Legislature(2023 - 2024)ADAMS 519
05/10/2024 09:00 AM House FINANCE
Note: the audio ![]()
and video ![]()
recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.
| Audio | Topic |
|---|---|
| Start | |
| SB104 | |
| HB223 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 151 | TELECONFERENCED | |
| + | SB 259 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 104 | TELECONFERENCED | |
| + | HB 223 | TELECONFERENCED | |
| + | HB 400 | TELECONFERENCED | |
| + | SB 205 | TELECONFERENCED | |
| += | SB 170 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
May 10, 2024
9:07 a.m.
9:07:25 AM
CALL TO ORDER
Co-Chair Foster called the House Finance Committee meeting
to order at 9:07 a.m.
MEMBERS PRESENT
Representative Bryce Edgmon, Co-Chair
Representative Neal Foster, Co-Chair
Representative DeLena Johnson, Co-Chair
Representative Julie Coulombe
Representative Mike Cronk
Representative Alyse Galvin
Representative Sara Hannan
Representative Andy Josephson
Representative Dan Ortiz
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
None
ALSO PRESENT
Senator Forrest Dunbar, Sponsor; Brodie Anderson, Staff,
Representative Neal Foster; Derek Nottingham, Director,
Division of Oil and Gas, Department of Natural Resources;
John Boyle, Commissioner, Department of Natural Resources;
Representative George Rauscher, Sponsor.
PRESENT VIA TELECONFERENCE
Nicole Tham, Operations Manager, Division of Community and
Regional Affairs, Department of Commerce, Community and
Economic Development; Maggie Humm, Executive Director,
Alaska Legal Services Corporation; Emily Nauman, Director,
Legislative Legal Services.
SUMMARY
HB 223 TAX & ROYALTY FOR CERTAIN GAS
CSHB 223(FIN) was REPORTED out of committee with
three "do pass" recommendations, one "do not
pass" recommendation, three "no recommendation"
recommendations, four "amend" recommendations and
with one new indeterminate fiscal note from the
Department of Natural Resources and one new
indeterminate fiscal note from the Department of
Revenue.
HB 400 CORRESPONDENCE STUDY PROGRAMS; ALLOTMENTS
HB 400 was SCHEDULED but not HEARD.
SB 104 CIVIL LEGAL SERVICES FUND
SB 104 was REPORTED out of committee with six "do
pass" recommendations and five "no
recommendation" recommendations and with one new
zero note from the Alaska Judicial System and one
previously published fiscal impact note: FN3
(CED).
SB 151 MISSING/MURDERED INDIGENOUS PEOPLE;REPORT
SB 151 was SCHEDULED but not HEARD.
SB 170 EXTND SR BENEFITS; REPEAL LONGEVITY BONUS
SB 170 was SCHEDULED but not HEARD.
SB 205 AHFC AUTHORITY TO ACQUIRE BUILDING
SB 205 was SCHEDULED but not HEARD.
SB 259 COMPENSATION FOR CERTAIN STATE EMPLOYEES
SB 259 was SCHEDULED but not HEARD.
Co-Chair Foster reviewed the meeting agenda.
SENATE BILL NO. 104
"An Act relating to appropriations to the civil legal
services fund."
9:09:57 AM
Co-Chair Foster asked for a brief recap of the bill. [The
bill was previously heard on May 2, 2024.]
SENATOR FORREST DUNBAR, SPONSOR, relayed that the bill
increased funding from 10 percent to 25 percent of certain
legal fees collected by the Court System. The funding was
collected for the Alaska Legal Services Fund to provide
free civil legal services for low-income Alaskans and was
the number one provider of legal services to victims of
domestic violence in the state. He listed the available
invited testifiers.
Co-Chair Foster asked for a review of the fiscal note.
