Legislature(2009 - 2010)BARNES 124
04/07/2010 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB305 | |
| HB337 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 305 | TELECONFERENCED | |
| += | HB 337 | TELECONFERENCED | |
| *+ | HB 320 | TELECONFERENCED | |
| *+ | HB 332 | TELECONFERENCED | |
| + | HB 411 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 337-OIL AND GAS PROD. TAX: CREDITS/INTEREST
CO-CHAIR JOHNSON announced that the next order of business would
be HOUSE BILL NO. 337, "An Act relating to interest on certain
underpayments or overpayments for the oil and gas production
tax, to certificates for certain oil and gas production tax
credits for qualified capital expenditures, and to alternative
tax credits for expenditures for certain oil and gas development
and exploration activities for the oil and gas production tax;
relating to the use of the oil and gas tax credit fund to
purchase certain tax credit certificates; and providing for an
effective date."
CO-CHAIR JOHNSON stated the document before the committee is
Version R. He recalled that Representative Guttenberg had moved
Conceptual Amendment 3, labeled 26-GH2057\A.l, Bullock, 8/24/10,
at the 3/29/10 meeting; however, the amendment was withdrawn so
the meeting could adjourn without any business before it.
REPRESENTATIVE GUTTENBERG moved Conceptual Amendment 3, labeled
26-GH2057\A.1, Bullock, 8/24/10, which read:
Page 1, line 2:
Delete ","
Insert "and"
Page 1, lines 3 - 4:
Delete ", and to alternative tax credits for
expenditures for certain oil and gas development and
exploration activities for the oil and gas production
tax"
Page 3, line 7:
Delete "AS 43.55.025(f) [AS 43.55.025(f)(2)]"
Insert "AS 43.55.025(f)(2)"
Page 3, line 9:
Delete "AS 43.55.025(f) [AS 43.55.025(f)(2)]"
Insert "AS 43.55.025(f)(2)"
Page 4, line 5, through page 9, line 5:
Delete all material.
Renumber the following bill sections accordingly.
Page 9, lines 11 - 25:
Delete all material.
Renumber the following bill sections accordingly.
Page 10, lines 2 - 6:
Delete all material.
Renumber the following bill sections accordingly.
Page 10, line 19:
Delete "Sections 4 - 12 of this Act take"
Insert "Section 5 of this Act takes"
Page 10, line 20:
Delete "sec. 17"
Insert "sec. 9"
CO-CHAIR JOHNSON objected for the purpose of discussion.
REPRESENTATIVE GUTTENBERG explained that the amendment is
conceptual because it was written for a different version of HB
337.
The committee took a brief at-ease.
[FTR audio recording restored.]
6:42:55 PM
REPRESENTATIVE GUTTENBERG, for "practical purposes at this time"
withdrew Conceptual Amendment 3.
6:43:10 PM
CO-CHAIR NEUMAN informed the committee Version E "does not have
the [Alaska Retirement Management (ARM)] Board amendment in
there." He then moved to adopt Version E.
6:43:47 PM
CO-CHAIR JOHNSON announced the motion to bring back before the
committee Version E, the effect of which allows the ARM Board to
purchase the credits.
REPRESENTATIVE P. WILSON objected for the purpose of discussion.
CO-CHAIR NEUMAN pointed out that Version E "does not include the
ARM Board version."
CO-CHAIR JOHNSON corrected his previous statement. He said,
"That's the effect of what [Version E] does, it takes away the
ARM Board version."
6:43:55 PM
REPRESENTATIVE P. WILSON spoke to her objection and asked why
the ARM Board amendment should be removed from the bill.
6:44:30 PM
CO-CHAIR NEUMAN explained that his request to remove the ARM
Board is not for the purpose of disallowing the board to
purchase credits, in fact, he expressed his belief that these
opportunities should be expanded; however, the committee
received a legal opinion from Don Bullock, Attorney, Legislative
Legal Counsel, Legislative Legal and Research Services, advising
that the provision may violate the single-subject clause.
