Legislature(2023 - 2024)BARNES 124
04/05/2024 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB394 | |
| HB393 | |
| HB388 | |
| HB359 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 393 | TELECONFERENCED | |
| += | HB 388 | TELECONFERENCED | |
| += | HB 349 | TELECONFERENCED | |
| += | HB 394 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 359 | TELECONFERENCED | |
HB 393-COOK INLET/MIDDLE EARTH GAS ROYALTIES
3:58:41 PM
CHAIR MCKAY announced that the next order of business would be
HOUSE BILL NO. 393, "An Act relating to oil and gas leases and
royalty shares; and providing for an effective date."
3:59:11 PM
REPRESENTATIVE MEARS moved to adopt Amendment 1 to HB 393,
labeled 33-LS1006\R.1, Nauman, 4/4/24, which read as follows:
Page 8, line 17, following "(7)":
Insert "except as provided in (nn) of this
section, and"
Page 8, line 27:
Delete "a new subsection"
Insert "new subsections"
Page 8, line 28:
Delete "Notwithstanding"
Insert "Except as provided in (nn) of this
section, and notwithstanding"
Page 9, following line 4:
Insert a new subsection to read:
"(nn) The royalty share modifications in (f)(7)
and (mm) of this section terminate on January 1,
2035."
3:59:17 PM
CHAIR MCKAY objected for the purpose of discussion.
3:59:22 PM
REPRESENTATIVE MEARS explained that Amendment 1 would put a
sunset date on royalty relief, so the legislature could revisit
the program in 10 years. She expressed the opinion that this
would be reasonable; otherwise, the state would be locked in to
never receiving royalties from Cook Inlet.
4:00:06 PM
MR. JEPSEN stated that he has no comments on Amendment 1, and he
suggested that this be left up to the will of the committee.
4:00:27 PM
REPRESENTATIVE SADDLER stated that there would be a long lead-in
time for investments for these projects, and time would go by
quickly. He suggested that future legislatures would have the
ability to put a sunset date on this once its effectiveness is
realized. He expressed the opinion that a hard sunset date put
in place in the beginning would erode the value of the royalty
reduction. He expressed opposition to Amendment 1.
4:01:16 PM
REPRESENTATIVE ARMSTRONG moved to adopt Conceptual Amendment 1
to Amendment 1, on page 1, line 15, to replace "2035" with
"2045". There being no objection, Conceptual Amendment 1 to
Amendment 1 was adopted.
4:02:06 PM
REPRESENTATIVE SADDLER commented that even though this would be
a longer time, the same argument applies; however, he stated
that he would add some more thought to this.
4:02:39 PM
CHAIR MCKAY commented that gas wells decline rapidly, and the
opportunity to tax and gather royalties would not last very
long. He suggested that the gas wells would most likely be shut
in, and something else would be happening. He expressed the
opinion that in 20 years the point would be mute.
4:03:19 PM
REPRESENTATIVE ARMSTRONG stated that the 2045 sunset would be
reasonable because it is 20 years away, and she expressed the
belief that future legislatures could easily extend this date,
while the public would be assured the current gas crisis is not
being used to enact an indefinite fix. She expressed the
importance of having a sunset clause.
4:04:08 PM
TREVOR JEPSEN, Staff, Representative Tom McKay, Alaska State
Legislature, on behalf of the sponsor, the House Resources
Standing Committee, of which Representative McKay serves as
chair, addressed the proposed sunset clause in Amendment 1, as
amended, to HB 393. He stated that the reason there is a zero
royalty rate is because this concerns Alaska gas, and any tax on
this would be passed to the consumer. He expressed the opinion
that there should not be any tax that would be passed through to
Alaskans. He added that to have the cheapest gas, it should be
royalty free.
4:04:45 PM
REPRESENTATIVE ARMSTRONG commented that the proposed legislation
is not only impacting natural gas, it also would be impacting
oil royalties, and currently there is not an oil crisis in the
state.