NICOLE THAM, OPERATIONS MANAGER, DIVISION OF COMMUNITY AND
REGIONAL AFFAIRS, DEPARTMENT OF COMMERCE, COMMUNITY AND
ECONOMIC DEVELOPMENT (via teleconference), reviewed the
Department of Commerce, Community and Economic Development
(DCCED) fiscal impact note (FN3 (CED) dated February 16,
2024. She reported that the fiscal note reflected the
increase from 10 percent to 25 percent, appropriated to the
Alaska Legal Services Fund.
Representative Tomaszewski asked where the money would go
if it was not directed to the civil legal services fund.
Senator Dunbar believed the funds would go to the general
fund and would not be appropriated to the Court System. He
deferred to DCCED for further answer. Ms. Thams answer was
inaudible, and the question was repeated. He wondered where
the extra 15 percent was currently going. Ms. Tham deferred
to the Court System for the answer.
Representative Josephson recalled that the Nancy Meade had
previously testified that the funds would go to the General
Fund (GF).
Representative Coulombe asked if the financial statements
for the fund were publicly available.
MAGGIE HUMM, EXECUTIVE DIRECTOR, ALASKA LEGAL SERVICES
CORPORATION, (via teleconference), replied in the
affirmative.
Representative Coulombe asked where they could be found.
Ms. Humm answered that as a non-profit the corporation was
required to make its financial statement publicly
available. She was uncertain if they were on posted on the
website and would respond in writing.
Senator Dunbar thanked the committee for hearing the bill.
Co-Chair Johnson MOVED to REPORT SB 104 out of committee
with individual recommendations and the accompanying fiscal
notes.
There being NO OBJECTION, it was so ordered.
SB 104 was REPORTED out of committee with six "do pass"
recommendations and five "no recommendation"
recommendations and with one new zero note from the Alaska
Judicial System and one previously published fiscal impact
note: FN3 (CED).
Co-Chair Foster thanked the sponsor.
HOUSE BILL NO. 223
"An Act relating to the production tax and royalty
rates on certain gas; and providing for an effective
date."
Co-Chair Foster recounted that in the prior hearing [May 1,
2024] some amendments were adopted and noted that Alaska
Legal Services had recommended two technical amendments in
response to the adopted amendments.
Co-Chair Johnson MOVED to ADOPT the proposed committee
substitute for HB 223, Work Draft 33-LS0886\H (Nauman,
5/3/24).
Co-Chair Foster OBJECTED for discussion. He invited his
staff to explain the new committee substitute (CS).
BRODIE ANDERSON, STAFF, REPRESENTATIVE NEAL FOSTER,
explained the changes in the CS. The CS incorporated all of
the amendments passed on May 2, including conforming
changes authorized to Legislative Legal Services. He
indicated that in the process of drafting the CS, legal
services had identified two provisions that needed further
clarification and submitted two technical amendments.
Co-Chair Foster asked for a brief summary of the amendments
incorporated into the CS.
Mr. Anderson complied and recalled that Amendment 1 offered
by Representative Stapp added the designation of Middle
Earth into the bill. He delineated that Amendment 3 offered
by Representative Josephson had been conceptually amended
to reduce the royalty to 3 percent and include a 10 year
sunset provision. Amendment 4 offered by Representative
Coulombe dealt with the royalty. He noted that Amendment 10
offered by Representative Josephson passed unanimously and
added the language "by the lessee." He continued that
Amendment 11 by Representative Coulombe was adopted with a
conceptual amendment that deleted part of the original
amendment. Amendment 12 by Representative Coulombe deleted
the word economically." Amendment 13 by Representative
Stapp discussed Middle Earth and the discount royalty and
was conceptually amended. Finally, Amendment 15 by
Representative Josephson added reserve based lending to the
bill.
9:22:00 AM
Co-Chair Foster wanted to ensure the amendments had been
characterized accurately. He asked members for any
comments. None were received.
9:22:34 AM
Co-Chair Foster MOVED to ADOPT Amendment 1.