Because of this advice, he stated that his intent is to provide
other opportunities to use for purchases of the credits. In
addition, Co-Chair Neuman expressed his understanding that the
commissioner of the Department of Revenue said the ARM Board
would not purchase the tax credits.
6:46:21 PM
PATRICK GALVIN, Commissioner, Department of Revenue (DOR),
advised that the inclusion of the ARM Board as a potential
market for the credits is no longer necessary as other
provisions of the bill remove any barriers to a credit-
certificate holder getting 100 percent of his/her cash back from
the state, whereas the ARM Board would offer 92 cents on the
dollar. Furthermore, given the advice from Legislative Legal
and Research that the provision raises the possibility of a
single-subject violation, he said the department decided not to
put something unnecessary in the bill and risk creating a legal
issue.
6:47:21 PM
CO-CHAIR JOHNSON expressed his understanding that the bill now
allows the state to purchase, "100 cents on the dollar," and
there is no need for other options.
COMMISSIONER GALVIN said correct.
6:47:34 PM
REPRESENTATIVE KAWASAKI recalled previous debate on this version
of the bill. He said,
Version R is the version that I've marked up, we've
passed two amendments, at least discussed two
amendments to this version, R. I think that the idea
would be that if you don't want the ARM Board in
there, that we could later amend it out. ... To switch
from version to version I think is confusing, I'd
prefer to stick with this version for now....
6:48:20 PM
CO-CHAIR JOHNSON observed that the committee could vote on that,
as any member can make a motion.
6:48:28 PM
REPRESENTATIVE SEATON observed, "This is actually rescinding an
action we took, without rescinding the action." He recalled
that the committee had a choice and discussed Version E, but
Version R was adopted. He then reminded the committee he had
provided a legal memo from 2008 quoting the supreme court, which
held that in matters with such themes such as taxation, a "broad
breadth" of interpretation is acceptable. Further, testimony by
the commissioner pointed out that the bill deals with tax
credits and with the ARM Board's ability to buy those specific
tax credits in the bill, thus "this is probably the closest call
you would ever had." Representative Seaton opined that a
precedent has been set on the floor of the House that subjects
as varied as scallops, hair crab, and fishing licenses have
economic impact, as do Alaska Regional Development Organization
(ARDOR) boards; yet these do not violate the single-subject
rule. He disagreed with legislative counsel in this regard and
objected to the adoption of Version E instead of Version R.
6:50:50 PM
CO-CHAIR JOHNSON noted there are two ways to handle this
situation, one way is to rescind the committee's action, and
both means are technically appropriate.
6:51:12 PM
REPRESENTATIVE OLSON asked the commissioner if he was speaking
from experience and as a member of the ARM Board.
COMMISSIONER GALVIN said he was a member of the ARM Board. In
further response, he advised that this has not been an issue for
the ARM Board, thus has no previous experience; however, he said
the advantages to the ARM Board that were previously identified
are being eliminated by the bill. Therefore, he said he did not
see the value of having the ARM Board alternative in the bill
from the perspective of the credit-certificate holders. From
the perspective of the ARM Board, it may have the opportunity to
buy the certificates, but there will be no sellers.
6:52:31 PM
CO-CHAIR NEUMAN observed that the commissioner finds this
provision unnecessary, and expressed his belief that the
committee did not discuss Version E. Although there may have
been other pieces of legislation that have not been challenged
by the single-subject rule, if there is a challenge, it will
cost the state money for a defense, which would affect
legislation "which is desperately needed." He pointed out the
current legal opinion from Mr. Bullock that there is the
possibility of a violation, and stated, "Then let's just not
even go there."
6:53:52 PM
CO-CHAIR JOHNSON agreed that the provision is not needed, and
opined the single-subject clause is of less concern than
allowing 100 percent on the dollar from the state.
6:54:09 PM
REPRESENTATIVE P. WILSON asked whether that is the only
difference in the two bills.
CO-CHAIR JOHNSON said yes.
6:54:22 PM
REPRESENTATIVE KAWASAKI advised it is easier and cleaner working
on Version R and "amending out the portions of ARM Board for the
folks that object to the ARM Board addition," rather than trying
to add amendments into Version E.
