Legislature(2013 - 2014)BARNES 124
03/14/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB203 | |
| HB282 | |
| HB230 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 203 | TELECONFERENCED | |
| += | HB 282 | TELECONFERENCED | |
| += | HB 230 | TELECONFERENCED | |
| += | HB 316 | TELECONFERENCED | |
HB 230-AIDEA BONDS FOR PROCESSING FACILITIES
4:26:23 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 230, "An Act allowing the Alaska Industrial
Development and Export Authority to issue bonds for an oil or
gas processing facility; and creating the oil and gas
infrastructure fund to finance construction or improvement of an
oil or gas processing facility."
REPRESENTATIVE PAUL SEATON, Alaska State Legislature, offered to
provide a brief refresher on HB 230. He stated that the purpose
of the bill is to increase the throughput in Trans-Alaska
Pipeline System (TAPS). He noted water constraints on some of
the processing facilities on the North Slope and difficulties
accessing others mean some small producers the ability to put
oil in TAPS. This bill provides a means to finance processing
facilities on the North Slope to increase the flow through TAPS.
4:28:07 PM
REPRESENTATIVE SADDLER made a motion to adopt Amendment 1,
[labeled 28-LS1053\U.1, Nauman, 2/24/14], which read
Page 4, line 23:
Delete "loan"
CHAIR OLSON objected for the purpose of discussion.
4:28:18 PM
REPRESENTATIVE SEATON explained this will delete the word "loan"
that was inadvertently put into the Alaska Industrial
Development and Export Authority (AIDEA) revolving fund. It is
not a loan fund.
CHAIR OLSON removed objection. There being no further objection,
Amendment 1 was adopted.
4:28:50 PM
REPRESENTATIVE SADDLER made a motion to adopt Amendment 2,
[labeled 28-LS1053\U.2, Nauman, 2/24/14], which read:
Page 5, line 2:
Delete "(1)"
Page 5, line 3:
Delete ";"
Insert "."
Page 5, lines 4 - 8:
Delete all material and insert:
"* Sec. 6. AS 44.88.900 is amended by adding a new
paragraph to read:
(18) "oil or gas processing facility" means
a project that is a facility that separates and cleans
crude oil or natural gas by separating impurities to
make the product suitable for transport through a
pipeline or a facility that chemically converts
natural gas to a liquid form; "oil or gas processing
facility" does not include a facility that uses phase
conversion of natural gas to liquid form."
Renumber the following bill section accordingly.
CHAIR OLSON objected for the purpose of discussion.
4:29:03 PM
REPRESENTATIVE SEATON explained this amendment moves the
definition of "Oil and Gas Processing Facility" from this
section statute to AIDEA's general statute. This change is
technical and does not change the definition.
CHAIR OLSON removed his objection. There being no further
objection, Amendment 2 was adopted.
4:29:37 PM
REPRESENTATIVE SADDLER made a motion to adopt Amendment 3,
[labeled 28-LS1053\U.4, Nauman, 2/24/14], which read as follows:
Page 2, line 16, through page 3, line 12:
Delete all material and insert:
"* Sec. 2. AS 43.20.049(e)(3) is amended to read:
(3) "qualified oil and gas service industry
expenditure"
(A) means an expenditure directly
attributable to an in-state manufacture or in-state
modification of tangible personal property used in the
exploration for, development of, or production of oil
or gas deposits;
(B) means an expenditure for the
construction or improvement of an oil or gas
processing facility, flow lines, or other
infrastructure of the facility north of 68 degrees
North latitude;
(C) [, BUT] does not include components or
equipment used for or in the process of that
manufacturing or modification.
* Sec. 3. AS 43.20.049(e) is amended by adding a
new paragraph to read:
(4) "oil or gas processing facility" has
the meaning given in AS 44.88.168."
Renumber the following bill sections accordingly.
CHAIR OLSON objected for the purpose of discussion.
4:29:57 PM
REPRESENTATIVE SEATON explained that Amendment 4 deletes the
repetition of the tax credit language and refers to the tax
provisions in SB 21 and keeps the provisions the same.
4:30:12 PM
REPRESENTATIVE JOSEPHSON asked for explanation of Amendment 3,
which is "U.4." He asked for clarification of subparagraph (B)
in terms of its direct economic benefits to Alaskans.
REPRESENTATIVE SEATON responded that this envisions that the
components for a facility being constructed on the North Slope
might be manufactured outside the state and those components
would not qualify for tax credit. He clarified that if the
module was made in Alaska, it would qualify for tax credits, but
if it is made outside the state it would not qualify for the tax
credits. He characterized the construction process as being a
combination resulting in a completed processing facility.
4:31:35 PM
REPRESENTATIVE JOSEPHSON expressed concern that litigation might
arise from the suggestion that the tax credits should apply. He
wondered whether the tax credits are "tight enough" to reflect
the sponsor's intent. He asked whether he had any concern.