Page 1, line 12, following "latitude":
Insert "from which commercial production of oil or gas
begins after July 1, 2024, and before January 1, 2035"
Page 2, line 4:
Delete "that begins after July 1, 2024;"
Insert ";or"
Page 2, lines 6 - 7:
Delete 11; or (3) January 1, 2035"
Page 6, line 2:
Delete "2035"
Insert "2045"
Representative Stapp OBJECTED for discussion.
Mr. Anderson explained the amendment. Legislative Legal
Services deduced that clarifying language was necessary for
the royalty discount sunset. The entity pursuing the
discount would have 10 years to receive the discount and 10
years to utilize it. He delineated that production would
have to happen between July 1, 2024, and January 1, 2035.
The expiration of the 3 percent discount would be January
1, 2045.
Co-Chair Foster asked legal services for comment.
EMILY NAUMAN, DIRECTOR, LEGISLATIVE LEGAL SERVICES, (via
teleconference), had no comments on the explanation. The
amendment was to clarify the intent of the committee.
Representative Josephson stated his understanding of the
amendment and provided examples. He asked whether he was
correct. Ms. Nauman agreed. She expounded that the benefit
ran for 10 years as long as it [production] started in the
window between July 1, 2024, and January 1, 2035. She
exemplified that if production began in 2030 the benefit
would end in 2040. She pointed to page 1, line 15 of the
bill that contained the 2045 date. She indicated that it
was the last possible day that someone could take the
royalty reduction.
9:25:52 AM
Representative Galvin asked for clarity on page 2 of the
amendment. She recalled that the committee had discussed
language regarding a project lapse for 6 months. Ms. Nauman
responded that the Department of Natural Resources (DNR)
spoke to the issue during the last committee hearing on the
bill. She noted that the item was part of Amendment 2.
Representative Galvin would wait until Amendment 2 was
discussed.
Representative Josephson relayed that they (the
committee?)(legislature?) suspended parts of what was
called the Cook Inlet Renaissance in HB 247 [Tax;
Credits; Interest; Refunds; O & Gas, Chapter 4 4SSLA 16,
06/28/16] He provided a scenario that took place 10 years
in the future with substantial new production in Cook Inlet
and elsewhere. He asked if the legislature could undo the
bill at that time and suspend the terms. Ms. Nauman
answered that it was a tricky question to answer. She
understood that royalty rates were locked in by contract
and altering a law could not change the terms of the
contract, under certain circumstances. She reported that
DNR had some authority to change the rates depending on the
language in the contract. There was some potential that if
the state relied on the rates and entered into a contract
it could not make the royalty change.
Representative Stapp withdrew the objection.
Representative Josephson OBJECTED for the purpose of
discussion. He commented that the committee needed to be
wide eyed about what they were doing. He related that Cook
Inlet royalties were currently $40 million per year. He
hypothesized a scenario where the discount was doubled, and
the state lost $30 million each year. He calculated that
$30 million times 20 years was $600 million. He believed
his scenario was unlikely. However, the committee just
learned that it could not be undone easily. He cautioned
the committee and wanted to draw attention to the issue.
Representative Josephson withdrew the objection.
There being NO further OBJECTION Amendment 1 was ADOPTED.
9:30:25 AM
Co-Chair Foster MOVED to ADOPT Amendment 2.
Page 2, lines 21 - 22:
Delete "has previously produced oil, but did not
produce oil during calendar year 2024"
Insert "the commissioner determines has not produced
oil during the preceding six months but that has
previously produced oil"
Representative Stapp OBJECTED for discussion.
Mr. Anderson explained that the amendment was a clarifying
amendment. Legislative Legal Services had questions
regarding the intent of prior Amendment 6. Amendment 6 had
passed and removed all references to Cook Inlet oil from
the bill. Subsequently, Representative Coulombe offered a
conceptual amendment that deleted the part of her Amendment
11 that referenced Cook Inlet oil since it had already been
removed by Amendment 6. However, later in the meeting the
committee rescinded action on Amendment 6, and it failed.