6:54:48 PM
CO-CHAIR JOHNSON stated his intention "to vote to have Version
R, and offer that amendment later."
6:55:17 PM
A roll call vote was taken. Representatives Edgmon, P. Wilson,
Olson, and Neuman voted in favor of adopting Version E.
Representatives Guttenberg, Kawasaki, Tuck, Seaton, and Johnson
voted against it. Therefore, Version E failed by a vote of 4-5.
6:56:37 PM
CO-CHAIR JOHNSON said, "I'm going to vote no, but I want to
qualify that with the amendments coming. And only because we've
got amendments made to this, I would hope that everyone would
remember this vote."
6:56:39 PM
CO-CHAIR NEUMAN moved Conceptual Amendment 4 which read:
Page 7
Delete lines 24-31
Page 8
Delete lines 1-2
Title change
Delete reference to ARM Board
CO-CHAIR JOHNSON restated the conceptual amendment and added
that conforming language would also be appropriate.
6:57:29 PM
REPRESENTATIVE KAWASAKI objected for purpose of discussion.
6:58:08 PM
COMMISSIONER GALVIN pointed out a reference to the ARM Board in
Sec. 3 on page 2.
6:58:32 PM
CO-CHAIR JOHNSON clarified the conceptual amendment is to remove
the ARM Board from the title, and the bill, and for conforming
language where appropriate.
6:58:38 PM
A roll call vote was taken. Representatives Tuck, P. Wilson,
Olson, Edgmon, Neuman, and Johnson voted in favor of Conceptual
Amendment 4. Representatives Guttenberg, Kawasaki, and Seaton
voted against it. Therefore, Conceptual Amendment 4 was adopted
by a vote of 6-3.
6:59:33 PM
REPRESENTATIVE SEATON offered Amendment 5 to rescind the
committee's action on 3/29/10, in failing to adopt Amendment 2,
labeled R.1, Bullock, 2/29/10, which was drafted to Version R,
and which read:
Page 7, line 2:
Delete "that expenditure"
Insert "the expenditures during a calendar year
that exceed the average annual well-related
expenditures for the calendar years 2008, 2009, and
2010; the producer or explorer shall submit the amount
of well-related expenditures for each of the years
2008, 2009, and 2010 at the time an election is made
to apply the credit authorized by this subsection"
[Amendment 2 was amended on 3/29/10 to delete all references to
"2010."
REPRESENTATIVE SEATON reminded the committee that Amendment 2
relates expenditures to the average expenditures during 2008 and
2009, thus the credits are extended to expenditures that exceed
that average amount. The purpose of the amendment is to
accomplish the goal of the bill which is to stimulate additional
investment and production. In fact, the amendment would
encourage companies to increase their investment and in-field
exploration because they would get a higher credit if they
exceeded the amount of their current annual expenditures.
7:02:00 PM
CO-CHAIR NEUMAN objected for the purpose of discussion. He
asked the commissioner how much work it would be for the
department to average all well-related expenditures for 2008 and
2009.
7:03:21 PM
COMMISSIONER GALVIN explained that it would not be possible for
the department to determine this average based on the
information received thus far from taxpayers regarding 2008 and
2009. The department would have to request that taxpayers
provide supplemental tax returns, including documentation of
their well-related expenditures. Currently, the tax reporting
system does not break out expenditures in that way.
7:04:12 PM
CO-CHAIR NEUMAN asked whether the amendment would set a
precedent for the DOR to average well-related expenditures for
prior years; and if so, would this affect any changes in the tax
code.
7:04:57 PM
COMMISSIONER GALVIN explained that it would establish for each
taxpayer a fixed number for their 2008-2009 expenditures, and
that number would determine whether the 30 percent credit
created by the bill is available, or not.
7:05:33 PM
CO-CHAIR NEUMAN restated his question about whether there were
any changes in the tax code, regulations, or statute since 2008
that affect well-related expenditures.
