Legislature(2021 - 2022)BUTROVICH 205
04/09/2021 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| SB104 | |
| SB61 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 97 | TELECONFERENCED | |
| += | SB 61 | TELECONFERENCED | |
| *+ | SB 104 | TELECONFERENCED | |
SB 61-OIL/GAS LEASE: DNR MODIFY NET PROFIT SHARE
4:29:08 PM
CHAIR REVAK reconvened the meeting and announced the
consideration of SENATE BILL NO. 61 "An Act authorizing the
commissioner of natural resources to modify a net profit share
lease."
He recapped that the bill was heard twice previously and public
testimony was heard. He advised that there was a committee
substitute (CS) and two amendments for the committee to consider
before potentially moving the bill.
4:30:05 PM
SENATOR MICCICHE moved to adopt the committee substitute (CS)
for SB 61, work order [32-GS1706\B].
4:30:20 PM
CHAIR REVAK objected for discussion purposes.
4:30:24 PM
At ease.
4:30:49 PM
CHAIR REVAK reconvened the meeting and asked Senator Micciche to
restate the motion.
4:30:54 PM
SENATOR MICCICHE restated the motion to adopt the committee
substitute (CS) for SB 61, work order 32-GS1706\B.
4:31:11 PM
CHAIR REVAK objected for discussion purposes. He asked Ms.
Tangeman to highlight the changes between version A and version
B.
4:31:22 PM
BETTY TANGEMAN, Staff, Senator Josh Revak, Alaska State
Legislature, Juneau, Alaska, presented the summary of changes
from version A to version B for SB 61. The prepared document
read as follows:
At the request of the Senate Resources Committee,
legislative legal was asked to conform the initial
version of the bill, 32-GS1706\A, to the legislative
drafting style and make other changes consistent with
existing law. The follow changes were made:
1. Changes to the Update: In several places, changes
were made to the existing statutory language in
AS 36.30.850 (b)(32) and AS 38.05.180 (j) to
increase readability and modernize usage. The
Department of Natural Resources, Division of Oil
and Gas confirmed that they agreed with the
changes.
2. Additional Subsections: AS 38.05.180(p), (s), and
(t) all contain references to modification of
royalty rates under AS 38.05.180 (j). This draft
bill adds language related to the net profit
share to those subsections, consistent with the
addition of the net profit modification option
added by the bill in (j). The Department of
Natural Resources, Division of Oil and Gas
confirmed that the edits were consistent with
their intent.
4:33:03 PM
CHAIR REVAK removed his objection. Finding no further objection,
version B was adopted.
4:33:49 PM
SENATOR MICCICHE moved Amendment 1.
4:33:54 PM
CHAIR REVAK objected for discussion purposes.
SENATOR MICCICHE explained that the amendment makes a language
change for clarity. It changes "net profit share" to "royalty or
net profit share on a lease". On page 2, line 17-18 it revises
that language as well to clarify that "without additional
capital expenditures, future production would no longer be
economically feasible."
He said the amendment makes no substantive change; it adds
clarifying language.
4:34:38 PM
CHAIR REVAK removed his objection; finding no further objection,
Amendment 1 passed.
4:34:53 PM
SENATOR KIEHL moved Amendment 2, work order 32-GS1706\B.4.
32-GS1706\B.4
Nauman
3/15/21
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR KIEHL
TO: CSSB 61(RES), Draft Version "B"
Page 3, following line 9:
Insert a new paragraph to read:
"(6) may not grant a net profit share modification for a field or
pool under (1) of this subsection unless the modification requires the lessee or
lessees to calculate separate net profit shares for oil and for gas, including
separately accounting for oil and for gas for profit, costs, and expenditures;"
Page 3, line 10:
Delete "(6)"
Insert "(7)"
Page 3, line 16:
Delete "(7)"
Insert "(8)"
Page 4, line 3:
Delete "(8)"
Insert "(9)"
Page 4, line 28:
Delete "(9)"
Insert "(10)"
Page 5, line 2:
Delete "(10)"
Insert "(11)"
Page 5, line 4:
Delete "(9)"
Insert "(10)"
Page 5, line 9:
Delete "(11)"
Insert "(12)"
Page 5, line 16:
Delete "(12)"
Insert "(13)"
Page 5, line 17:
Delete "(9)"
Insert "(10)"
Page 5, line 29:
Delete "(9)"
Insert "(10)"
Page 5, line 31:
Delete "(13)"
Insert "(14)"
SENATOR KIEHL explained that Amendment 2 requires the department
to decouple oil and gas if it enters into an agreement with a
leaseholder to modify a net profit share contract. He noted that
the legislature had begun the decoupling process for some taxes
and it could continue to do so in the future, but because the
net profit share lease is a contract, it can only be opened by
mutual agreement. The amendment clarifies that if the contract
is opened for modification, the state needs to get decoupling as
part of that agreement.