The committee never doubled back to Amendment 11 to
consider whether the deleted section should be reinstated.
Legislative Legal Services determined that the issue should
be resolved in committee. He elaborated that Amendment 2
took lines 7 through 11 from Amendment 11 and offered it
again as an amendment to determine the will of the
committee. He briefly summarized how the Department of
Natural Resources interpreted Amendment 2. He elaborated
that the amendment revised one way that oil could be
considered as new to become eligible for the royalty
reduction in order to drive new oil production in Cook
Inlet. The amendment removed the 2024 restriction that some
production could go offline in 2025 or later and included
sideboards for the field to be offline for at least six
months to avoid operators from gaming the system." He
offered that the committee could ask for clarification from
DNR.
9:34:00 AM
Ms. Nauman agreed with the summary provided by Mr.
Anderson.
Representative Hannan wondered if the date was removed,
whether an operator had a full ten year period to receive
the royalty relief.
Mr. Anderson deferred to the department.
DEREK NOTTINGHAM, DIRECTOR, DIVISION OF OIL AND GAS,
DEPARTMENT OF NATURAL RESOURCES, confirmed that if the date
was removed any field that would temporarily stop producing
and subsequently start again could receive the royalty
benefit until 2035.
9:35:31 AM
Representative Hannan stated that the answer troubled her.
She related that that most of the discussion around the
bill had been incentivizing immediate action. She believed
that that royalty relief was a "really big deal" meant to
incentivize an immediate crisis. However, if Cook Inlet
production did not significantly increase within the next 5
to 7 years there would be another solution by then. She
did not support allowing a company who stopped production
to come back online in the next 5 to 7 years or so and
still be eligible for royalty relief and allow that for a
20 year window. She suggested moving the date to 2025 or
2026. Her view was the reduction in royalty was to
incentivize immediate production or in the near future. She
was uncomfortable eliminating the date.
Representative Stapp did not understand Representative
Hannan's analogy. He wondered if she was suggesting that a
company would spend sigificant amounts on capital and
operating expenditures on a field then freeze production,
fire everyone, and subsequently resume production when the
economics were more favorable and repeat the process until
2035.
Representative Hannan disagreed with his summation of her
remarks. Her point was regarding the 20 year window where
that could happen. She reiterated that the incentive was
intended for a quicker response and narrower time window.
She deduced that the amendment was a more permanent change
to the Cook Inlet oil royalty, which she did not believe
was the intent of the bill.
Co-Chair Foster asked for any comments from the
commissioner.
Representative Galvin reminded the committee that the
amendments had been made late into the night without any
outside advisory. The committee had heard from the
department and individual companies advocating on their own
behalf. They had not heard from anyone regarding modeling
the amendment and its potential affects. She was concerned
about the extended timeline and being able to afford other
things that Alaskans care about. She emphasized that the
committee had not gone through a process that would
normally happen with very big decisions" like royalty
reductions. She cautioned that the committee "carefully"
"walk the line" regarding incentivizing gas and oil and the
ability to spend on other budget expenditures.
9:40:28 AM
JOHN BOYLE, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES,
suggested that he was favorable to potentially lengthening
the window to one year. He did not believe the likelihood
was high that an oil company would sit idle for a year
after it made significant investments just to game the
system. He reiterated that the department had a "good
sense" why and when wells were "shut in." He proposed that
if a year made the committee feel more comfortable the
department would not oppose that length of time.
Representative Stapp MOVED to ADOPT Conceptual amendment 1
to Amendment 2.
Representative Stapp moved to remove the words "six months"
on lines 4 and 5 and replacing it with the words "one
year."
There being NO OBJECTION, conceptual Amendment 1 to
Amendment 2 was adopted.
Ms. Nauman asked if the committee wanted to also change the
six month range specifically related to gas on page 2, line
13 of the bill.