7:05:53 PM
COMMISSIONER GALVIN related that the regulations that define
lease expenditures, as well as those that define qualified
capital expenditures, have been put in place recently and are
retroactive.
7:06:32 PM
CO-CHAIR NEUMAN assumed that if there have been changes dealing
with well-related expenditures since 2008, additional changes
may have negative impacts on companies that have made financial
decisions.
7:07:18 PM
COMMISSIONER GALVIN clarified that the information submitted to
the department for 2008-2009 would not have specified
expenditures that were, or were not, well-related. Thus, new
information from 2008-2009 would have to be provided so that
taxpayers could seek a credit from 2010 forward. He recalled
his previous testimony on this amendment, pointing out that
taxpayers would be motivated to minimize their well-related
expenditures for 2008-2009, perhaps with controversy. He
concluded, "It's doable, as long as you take what they say for
face value."
7:09:35 PM
CO-CHAIR NEUMAN observed that for the governor's bill a
determination was made about penalties for taxes that were
underpaid. If the state changes the rules, it may create an
"inverse" situation that taxpayers would not be able to take
advantage of. He also cautioned about the amount of work
changes would require of the department and the producers.
7:11:14 PM
COMMISSIONER GALVIN advised that this amendment and the in-field
drilling credit in the bill would not affect a tax liability
from 2008-2009; however, when taxpayers submit a request for an
in-field drilling credit, they must show that their well-related
expenditures are consistent. The amendment will create some
additional accounting issues, but it will not impact the past
tax liability.
7:12:41 PM
CO-CHAIR NEUMAN noted that it would impact the value of a
taxpayer's money.
7:13:19 PM
REPRESENTATIVE GUTTENBERG clarified that new information will be
needed whether the amendment is adopted or not; in fact, the
department will be looking at new reporting forms for well
credits because well credits for capital and operating are all
"new ground." He surmised that if the bill passes, auditors
will be evaluating numbers from one year to the next to deal
with well rework.
7:14:50 PM
COMMISSIONER GALVIN agreed that the nature of the credit itself
requires a different accounting methodology than what is
currently required for a taxpayer, but noted that the amendment
does create a requirement for the taxpayer to retroactively
resubmit information for 2008-2009.
7:15:20 PM
REPRESENTATIVE GUTTENBERG confirmed it does not change the past
tax liability in any way.
7:15:34 PM
REPRESENTATIVE KAWASAKI asked how a company would view this
aspect of the bill. For example, a company may decline the
credit to avoid submitting additional information.
7:16:01 PM
CO-CHAIR JOHNSON reminded the commissioner that he is not
required to answer for oil companies.
7:16:06 PM
COMMISSIONER GALVIN opined that if taxpayers are offered an
opportunity to save money, they will.
7:16:26 PM
REPRESENTATIVE KAWASAKI further asked whether there is reason to
believe that the companies may not disclose accurate
information.
7:17:06 PM
COMMISSIONER GALVIN related that the amendment is something that
the department could implement, but it will create complexities
for DOR and for the taxpayer. He acknowledged that taxpayers
may "low ball" their expenditures and added that, from a tax
administration standpoint, the amendment imposes a burden.
7:18:20 PM
REPRESENTATIVE KAWASAKI guessed that the companies "are pretty
honest when they do their taxes, right?"
7:19:01 PM
COMMISSIONER GALVIN advised that taxpayers will interpret the
tax code to their maximum advantage, not to violate the statute,
but to take advantage of accounting principles. This amendment
will motivate taxpayers to lower their 2008-2009 expenditures in
order to maximize their ability to obtain credits.
7:20:24 PM
REPRESENTATIVE KAWASAKI suggested the assessment of penalties
for false claims of tax liability.
COMMISSIONER GALVIN assumed the normal tax penalties for
misreporting tax return data would apply.
7:21:28 PM
CO-CHAIR JOHNSON opined that the amendment sets a policy for a
number that only above which an oil company can take a tax
credit. This will create a disincentive and affect a decision
to complete rework or not. He questioned whether the state
wants to encourage in-field work, or create a barrier by setting
an arbitrary number. The policy call is to either "raise the
bar of disincentive," or to encourage companies to do all the
work they can. It is basically whether the state wants more
incentive or less incentive.