4:05:05 PM
REPRESENTATIVE SADDLER expressed opposition to Amendment 1, as
amended, for the same reasoning he expressed earlier.
4:06:00 PM
CHAIR MCKAY expressed the belief that Amendment 1, as amended,
would make no difference, and he expressed support for the
amendment.
[The committee treated the objection as if it were maintained.]
4:06:18 PM
A roll call vote was taken. Representatives Armstrong, Mears,
and Dibert voted in favor of Amendment 1, as amended, to HB 393.
Representatives McCabe, Saddler, Wright, and McKay voted against
it. Therefore, Amendment 1, as amended, failed to be adopted by
a vote of 3-4.
4:07:21 PM
REPRESENTATIVE MEARS moved to adopt Amendment 2 to HB 393,
labeled 33-LS1006\R.2, Nauman, 4/4/24, which read as follows:
Page 1, line 1, following "shares;":
Insert "relating to disclosure of information
related to oil and gas production taxes;"
Page 9, following line 4:
Insert new bill sections to read:
"* Sec. 3. 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. 4. 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. 3
of this Act, applies to information collected on or
after the effective date of sec. 3 of this Act."
Renumber the following bill sections accordingly.
4:07:33 PM
REPRESENTATIVE SADDLER objected for the purpose of discussion.
4:07:38 PM
REPRESENTATIVE MEARS spoke to her perspective on transparency
and accountability for Alaska's resources. Looking specifically
at Cook Inlet gas, she expressed the belief that smaller
operators would have no problem sharing their financials. She
pointed out that the largest operator [Hilcorp] also operates in
Texas, where there is fiscal transparency. She stated that
adding the amendment to the proposed legislation would be on par
with other business practices in the country, and she opined
that businesses in Alaska should not be treated any differently.
4:08:32 PM
MR. JEPSEN deferred to the chair.
4:09:16 PM
The committee took an at-ease from 4:09 p.m. to 4:10 p.m.
4:10:01 PM
CHAIR MCKAY stated that the discussion is on forcing S
corporations operating in Alaska to reveal competitive financial
information. He pointed out that this could be damaging to
current and future operations. He expressed opposition to the
proposed amendment.
4:10:33 PM
REPRESENTATIVE MCCABE expressed the understanding that Hilcorp
was invited to Alaska to do business 10 years ago, and at that
time the state knew that Hilcorp was an S corporation, and it
knew how Hilcorp reported its financials. He warned that the
amendment would "change the game" with an oil company, and he
argued that the state has done this over the past decades, and
this is why oil companies "shy away from Alaska." He expressed
opposition to Amendment 2.
REPRESENTATIVE SADDLER maintained his objection to the motion to
adopt Amendment 2.
4:11:25 PM
A roll call vote was taken. Representatives Dibert, Armstrong,
and Mears voted in favor of Amendment 2 to HB 393.
Representatives McCabe, Saddler, Wright, and McKay voted against
it. Therefore, Amendment 2 failed to be adopted by a vote of 3-
4.
4:12:14 PM
REPRESENTATIVE MEARS moved to adopt Amendment 3 to HB 393,
labeled 33-LS1006\R.3, Nauman, 4/4/24, which read as follows:
Page 1, line 1, following "shares;":
Insert "establishing an income tax on certain
entities producing or transporting oil or gas in the
state;"
Page 9, following line 4:
Insert new bill sections to read:
"* Sec. 3. AS 43.20 is amended by adding a new
section to read:
Sec. 43.20.019. Tax on income attributable to a
qualified entity. (a) If an entity has qualified
taxable income over $4,000,000 in a tax year, the
entity shall pay a tax of 9.4 percent on the qualified
taxable income over $4,000,000.
(b) The tax under this section does not apply to
a corporation paying tax under AS 43.20.011.
