Legislature(2011 - 2012)BUTROVICH 205
04/04/2011 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB85 | |
| Confirmation Hearings: Aogcc, Commercial Fisheries Entry Commission, and Board of Fisheries | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 85 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SB 85-TAX CREDIT FOR NEW OIL & GAS DEVELOPMENT
CO-CHAIR WAGONER announced the consideration of SB 85. [Version
27-LS0484\E was before the committee.]
3:32:41 PM
CO-CHAIR PASKVAN moved to withdraw version E and adopt CSSB 85,
labeled 27-LS0484\X ("version X"), as the working document.
CO-CHAIR WAGONER objected for discussion purposes.
3:33:26 PM
MICHAEL PAWLOWSKI, staff to Senator McGuire, stated that CSSB
85, version X, makes two substantive changes. The first is in
Section 2, page 2, lines 2-4. The timeframe for the Sec.
43.55.026 development cost credit was changed to within 24
months after completion of the first development well for a
qualifying pool, lease or property. This responds to the earlier
concern that the way the credit was established could have
incentivized producers to delay the beginning of production.
3:34:10 PM
The second substantive change is the addition of new sections 3
and 4. Section 3 amends AS 43.55.160(a), on page 3, lines 17-18,
by referring to a new subsection (f) in AS 43.55.160.
Section 4, [page 5, line 31 through page 6, lines 1-5,] adds the
new subsection (f). It increases the production tax value by the
value of the development cost credit under Sec 43.55.026. This
addresses the concern that qualified development expenditures
could be deducted from a person's tax liability, which would
essentially overcome the sponsor's intent of a 100 percent limit
on the credit.
MR. PAWLOWSKI said the other changes are largely conforming, and
based on moderate language suggestions by the Department of
Revenue (DOR). One of the most important is on page 2, line 16.
The development cost credit under Sec. 43.55.026 is 100 percent
of the qualified capital expenditures less other credits that a
producer would get under the current tax system. Now the
exploration credits under Sec 43.55.025 are included in the
calculation. If there is delineation work after the first
development well is drilled, this ensures that credit, too, will
be subtracted in determining the 100 percent.
Sections 6, 7, and 8 were renumbered to accommodate the new
sections.
SENATOR FRENCH asked if he had an estimate on the fiscal impact
of the changes.
MR. PAWLOWSKI answered no, but subsection (g), on page 3, lines
2-7, tightens the allocation language to clarify that the credit
earned under Sec. 43.55.026 can offset a person's tax liability
proportional to the volume of oil and gas produced that is
attributable to the pool or lease from which the credit was
earned. The goal is that the tax credit is only usable on
revenue the state isn't getting under current production.
3:37:44 PM
SENATOR WIELECHOWSKI joined the committee.
SENATOR FRENCH mused that this does a good job of ring-fencing
the credit, and he appreciates the focus.
CO-CHAIR WAGONER asked Senator McGuire to discuss Section 6.
SENATOR MCGUIRE asked the members to review the bill in detail
to better prepare to respond to those people who believe that
modification of the fiscal system is in order. She noted that
the Senate version of the bill does not have a progressivity
element, but it could be added. She emphasized that the Senate
is listening and that her goal is to ensure that Alaska remains
the number one oil and gas province in the nation. Tweaking the
tax code isn't difficult for her to accept, and this should be
the committee that is expert at doing that.
3:41:19 PM
SENATOR MCGUIRE explained that the proposal in Section 6 is to
establish an "Oil and Gas Competitiveness Review Board" to
maintain focus on the single largest revenue source that
supports the state. This board will consist of nine members: one
senator appointed by the president of the Senate; one
representative appointed by the speaker of the House of
Representatives; five public members appointed by the governor,
including one petroleum engineer, one geologist, one economist,
and one who is a member of an environmental or conservation
group; the commissioner of natural resources or their designee;
and the commissioner of revenue or their designee.
The legislative members will be co-chairs and each member will
serve for the duration of the Legislature during which he or she
is appointed. Each public member will serve three years and may
be reappointed. Vacancies will be filled in the manner of the
original appointment. Board members may be replaced at the
discretion of the person appointing that member. Public members
will not be compensated, but will receive per diem and travel
expenses, as authorized for boards and commissions under AS
39.20.180. The board may contract for professional services and
may hire administrative support staff.
3:44:44 PM
SENATOR MCGUIRE said the duties of the board set out in Sec.
44.99.610 are based on what the Province of Alberta did, when it
assessed the competitiveness of the province in terms of its
fiscal and regulatory regime. The board will be tasked with
reviewing the historical, current, and potential levels of
investment in the state's oil and gas sector on an ongoing
basis. Alaska currently does not have the necessary data in one
readily accessible location.
The board will also identify factors that affect investment in
oil and gas exploration, development, and production in this
state, including the tax structure, rates, and credits; royalty
requirements; infrastructure; workforce availability; and
regulatory requirements. She explained that this is meant to
compliment Alaska's Clear and Equitable Share (ACES), and to
highlight the need to have a board that is continually tracking
the state's overall competitiveness. The board will review the
competitive position of the state to attract and maintain
investment in the oil and gas sector as compared to the
competitive position of other regions with oil and gas
resources. She referenced the Wood Mackenzie report and
emphasized that members should be continually tracking the
updates to see how Alaska compares on a worldwide basis.
Another duty of the board will be to establish procedures to
accept and keep confidential information that is beneficial to
the work of the board. This includes creating a secure data room
and confidentiality agreements that will be signed by
individuals that have access to the confidential information.
3:50:47 PM
The board will make written findings, recommendations and
suggest legislation before December 1 of each year regarding:
changes to the state's regulatory environment that would
encourage investment while protecting the interests of the
people and the environment; changes to the state's fiscal regime
to encourage new and ongoing long-term investment and
development of the state's oil and gas resources; and
alternative means for increasing the state's ability to attract
and maintain investment and development of the state's oil and
gas resources.
SENATOR MCGUIRE said Sec. 44.99.620 states that all
commissioners who are responsible for information related to oil
and gas investment and activity in this state shall provide any
information that the board requires to carry out its duties. She
noted that legislation passed last year that directed the
Department of Natural Resources (DNR) to give a license on the
instate line returned great dividends. Except for information
that is confidential under AS43.05.230, a commissioner may
disclose information to the board that is otherwise
confidential.
SENATOR MCGUIRE welcomed suggestions with regard to Section 6
and opined that regardless of the viewpoint, Alaska is well
behind the times in adopting some sort of board to assess the
its competitiveness. She directed attention to a March 2011
report by Commonwealth North urging a competitiveness review.
CO-CHAIR WAGONER announced he would hold SB 85 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Apr 4 Confirms.pdf |
SRES 4/4/2011 3:30:00 PM |
Confirmations |
| UFA Support Ben Brown CFEC - Senate Resources 040411.pdf |
SRES 4/4/2011 3:30:00 PM |
Confirmation |
| SB 85 CompStudyPresentation2Stakeholders.pdf |
SRES 4/4/2011 3:30:00 PM |
SB 85 |
| CompStudyStakeholderBriefing.pdf |
SRES 4/4/2011 3:30:00 PM |
SB 85 |