7:23:25 PM
REPRESENTATIVE KAWASAKI expressed his belief that the policy is
to try to create an incentive for more investment and more jobs.
The baseline set by the amendment identifies a company's present
investment, and shows that it can put in more money and apply
for a credit. He recalled testimony that companies might spend
more in Alaska, but decisions to invest are "made in boardrooms
in Houston and London, and they're not made here in the State of
Alaska." Thus the amendment goes to the heart of why we are
trying to push for credits for better investments and without
it, the money goes to other states or countries.
7:24:26 PM
CO-CHAIR JOHNSON disagreed.
7:24:35 PM
CO-CHAIR NEUMAN read from Amendment 2, 26-GH2057\R.1, Bullock,
8/26/10, [amended and not adopted on 3/29/10] paraphrasing as
follows:
Expenditures during a calendar year that exceed the
average wellhead-related expenditures for '08 and '09
... the producer or explorer shall submit the amount
of well-head, well-related expenditures for those
years at the time an election is made, applied, by the
credit authorized by this subsection.
REPRESENTATIVE NEUMAN pointed out that the aforementioned
subsection [found on page 6, line 25, of HB 337, Version R] in
the bill deals with credits taken after June 30, 2010, and
before July 1, 2016. He surmised the department would go back
and average 2008-2009 and apply that information to the credit
authorization in the subsection. Representative Neuman
questioned whether the time, issues, and dates "all falls in
line."
7:26:28 PM
COMMISSIONER GALVIN responded that the elimination of 2010 makes
it mathematically possible to arrive at an average for
comparison. However, the concern for the department is what
happens when an attempt is made to isolate individual taxpayers,
thus creating anomalies and unintended situations. For example,
a taxpayer may have well-related expenditures in 2008, but not
in 2009. The other issue of concern is that when taxpayers
apply for tax credits, they are also members of partnerships
with varied interests dependent upon lease relationships and
other considerations. This problem is exacerbated if the state
sets up a situation in which one partner is allowed to take a
disproportionate advantage of a tax credit, even though "the
concept is, you know, pure, the application ends up not being
so." He warned that the situation would lead to manipulation,
frustrating the underlying purpose.
7:30:14 PM
CO-CHAIR NEUMAN observed the problem would compound
exponentially when multiple companies are involved.
7:30:50 PM
REPRESENTATIVE SEATON reminded the committee that the present
structure allows for a 20 percent capital credit of 2008-2009
expenditures - expenditures and credits that were determined by
the companies to be adequate incentives for the amount of work
that they did. This bill not only allows 30 percent on capital
credits, but expands the credits into additional well-related
expenditures, which are of a greater proportion than the capital
credits. Therefore, the bill allows for a very large credit "on
a much broader sweep of expenditures, under this bill, than the
20 percent capital credit which was sufficient to get the amount
of work that was done in 2008 and 2009; it's obvious it was
enough incentive because they did the work with a 20 percent
capital credit." Addressing the complexity involved to
implement the amendment, he pointed out that the companies all
have joint operating agreements and are sophisticated partners
with clear financial arrangements. He acknowledged that since
this is a new category of well-related expenditures, the
companies will have to develop new computer models, but these
will be based on standard accounting principles; in fact, the
biggest question is the fiscal impact to the state.
Representative Seaton referred to the analysis contained in
Fiscal Note #3 **Corrected**, dated 2/08/10, from Tax Division,
DOR, and stated that revenues are estimated to be reduced by
$325 million in 2011 for doing the same work that is already
sanctioned, and that will garner a 20 percent capital credit.
The fiscal note further indicates that revenues are estimated to
be reduced by $350 million from 2013 to 2016. He concluded that
the amendment would likely reduce that loss by $200 million per
year.
7:34:33 PM
CO-CHAIR JOHNSON interjected that predicting a loss of revenue
to the state is speculation, and questioned whether
Representative Seaton could "extrapolate the numbers the way you
are doing it."