(c) The department may aggregate the qualified
taxable income of two or more entities for the purpose
of determining the tax due under this section if the
department determines that, without the provisions of
this section, the qualified taxable income would
reasonably be expected to be attributed to a single
entity.
(d) In this section,
(1) "entity" means a
(A) sole proprietorship;
(B) partnership; or
(C) entity that has elected to file federal
returns under 26 U.S.C. 1361 - 1379 (Internal Revenue
Code);
(2) "qualified taxable income" means income
from the production of oil or gas from a lease or
property in the state or from the transportation of
oil or gas by pipeline in the state before deductions
for
(A) dividends and gifts; and
(B) wages, salaries, bonuses, or other
similar payments to owners, partners, members, or
shareholders of the entity.
* Sec. 4. The uncodified law of the State of Alaska
is amended by adding a new section to read:
APPLICABILITY. AS 43.20.019, added by sec. 3 of
this Act, applies to the tax year of an entity
beginning on or after the effective date of sec. 3 of
this Act."
Renumber the following bill sections accordingly.
4:12:19 PM
REPRESENTATIVE SADDLER objected.
4:12:23 PM
REPRESENTATIVE MEARS stated that the subject of Amendment 3 has
been discussed by the committee before. She stated that the
amendment is most colloquially known as "closing the S-corp
loophole." She noted that when Hilcorp took over BP's assets,
the result was a lack of income to the state. She noted that
Hilcorp pays corporate income taxes in Texas, but this does not
happen in Alaska. In looking at the state's financials, she
suggested that revenue should be compared with the needs of the
state. She maintained that it has been a decade since the oil
and gas tax structure in the state was examined. She argued
that this tax structure has not been working for Alaska, and the
revenue from the oil and gas industry needs to be examined.
4:13:46 PM
CHAIR MCKAY expressed disagreement with Representative Mears.
He argued that the permanent fund dividends have been decreasing
because of the cost of government. He stated that the
production on the North Slope has been increasing, with new
fields opening because the tax structure has not been changed.
He continued that tax stability and certainty is vital to long-
term industry investment.
4:14:33 PM
REPRESENTATIVE SADDLER argued that the tax structure created 10
years ago has been benefiting the state, and the amendment would
undo this progress. He provided examples of success with the
current tax structure. He noted Hilcorp's expertise in
obtaining more oil and gas out of mature fields. He restated
his opposition to Amendment 3.
4:15:31 PM
CHAIR MCKAY refocused the discussion to Cook Inlet, not the
North Slope. He expressed gratitude that Hilcorp came to the
state and "rescued Cook Inlet."
REPRESENTATIVE SADDLER maintained his objection to the motion to
adopt Amendment 3.
4:16:04 PM
A roll call vote was taken. Representatives Mears, Dibert, and
Armstrong voted in favor of adopting Amendment 3 to HB 393.
Representatives McCabe, Saddler, Wright, and McKay voted against
it. Therefore, Amendment 3 failed to be adopted by a vote of 3-
4.
4:16:58 PM
REPRESENTATIVE MCCABE moved to report HB 393 out of committee
with individual recommendations and the accompanying fiscal
notes.
REPRESENTATIVE MEARS objected.
4:17:17 PM
A roll call vote was taken. Representatives McCabe, Saddler,
Wright, and McKay voted in favor of reporting HB 393 out of
committee with individual recommendations and the accompanying
fiscal notes. Representatives Armstrong, Mears, and Dibert
voted against it. [The tally was 4 yeas and 3 nays, but without
a 5-person majority of the full membership in favor, the vote
was not valid, and HB 393 was reported as failed to move out of
the House Resources Standing Committee.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| AM1 HB 394.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 394 |
| AM2 HB 394.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 394 |
| AM3 HB 394.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 394 |
| AM4 HB 394.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 394 |
| AM1 HB 393.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 393 |
| AM2 HB 393.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 393 |
| AM3 HB 393.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 393 |
| AM1 HB 388.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 388 |