REPRESENTATIVE SEATON answered no. It seems to be well
understood that the goal is building a processing facility. He
highlighted that subparagraph (A) relates to tangible personal
property and wouldn't relate to the structure. Thus, it would
be necessary to segregate out parts of the processing facility.
He related that this doesn't relate to intangible property but
subparagraph (B) does include the entire processing facility;
however, it is limited to expenditures made in Alaska.
4:33:32 PM
REPRESENTATIVE JOSEPHSON, with respect to Amendment [3], said
that the existing statute, listed in subparagraph (A), relates
to in-state manufacture or in-state modification of tangible
personal property; however, subparagraph (B), does not do so.
He said he likes this bill, but is curious about that aspect.
TED LEONARD, Executive Director, Alaska Industrial Development &
Export Authority (AIDEA), Department of Commerce, Community, &
Economic Development (DCCED) related that this issue was
previously discussed, although AIDEA can't answer questions on
the tax credit itself. He recalled that the Department of
Revenue (DOR) previously testified. He clarified that this
statute is not under Alaska Industrial Development and Export
Authority (AIDEA).
4:34:57 PM
REPRESENTATIVE SEATON recalled that this was discussed with the
Legislative Legal and Research attorney. He stated that this
language was already adopted in SB 21 and is merely inserted in
this section of statute.
4:35:55 PM
The committee took an at-ease from 4:35 p.m. to 4:43 p.m.
4:43:50 PM
REPRESENTATIVE JOSEPHSON referred to Amendment [3], which
includes language for the definition of a qualified oil and gas
service industry expenditure. He asked when an audit or
accounting is completed whether it would be deemed legally
significant that [subparagraph] (A) refers to in-state
manufacturers and modification and [subparagraph] (B) doesn't.
4:44:35 PM
EMILY NAUMAN, Legislative Legal Counsel, Legislative Legal and
Research Services, stated that she was unsure from an auditing
perspective; however, she agreed that it is true [subparagraph]
(A) requires the taxable or tax credit event to occur in the
state whereas the new language in [subparagraph] (B) does not
require the activity to occur in state. She deferred to the DOR
to answer any questions on auditing.
REPRESENTATIVE SEATON pointed out that this refers to facilities
north of 68 degrees North latitude. He suggested that it could
specify Alaska, if necessary.
4:45:39 PM
REPRESENTATIVE SADDLER referred to page 2, line 2 [of Version U]
to a reference to the "pipeline." He asked whether it is
necessary to specify the TransAlaska Pipeline System on page 2
and again on page 4 to similar references.
MS. NAUMAN noted this is legislative intent language so it is
not legally binding; therefore, it might not need to be as
specific but it could be clarified.
REPRESENTATIVE SADDLER stated that the sponsor said it was
acceptable.
4:46:51 PM
REPRESENTATIVE SADDLER made a motion to adopt Conceptual
Amendment 1 on page 2, line 2, to change pipeline to "Trans-
Alaska Oil Pipeline" and any other place in the bill that it is
necessary to clarify the pipeline to the Trans-Alaska Oil
Pipeline.
REPRESENTATIVE SADDLER withdrew his amendment since procedurally
an amendment was already on the table.
4:47:31 PM
CHAIR OLSON withdrew his objection to Amendment 3.
There being no further objection, Amendment 3 was adopted.
REPRESENTATIVE SADDLER made a motion to adopt Conceptual
Amendment 1, on page 2, line 2, remove the word "pipeline" and
insert "Trans-Alaska Oil Pipeline" and again on page 2, line 4,
and any place else in the bill where it is necessary to make
that clarification.
There being no objection, Conceptual Amendment 1 was adopted.
4:48:39 PM
REPRESENTATIVE SADDLER made a motion to adopt Amendment 4,
labeled 28-LS1053\ U.5, Nauman, 3/11/14, which read as follows:
Page 5, lines 14 - 16:
Delete "The processing facility, flow lines, and
other surface infrastructure for the facility shall be
used to secure bonds issued under this section."
Page 5, line 17, following "exceed":
Insert "the sum of"
Page 5, line 18:
Delete "may include"
Delete "other"
Insert "the"
Page 5, lines 19 - 22:
Delete "Notwithstanding AS 44.88.140, an oil or
gas processing facility, flow lines, and other surface
infrastructure for the facility constructed or
financed by the oil and gas infrastructure fund
(AS 44.88.168) are subject to taxes and special
assessments of the state or a political subdivision of
the state."
Page 5, following line 22:
Insert new subsections to read:
"(b) The bonds authorized in this section may be
(1) issued as either bonds that are a
general obligation of the authority or as revenue
bonds payable exclusively from the income and other
money derived from the oil and gas processing
facility, as the authority considers appropriate;
(2) used to provide financing under another
program of the authority.