7:35:05 PM
REPRESENTATIVE SEATON called attention to the Alaska Department
of Revenue presentation dated 3/29/10, slide 2 titled,
"Production Tax Revenue with Additional Well-Related Credit
Under HB 337," found in the committee packet. The chart
illustrated projected FY 08 expenditures in the amount of $245
million, FY 09 expenditures in the amount of $255 million, and
FY 10 expenditures in the amount of $297 million. This program
will put all well-related expenses in these years in a new
category that enjoys a 30 percent tax credit - not only raising
the capital credit by 10 percent - but giving 30 percent on the
new category of "intangible drilling and development costs."
Although the numbers may be speculative, they have been provided
by the department and indicate the reduction of the revenue
stream, even though the companies are basically operating at
exactly the same level as they have operated in the last year.
7:36:36 PM
CO-CHAIR JOHNSON acknowledged Representative Seaton's point;
however, the facts are unknown and whether the bill spurs
development will be known very quickly.
7:36:47 PM
REPRESENTATIVE SEATON speculated that the amendment will save
the state about $200 million per year, and asked the department
whether the additional tax evaluations would be an unsustainable
burden.
7:37:43 PM
COMMISSIONER GALVIN appreciated the committee's attempt to
simplify the issue before it; however, he described the
challenges faced by the department as it was trying to write a
bill for a credit that will spur the development of additional
wells. He cautioned against assuming that there will be the
same number of well-related expenditure opportunities from one
year to the next. As a matter of fact, companies operate on a
basis of opportunity, development, schedules for fields, and
sophisticated investment methods, including the economics of a
specific well. The state does not have a methodology to discern
whether certain costs are for work a company would be doing
anyway, and other if costs are "additional stuff." The
governor's bill attempts to give an across-the-board credit for
well-related work because drilling wells is good for the state.
7:40:25 PM
REPRESENTATIVE TUCK acknowledged that the purpose of the bill is
to change behavior, create jobs, and increase the flow of oil in
the Trans-Alaska Pipeline System (TAPS). He stressed that the
hope is to have production above and beyond what is already
taking place, but the bill gives tax credits for work that is
already being done. On the other hand, the amendment offers
credit to those companies that are going above and beyond,
thereby producing more jobs, more revenue for the state, and
more oil for TAPS. Representative Tuck acknowledged the
difficulties created by the amendment, and related that he
supported the new capital and exploration credits, but said he
had concerns about the operating portion. Spending more on its
operating budget to produce more oil is beneficial to a company
and to the state, but testimony before the committee has
indicated that doing that may be hindered because of the current
tax regime. Without the amendment, he said he was hesitant to
include operating expenses, although he supported the original
proposals that gave capital credits "where we know we're
successful, and give a little bit more for that."
7:42:53 PM
REPRESENTATIVE EDGMON said a clear picture is not evident; in
fact, there remains an element of false economy and speculation.
Hearing the debate leads him to support the amendment, and he
recalled that previous testimony on oil and gas topics failed to
reveal the financial aspects of the industry. He cautioned,
however, that the bill may not do what it intends to do, and it
could cost the state money in the process. Representative
Edgmon then called the question.
7:43:56 PM
REPRESENTATIVE GUTTENBERG restated the estimated production tax
revenue credits from aforementioned slide 2: $297 million in FY
10; $327 million in FY 11; $336 million in FY 12; $390 million
in FY 13. He suggested that the companies will be happy with
this bill in any form, even if they have to hire accountants,
because they will receive unexpected credits for work that they
were going to do anyway.
7:45:02 PM
CO-CHAIR JOHNSON observed that the bill may not work, and the
amount of money involved is unknown; however, what is known is
that employment on the slope continues to decline, and the state
is losing $100 million per year in revenue. The focus of the
committee is on the loss of revenue to the state, but the
committee did not even discuss the number of jobs that these
credits create.
7:45:50 PM
REPRESENTATIVE NEUMAN maintained his objection to the motion.
CO-CHAIR JOHNSON clarified that a yes vote [on Amendment 5]
would put Amendment 2 before the committee.