4:36:09 PM
CHAIR REVAK asked Mr. Fitzpatrick or Mr. Meza from DNR to
comment on the amendment.
4:36:29 PM
RYAN FITZPATRICK, Commercial Analyst, Division of Oil and Gas,
Department of Natural Resources (DNR), Anchorage, Alaska,
thanked Senator Kiehl for taking time to discuss the amendment
with the division. He offered his understanding that the intent
of Amendment 2 was to require separate accounting for oil and
gas for the purpose of calculating net profit shares if a
contract modification is granted.
He opined that the analogous provision in the oil and gas
production tax statutes was different in that that it creates
different tax rates for oil and gas. Oil is taxed at 35 percent
of the production tax value and gas is taxed at 13 percent of
the gross value. By contrast, oil and gas would still be subject
to the same net profit share percentage. The percentage would
not be an issue but there is potential for some timing issues
with regard to when the revenues are received. Nevertheless,
they should equate over time.
MR. FITZPATRICK said the division does not have a particular
opinion on the amendment but it does not create complications.
He added that he did want to clarify his understanding that the
intent was that the division would be expected to include in the
Best Interest Finding the mechanism for dividing the oil
expenses from the gas expenses when a contract is being
modified.
4:39:36 PM
SENATOR KIEHL confirmed the intent is that the mechanism would
be part of the Best Interest Finding that the public can see and
is presented to LB&A. He said it is important to understand that
DNR's Commercial Analysis Section will set it up after a
thorough commercial and fiscal analysis and negotiation process
with the leaseholder. He said the bill provides the commercial
analysts tremendous say in the structure and the amendment does
not change that except to say the lease would need to decouple
oil and gas. He opined that the timing of when the money comes
is important when trying to pay for state services.
4:40:35 PM
SENATOR STEVENS asked if there was a fiscal note attached to the
CS, and whether the amendment would require one.
MS. TANGEMAN said the CS did not have a new fiscal note but one
will likely be forthcoming.
CHAIR REVAK noted the bill goes to finance next and he believes
it will pick up a fiscal note.
SENATOR MICCICHE commented that the reason for the bill is to
prolong the life of a very marginal development, and he views
the amendment as an unnecessary complication that would add
costs.
4:42:54 PM
CHAIR REVAK stated agreement and maintained his objection. He
asked for a roll call vote.
4:43:23 PM
A roll call vote was taken. Senators Kawasaki and Kiehl voted in
favor of Amendment 2 and Senators Stevens, Micciche, and Chair
Revak voted against it. Therefore, Amendment 2 failed by a 2:3
vote.
CHAIR REVAK found no further amendments and asked the will of
the committee.
4:44:11 PM
SENATOR MICCICHE moved to report the CS for SB 61, work order
32-GS1706\B as amended, from committee with individual
recommendations and attached fiscal note(s).
4:44:29 PM
SENATOR KAWASAKI objected. He said he tried to figure out how to
improve the bill and he though Senator Kiehl's amendment was
appropriate. He said there are 26 active net profit share leases
on the North Slope, and at a time when the legislature is trying
to balance the budget, it is difficult to relinquish control
over future net profit share leases to a commissioner and then
the Legislative Budget and Audit Committee. He said he would
continue to object to the bill.
4:45:31 PM
SENATOR MICCICHE withdrew the motion to report SB 61 from
committee. He said this will give members time for further
discussion and perhaps the bill could move at a later date.
4:45:48 PM
CHAIR REVAK announced he would hold SB 61 in committee for
future consideration.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 97 Generally Allowed Uses Fact Sheet.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 97 |
| SB 97 Legislatively Designated Areas Factsheet.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 97 |
| SB 97 Letter of Opp Becky Long 4.2.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 97 |
| SB 97 Rec Rivers Comparison - 3.30.2021.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 97 |
| SB 61 Amendment Kiehl b.4(004).pdf |
SRES 4/9/2021 3:30:00 PM |
SB 61 |
| SB 104 Fiscal Note 1 & 2 dated 3.5.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 104 |
| SB 104 Sponsor Statement 3.9.21.pdf |
SFIN 1/24/2022 1:00:00 PM SRES 4/9/2021 3:30:00 PM |
SB 104 |
| SB 104 Sectional Analysis Version A 3.11.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 104 |
| SB 104 Geothermal Resources Presentation 4.9.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 104 |
| SB 61 Summary of Changes for CS SRES Work Draft 32-GS1706.B 3.8.21.pdf |
SRES 4/9/2021 3:30:00 PM |
SB 61 |