(c) Notwithstanding AS 44.88.140 and
AS 29.45.030(a), an oil or gas processing facility,
flow lines, and other surface infrastructure for the
facility constructed or financed by the oil and gas
infrastructure fund (AS 44.88.168) are subject to
taxes and special assessments of the state or a
political subdivision of the state."
Reletter the following subsections accordingly.
Page 5, line 23, following "AS 44.88.095(g).":
Insert "The bonds authorized in this section may
not be considered in calculating the authority's 12-
month bonding limitation under AS 44.88.095(a)."
Page 5, lines 24 - 27:
Delete all material.
4:49:15 PM
CHAIR OLSON objected for the purpose of discussion.
REPRESENTATIVE SEATON stated that AIDEA recommended the language
in Amendment [4]. He explained that AIDEA was concerned that it
might limit revenue bonds; and depending upon the rates, it's
important to have the flexibility to issue revenue and general
obligation bonds as their normal process and AIDEA would use the
most financially beneficial bonding for the project.
4:49:59 PM
REPRESENTATIVE JOSEPHSON, with respect to Amendment [4], asked
about the first deletion. He related his understanding that
under existing law facilities could be used to secure bonds, but
now they cannot be used.
REPRESENTATIVE SEATON answered that is not intent of Amendment
4. He suggested the Legislative Legal and Research attorney
could further explain. He reiterated that the intention is to
insert suggested language from AIDEA to allow either type of
bonds to be used.
MS. NAUMAN responded that omitting the language does not mean
that the processing facility flow lines or other infrastructure
for the facility can't be used to secure bonds. Instead, this
section is silent and leaves the option open.
4:51:28 PM
REPRESENTATIVE JOSEPHSON assumed the idea is to give AODEA more
flexibility on financing.
MS. NAUMAN answered that is her best guess about the purpose.
4:51:56 PM
REPRESENTATIVE SEATON referred to a letter from Ted Leonard,
executive director of AIDEA stating what he believed
Representative Josephson just said.
4:52:18 PM
MR. LEONARD responded that the deletion is to assure that AIDEA
has the flexibility to use either GO bond or revenue bond. He
indicated that AIDEA's financial advisors indicate that rating
agencies and the parties buying the bonds would assume it
referred to a revenue bond based on the current language. Thus,
Amendment 1 deletes the language and inserts the new subsection
that indicates that AIDEA could fund this based on the revenues
and project. He referred to page 2, line 19 of Version U, to a
general description. He reiterated that the bonds issued could
be either GO bonds of the authority or a revenue bond.
CHAIR OLSON removed his objection. There being no further
objection, Amendment 4 was adopted.
4:54:58 PM
REPRESENTATIVE JOSEPHSON asked if the goal is to give credit on
corporate taxes but not production taxes, up to $10 million.
REPRESENTATIVE SEATON answered yes. He explained that Amendment
4 would give a 10 percent credit to stimulate in-state work and
faster "flow" into the Trans-Alaska Pipeline System (TAPS).
4:55:33 PM
REPRESENTATIVE JOSEPHSON asked whether the purpose of the bill
is to aid independent [producers] more than others.
REPRESENTATIVE SEATON answered that HB 230 is not a subsidy, but
the purpose is to incentivize a more rapid build out of
processing facilities to allow additional oil into TAPS. He
offered his belief that it may affect one project or more. He
related that he was aware of one smaller independent [producer]
that this could aid; however, there are other independent
[producers] and major producers that may have some use, as well.
The legislature has already adopted the in-state manufacture
credit. This ensures that it is applicable to processing
facilities to promote production to TAPS.
4:56:57 PM
REPRESENTATIVE CHENAULT expressed concern about tax credit. He
asked what else the bill will do, for example, does it eliminate
AIDEA's capacity for bonding.
REPRESENTATIVE SEATON answered no. He explained that AIDEA has
a $400 million general cap on bonds. This bill would establish
a separate $200 million for oil and gas processing facilities in
addition to the $400 million.
4:57:42 PM
REPRESENTATIVE CHENAULT asked whether AIDEA's bond capacity is
limited to $600 million or if it removes the limit for bonding
capacity for the processing facilities.
REPRESENTATIVE SEATON answered that it does not remove the
limit. It would give [AIDEA] a $200 million [bonding capacity]
for oil and gas processing facilities. He explained that AIDEA
could not take the $200 million and invest in some other kind of
project other than oil and gas processing facilities. He
acknowledged that it is someone limited in that respect, such
that it does not increase their general bonding limit; however,
removing the $200 million from their bonding authority would
"squeeze" many other projects around the state.
4:58:40 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 230.
[HB 230 was held over.]