7:47:16 PM
A roll call vote was taken. Representatives Kawasaki, Tuck, P.
Wilson, Seaton, Edgmon, and Guttenberg, voted in favor of
[Amendment 5] rescinding the previous vote on Amendment 2.
Representatives Olson, Neuman, and Johnson voted against it.
Therefore, Amendment 5 was adopted by a vote of 6-3.
7:47:19 PM
CO-CHAIR JOHNSON announced that Amendment 2 was before the
committee.
7:47:26 PM
REPRESENTATIVE SEATON moved to adopt Amendment 2.
CO-CHAIR JOHNSON objected.
COMMISSIONER GALVIN pointed out that Amendment 2 originally
affected 2008, 2009, and 2010, but there was an amendment to the
amendment.
CO-CHAIR JOHNSON, in response to Commissioner Galvin, clarified
that Amendment 2, as amended, removes 2010 from the years that
are averaged.
7:48:39 PM
A roll call vote was taken. Representatives Kawasaki, Tuck,
Seaton, Edgmon, and Guttenberg voted in favor of Amendment 2, as
amended. Representatives P. Wilson, Olson, Neuman, and Johnson
voted against it. Therefore, Amendment 2, as amended, was
adopted by a vote of 5-4.
7:48:41 PM
CO-CHAIR JOHNSON announced that HB 337 was before the committee.
7:48:47 PM
CO-CHAIR NEUMAN moved to report CSHB 337, out of committee with
individual recommendations and the accompanying fiscal notes.
He then withdrew his motion.
7:49:24 PM
CO-CHAIR JOHNSON, hearing no objection to the withdrawal of the
motion, announced that the bill was before the committee.
7:49:35 PM
REPRESENTATIVE KAWASAKI offered Conceptual Amendment 6, which
read as follows:
On page 3, line 1
Delete the word "three"
Insert the word "five"
7:50:06 PM
REPRESENTATIVE TUCK said that was an error that was previously
noted.
7:50:24 PM
CO-CHAIR JOHNSON, hearing no objection, announced that
Conceptual Amendment 6 was adopted.
7:50:36 PM
REPRESENTATIVE KAWASAKI offered Conceptual Amendment 7, which
read as follows:
On page 6, line 26,
After the word "expenditure"
Insert "incurred"
7:51:00 PM
There being no objection, Conceptual Amendment 7 was adopted.
7:51:47 PM
REPRESENTATIVE NEUMAN moved to report CSHB 337, 26-GH2057\R, as
amended, out of committee with individual recommendations and
the accompanying fiscal notes.
REPRESENTATIVE GUTTENBERG objected for the purpose of
discussion. He spoke to his objection by first reminding the
committee the purpose of the bill is to encourage a heightened
level of jobs for Alaskans and an increased level of oil
production through TAPS; however, no analysis to support this
result has been offered. Although passage of the bill implies
that more jobs will be available after the industry is granted
these credits, there is no guarantee, but only speculation. He
read from written testimony given by an oil and gas attorney,
Spencer Hosie, Hosie McArthur, San Francisco, California, to the
Regulatory Commission of Alaska (RCA) [date and source not
provided]:
Under the duty to develop, a royalty owner's project
need not be the most economic development project on
the producers' platter. After the lease is signed,
the royalty owner is not in competition with other
potential projects in this country and abroad for the
producers' development dollars. Under the lease
agreements, the producers' obligation is to continue
to produce from and develop a field if reasonably
economic, despite individual preferences to defer
development or invest capital dollars elsewhere.