9:43:26 AM
AT EASE
9:43:44 AM
RECONVENED
Commissioner Boyle answered that gas and oil could have
different economics. He recommended extending the time to a
year. He thought six months was slightly more generous for
gas development. However, if the intent was to act as an
incentive, the latter could produce better results.
Representative Galvin thought the question would be great
for an advisor who knew the fields and would know how to
answer the difference between Cook Inlet oil and gas fields
and how they produce. She advocated for more information on
major decisions before voting on them.
Co-Chair Edgmon relayed that he had listened to the Gaffney
Cline [GaffneyCline and Associates, Energy Advisory] from
the Senate hearing and his concerns had been somewhat
assuaged since the last hearing. He supported some relief
for Cook Inlet, but not zero relief. He believed that there
was a middle ground and wanted the bill to move forward.
9:46:25 AM
Representative Ortiz noted that he had previously raised
concerns about the issue earlier in other bill hearings.
Co-Chair Foster MOVED to ADOPT Amendment 2 as amended.
Representative Hannan objected.
A roll call vote was taken on the motion.
IN FAVOR: Stapp, Tomaszewski, Cronk, Galvin, Coulombe,
Edgmon, Johnson, Foster
OPPOSED: Josephson, Ortiz, Hannan
The MOTION PASSED (8/3).
9:49:25 AM
Representative Ortiz shared his concerns with the bill. He
related that he was aware of the problems in Cook Inlet and
wanted to support the bill. However, he acknowledged that
future revenue challenges were expected yet there would
still be the same demands on the budget. He cautioned that
as the committee moved forward with HB 223 or any other
type of bill considering revenue reductions, it needed
careful consideration. The demand for revenue would remain
in the future. He understood the importance for people to
have enough energy to heat their homes. He reminded the
committee that the future for revenue was not that bright.
He acknowledged that there would not be revenue [from Cook
Inlet] if there was not production. He characterized it as
a atch 22. He thought about the next year's budget
forecast and budgeting in relation to dropping to a 3
percent share of royalties. He reminded members that
investors were not dropping their royalty shares. It was
the state that was providing the subsidy. He did not know
what his vote on the bill would be. He would let it move
from committee without objecting but would have a difficult
time supporting it on the House floor.
9:53:14 AM
Representative Hannan voiced that Representative Ortiz's
concerns were similar to hers. She wanted to resolve South
Central's impending gas crisis, however she deduced that
was a short term issue that would be resolved regardless of
the effectiveness of royalty relief. Her concerns largely
lay with the oil portion of the royalty relief. She
elaborated that Cook Inlet had the oldest oil
infrastructure in that state and a lot of shut in oil
facilities that should have been cleaned up. She believed
that it delayed cleanup of rusting infrastructure for
another 20 years because a producer could say they might
start drilling again. She maintained her revenue concerns
and did not know how she would vote on the bill on the
floor.
Representative Josephson thought the record should be clear
that the governor's bill called for 5 percent royalty and
the committee reduced it to 3 percent. He stated it was an
aggressive bill that was supportive of gas resource
development. The argument from DNR was not without merit.
He recalled that the commissioner had stated that oil was
an enticer to gas and deduced that it was because it was
profitable. He offered that oil was not initially "part of
the bargain" and currently oil royalty relief was extended
for fields south of 68 degrees north latitude for 20 years.
He agreed with Rep. Galvin that the affects were unknown
without modeling. He would not object to moving the bill.
9:57:10 AM
Representative Galvin was concerned about some of the
details. She stressed that they did not know how much
revenue they were giving up and how much gas would result
from the bill. She noted that there were experts who could
make an informed presumption. She thanked Co-Chair Edgmon
for sharing information he had viewed from a Senate
Resources hearing. She was not certain the committee had
done its homework. She wondered if anyone knew what they
were giving up by reducing the rate to 3 percent from 5
percent. In addition, the dates had been changed and they
did not know what it meant for revenue. She emphasized the
unknowns. She also knew homes needed to be kept warm. She
would vote in support of the bill because of the urgency.
