bill to allow for transferable tax credits that
encourage local hire and attribute a percentage of tax credit to
an applicant's contractors and employees on site.
2:51:05 PM
REPRESENTATIVE SADDLER stated his objection to Amendment 3 and
characterized it as the "poster child" for inconsistent tax
policy. He opined that it's not appropriate to predicate tax
credits on the rate of hire.
CHAIR MCKAY reported that the rate of local hire in the Alaska
oil and gas industry is approximately 80 percent. He surmised
that its unconstitutional to demand that "everyone" be an Alaska
resident.
2:52:55 PM
REPRESENTATIVE MEARS [moved to withdraw] Amendment 3. [There
being no objection, Amendment 3 was withdrawn.]
2:53:04 PM
REPRESENTATIVE MEARS moved to adopt Amendment 7 to HB 223,
Version S, labeled 33-LS0886\S.1, Nauman, 2/20/24, which read as
follows:
Page 1, line 1, following "gas;":
Insert "relating to disclosure of information
related to oil and gas production taxes;"
Page 9, following line 24:
Insert new bill sections to read:
"* Sec. 5. AS 43.55.890 is amended to read:
Sec. 43.55.890. Disclosure of tax information.
Notwithstanding any contrary provision of AS 40.25.100
or AS 43.05.230, [AND REGARDLESS OF WHETHER THE
INFORMATION IS CONSIDERED UNDER AS 43.05.230(E) TO
CONSTITUTE STATISTICS CLASSIFIED TO PREVENT THE
IDENTIFICATION OF PARTICULAR RETURNS OR REPORTS,] the
department shall make publicly available [MAY PUBLISH]
the following information under this chapter, [IF
AGGREGATED AMONG THREE OR MORE PRODUCERS OR
EXPLORERS,] showing by month or calendar year and by
lease or property, unit, or area of the state:
(1) the amount of oil or gas production;
(2) the amount of taxes levied under this
chapter or paid under this chapter;
(3) the effective tax rates under this
chapter;
(4) the gross value of oil or gas at the
point of production;
(5) the transportation costs for oil or
gas;
(6) qualified capital expenditures, as
defined in AS 43.55.023;
(7) exploration expenditures under
AS 43.55.025;
(8) production tax values of oil or gas
under AS 43.55.160;
(9) lease expenditures under AS 43.55.165;
(10) adjustments to lease expenditures
under AS 43.55.170;
(11) tax credits applicable or potentially
applicable against taxes levied by this chapter.
* Sec. 6. The uncodified law of the State of Alaska
is amended by adding a new section to read:
APPLICABILITY. AS 43.55.890, as amended by sec. 5
of this Act, applies to information collected on or
after the effective date of sec. 5 of this Act."
Renumber the following bill sections accordingly.
2:53:21 PM
REPRESENTATIVE RAUSCHER objected.
2:53:59 PM
REPRESENTATIVE MEARS explained that Amendment 7 requires
physical transparency by making disclosure of tax information
publicly available.
REPRESENTATIVE SADDLER asked how often the Division of Oil & Gas
exercises the discretion to release confidential information.
2:55:49 PM
MR. CROWTHER responded that DNR regularly publishes this kind of
information pursuant to the terms of current law, which prevents
individual or corporate information from being disclosed. He
expressed concern that releasing that kind of particularized
data could result in significant exposure to corporate and
commercial information.
2:57:36 PM
DEREK NOTTINGHAM, Director, Division of Oil & Gas, Department of
Natural Resources, agreed that the individualized release of
that information exposes those entities to competitive
information being released publicly.
REPRESENTATIVE SADDLER asked whether companies would be more or
less likely to invest if their competitive information was made
public.
MR. CROWTHER responded that it would be a key change to the
operational environment of Alaska. Operators would have to
carefully assess what information would be submitted to the
department.
2:59:13 PM
REPRESENTATIVE ARMSTRONG sought to confirm that Amendment 7
would put Alaska in compliance with the way that disclosures are
handled in Texas and North Dakota.
MR. CROWTHER said he could not confirm the treatment of tax or
commercial information in either state.
REPRESENTATIVE ARMSTRONG referenced the Texas Report on Natural
Gas Tax and pointed out that Texas is not considered a fragile
jurisdiction like Alaska, has a well-endowed university, and
does not have income tax. She shared her belief that Amendment
7 would be hugely beneficial to Alaska, and she posited that
citizens of both Texas and North Dakota have benefited from the
availability of this information as well.
3:01:10 PM
REPRESENTATIVE MCCABE said he might be inclined to support
Amendment 7 if there were a grandfather clause for entities
already established in Alaska. He asked whether this is another
"thinly veiled" attempt to access Hilcorp's data that it refuses
to provide.
REPRESENTATIVE MEARS responded that Amendment 7 is an honest and
vigorous attempt to understand the largest business in Alaska.
REPRESENTATIVE MCCABE said he would not be supporting Amendment
7 because it's unfair to target one company.
CHAIR MCKAY reiterated that the intent of the bill is to
incentivize gas production in Cook Inlet and opined that
requiring "the opening of books" would be a disincentive.
3:03:40 PM
REPRESENTATIVE RAUSCHER maintained his objection to Amendment 7.
3:04:21 PM
A roll call vote was taken. Representatives Mears and Armstrong
voted in favor of adopting Amendment 7. Representatives McCabe,
Baker, Rauscher, Saddler, and McKay voted against it.
Therefore, Amendment 7 failed to be adopted by a vote of 2-5.
3:05:22 PM
CHAIR MCKAY announced that HB 223, Versions S, [as amended], was
held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| exor0126.pdf |
HRES 3/1/2024 1:00:00 PM |
SSCR 3 |
| exor0132.pdf |
HRES 3/1/2024 1:00:00 PM |
SSCR 9 |
| exor0134.pdf |
HRES 3/1/2024 1:00:00 PM |
SSCR11 |
| exor0124.pdf |
HRES 3/1/2024 1:00:00 PM |
SSCR 1 |
| Sect. Analysis for HB-359.pdf |
HRES 3/1/2024 1:00:00 PM |
HB 359 |
| HB-359 PFD Cash Out Sponsor Statement.pdf |
HRES 3/1/2024 1:00:00 PM |
HB 359 |
| EO 126 Wood-Tikchik State Park Management Council DNR Presentation 03.01.24.pdf |
HRES 3/1/2024 1:00:00 PM |
SSCR 3 |
| 2024 Executive Order 134 - Rec Rivers Advisory Board Overview 03.01.24.pdf |
HRES 3/1/2024 1:00:00 PM |
SSCR11 |
| EO 132 Chilkat Bald Eagle Preserve Advisory Council DNR Presentation 03.01.24.pdf |
HRES 3/1/2024 1:00:00 PM |
SSCR 9 |
| EO 132 Supporting Doc - Chilkat Bald Eagle Preserve Management Plan 2.1.24.pdf |
HRES 3/1/2024 1:00:00 PM SRES 2/14/2024 3:30:00 PM |
SSCR 9 |
| EO 132 Testimony - Received as of 2.13.24.pdf |
HRES 3/1/2024 1:00:00 PM SRES 2/14/2024 3:30:00 PM |
SSCR 9 |
| HB 223 HRES Amendment Packet.pdf |
HRES 3/1/2024 1:00:00 PM HRES 3/4/2024 1:00:00 PM |
HB 223 |
| HB 223 Legal Memo on CS.pdf |
HRES 3/1/2024 1:00:00 PM |
HB 223 |
| HB 359 Fiscal Note.pdf |
HRES 3/1/2024 1:00:00 PM |
HB 359 |