7:58:10 PM
REPRESENTATIVE GUTTENBERG explained that Mr. Hosie is saying
that a company that signs an oil and gas lease with the state is
obligated to put the state on equal footing; in fact, the duty
to develop the leases means they must. The only way the company
is not obligated to do all the things the state grants credits
for, is for the state to "let them off the hook." Furthermore,
there is a duty to develop in the development clause of the
resources section of the state constitution, thus when the state
signs a lease agreement it expects development for the good of
all Alaskans. Routinely, leaseholders ask for and receive
credits for development; however, Mr. Hosie advises that the
leaseholders alone have the duty to develop. Representative
Guttenberg gave the example of former Governor Murkowski's
statement that the leaseholders at Point Thomson have an
obligation to develop. He concluded that well drilling, in-
field drilling, and processes to enhance production are part of
the schedule that every oil field has and now, 20-30 years into
production, the obligation to enhance production remains with
the leaseholder. He restated his objection to giving credits
for actions that the leaseholders "knew that they were going to
do." On the other hand, the standing of the bill would be
improved if the sponsors provided definitive answers on jobs,
the flow of oil, and revenue for the state. Representative
Guttenberg said he could not support the bill.
7:58:26 PM
CO-CHAIR NEUMAN questioned the objectivity of the testimony
quoted by Representative Guttenberg because the testimony was
solicited by the state. He agreed that leases call for the due
regard for the interests of the landowner, which is the state,
and to that regard, he said the governor and the commissioner
recognized the recent large increases in oil production along
with a decrease in new investment. He said he disagreed with
some earlier testimony about, "how we're giving this money away,
well, it's just money that we're not taking." Representative
Neuman opined that the "trade-out" is the sweet spot of the
policy call that must be made by the legislature. He recalled
that at the introduction of the bill, he assumed the governor
and the commissioner believed the bill provides incentives for
further exploration. Although there is less money coming in as
revenue due to the credits, there is also less oil flowing
through TAPS, and the solution is more exploration, more oil
flowing through TAPS, more jobs, more economic diversification,
and more benefits to the state and the economy. He expressed
his support for the bill.
REPRESENTATIVE GUTTENBERG maintained his objection.
8:01:14 PM
A roll call vote was taken. Representatives Tuck, P. Wilson,
Olson, Seaton, Edgmon, Neuman, and Johnson voted in favor of HB
337, Version R, as amended. Representatives Guttenberg and
Kawasaki voted against it. Therefore, CSHB 337(RES) was
reported out of the House Resources Standing Committee by a vote
of 7-2.
8:02:26 PM
REPRESENTATIVE SEATON asked Co-Chair Johnson to ensure that the
committee receives copies of the revised fiscal note.
8:02:37 PM
CO-CHAIR JOHNSON agreed.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 305 versionW.A.pdf |
HRES 4/7/2010 1:00:00 PM |
SB 305 |
| SB 305 sponsor statement.pdf |
HRES 4/7/2010 1:00:00 PM |
SB 305 |
| SB 305 W.A.sec.analysis.pdf |
HRES 4/7/2010 1:00:00 PM |
SB 305 |
| SB 305 40710 LogsdonAssocHouseRes.pdf |
HRES 4/7/2010 1:00:00 PM |
SB 305 |
| SB 305 1-2-033110-FIN-Y.pdf |
HRES 4/7/2010 1:00:00 PM |
SB 305 |
| HB 411A.pdf |
HRES 4/7/2010 1:00:00 PM |
HB 411 |
| SB 305 Amend WA.2 Rep. Seaton.pdf |
HRES 4/7/2010 1:00:00 PM |
SB 305 |
| 2-17-2010_MOU_AIDEA_AEA.pdf |
HRES 4/7/2010 1:00:00 PM |
|
| HB 411-1-2-030810-CED-N.pdf |
HRES 4/7/2010 1:00:00 PM |
HB 411 |
| HB 411-2-1-022610-REV-N.pdf |
HRES 4/7/2010 1:00:00 PM |
HB 411 |
| HB 411-3-1-022610-DOT-N.pdf |
HRES 4/7/2010 1:00:00 PM |
HB 411 |
| HB 411-4-2-030810-CED-Y.pdf |
HRES 4/7/2010 1:00:00 PM |
HB 411 |
| SB 305 AOGA Testimony 4.7.10.pdf |
HRES 4/7/2010 1:00:00 PM |
SB 305 |
| SB305 Dept of Rev 4-7-10 final.pdf |
HRES 4/7/2010 1:00:00 PM |
SB 305 |