04/19/2001 01:48 PM House FIN

SENATE BILL NO. 77                                                                                                            
                                                                                                                                
     An  Act   repealing  the   exception  that   applies  to                                                                   
     collection and  payment of interest  of $150 or  less on                                                                   
     royalty   or   net  profit   share   underpayments   and                                                                   
     overpayments; and providing for an effective date.                                                                         
                                                                                                                                
DARWIN  PETERSON, STAFF,  SENATOR  JOHN  TORGERSON, noted  in                                                                   
1998, the Legislature enacted  AS 38.05.135(g), exempting the                                                                   
Department of Natural Resources  from calculating interest on                                                                   
small over  to underpayments of  royalty if the  interest was                                                                   
$150  or   less.     The  cost   of  calculating  the   small                                                                   
over/underpayments  was more  than the  interest received  or                                                                   
credit  applied.    Prior  to  1998,  Department  of  Natural                                                                   
Resources was  calculating the small processed  1,716 royalty                                                                   
filings where  interest amounts were between  a negative $150                                                                   
and   a   positive   $150.      The   net   amount   of   the                                                                   
under/overpayments was a positive $4,096.                                                                                       
                                                                                                                                
Mr.  Peterson   stated  that   the  effort  of   calculating,                                                                   
processing and  tracking interest for small  payments was not                                                                   
cost effective for the oil companies  or the State.  With the                                                                   
advent  of the  State's new  Oil and  Gas Royalty  Accounting                                                                   
System,  all interest  is  calculated electronically.    Most                                                                   
royalty  payers  are  using mainframe  computer  systems  and                                                                   
sending their  royalty reports  electronically.   The failure                                                                   
to repeal  AS 38.05.135(g) would  require the  Department and                                                                   
royalty  payers to reprogram  their computer  systems  to not                                                                   
compute payments of less than $150 dollars.                                                                                     
                                                                                                                                
Mr.  Peterson added  that  the repeal  of  the statute  would                                                                   
solve the  problem of the  administrative burden on  the part                                                                   
of the  royalty payers and the  State to manually  track very                                                                   
small amounts of interest.                                                                                                      
                                                                                                                                
Vice-Chair Bunde MOVED to report  SB 77 out of Committee with                                                                   
individual recommendations  and with the  accompanying fiscal                                                                   
note.  There being NO OBJECTION, it was so ordered.                                                                             
                                                                                                                                
SB  77  was  reported  out of  Committee  with  a  "do  pass"                                                                   
recommendation and  with a zero fiscal note  by Department of                                                                   
Natural Resources dated 2/22/01.