9:59:19 AM
Co-Chair Edgmon believed that the committee had been at a
disadvantage that consultants had not been brought on to
advise the members earlier. Gaffney Cline had not been
involved long enough to help the committee sort out all of
the unknown variables. He indicated that the Cook Inlet
basin had supported a good part of Alaska's economy for
many years, which was fairly unique and made it harder to
compare to other regimes. He deemed that 3 percent was
likely too generous. He thought the bill was going in the
right direction overall.
Representative Cronk emphasized that the risk of doing
nothing was real. He did not understand why anyone would
stop the bill from moving forward. He wanted to avoid a
crisis. He believed that the state had eliminated other
revenue sources including timber and mining. He surmised
that royalty from zero was still zero.
10:02:23 AM
Representative Stapp ascertained that 12.5 percent of zero
was zero. He clarified that he referred to new production
from existing fields that had yet to be produced. He
guessed that based on royalties the state received from
Cook Inlet the loss of revenue was likely around $4 million
annually from new production. Concerning the expansion to
Middle Earth, there was no production on state lands in the
region. He was skeptical that the reductions would be as
effective as may be imagined, but he wanted to be a good
team player to help with the problem. He presumed that
importing natural gas would be unpopular.
Co-Chair Foster asked if the sponsor had any closing
comments.
REPRESENTATIVE GEORGE RAUSCHER, SPONSOR, thanked the
committee for all of the time it spent on the bill. He
understood many of the stated concerns. He related that
his bill had been similar to the governor's and many of the
provisions had been melded. He reiterated that 3 percent of
something was better than a percentage of nothing. He
emphasized that something had to be done. He recounted that
12 years prior, incentives had been used and it had worked
for a decade or so.
10:06:05 AM
Co-Chair Johnson MOVED to REPORT CSHB 223(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes.
Co-Chair Foster OBJECTED.
A roll call vote was taken on the motion.
IN FAVOR: Stapp, Coulombe, Cronk, Galvin, Tomaszewski,
Josephson, Johnson, Edgmon
OPPOSED: Ortiz, Hannan, Foster
The MOTION PASSED (8/3).
There being no further objection, CSHB 223(FIN) was
REPORTED out of committee with three "do pass"
recommendations, one "do not pass" recommendation, three
"no recommendation" recommendations, four "amend"
recommendations and with one new indeterminate fiscal note
from the Department of Natural Resources and one new
indeterminate fiscal note from the Department of Revenue.
10:07:41 AM
RECESSED
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB 151 Sectional Analysis 4.30.24 Version H.pdf |
HFIN 5/10/2024 9:00:00 AM |
SB 151 |
| SB 151 Sponsor Statement 4.30.24 Version H.pdf |
HFIN 5/10/2024 9:00:00 AM |
SB 151 |
| SB151 CS in SFin summary of changes 4.30.24.pdf |
HFIN 5/10/2024 9:00:00 AM |
SB 151 |
| SB 259 Support Document_Legal Services Memo_03.04.24.pdf |
HFIN 5/10/2024 9:00:00 AM |
SB 259 |
| SB259 Sponsor Statement Version R 04.26.24.pdf |
HFIN 5/10/2024 9:00:00 AM |
SB 259 |
| SB259 Sectional Analysis Version R 04.26.24.pdf |
HFIN 5/10/2024 9:00:00 AM |
SB 259 |
| SB259 Summary of Changes Version R 04.26.24.pdf |
HFIN 5/10/2024 9:00:00 AM |
SB 259 |
| SB 259 Letter of Support from Dept of Admin 05.03.24.pdf |
HFIN 5/10/2024 9:00:00 AM |
SB 259 |
| HB 223 CS FIN v Y 051024.pdf |
HFIN 5/10/2024 9:00:00 AM |
HB 223 |
| HB 223 Public Testimony Rec'd by 051024.pdf |
HFIN 5/10/2024 9:00:00 AM |
HB 223 |