03/18/2010 03:30 PM Senate RESOURCES

            SB 228-TAX INCENTIVES FOR GAS-TO-LIQUID                                                                         
                                                                                                                                
5:16:44 PM                                                                                                                    
CO-CHAIR MCGUIRE  announced the  next matter  to come  before the                                                               
committee was SB 228.                                                                                                           
                                                                                                                                
SENATOR FRENCH  moved to adopt the  proposed committee substitute                                                               
to SB  228, labeled 26-LS1324\P,  as the working document  of the                                                               
committee.   There being no  objection, version P was  before the                                                               
committee.                                                                                                                      
                                                                                                                                
MR. PAWLOWSKI explained changes were made  to Section 1 of SB 228                                                               
[amending  AS  43.20]  after  working   with  the  Department  of                                                               
Revenue. On page 1, line 6 changes  the name of the tax credit to                                                               
clarify that this  is a special investment  incentive tax credit,                                                               
specifically for gas, coal or biomass to liquids.                                                                               
                                                                                                                                
Page 2,  line 3  explicitly lists that  the allowable  credit for                                                               
any one facility  is $475 million. There was some  concern in the                                                               
first  hearing that  multiple investors  could invest  and accrue                                                               
multiple credits. Given  the size of the state's  tax interest on                                                               
these  facilities,  a  single facility  credit  of  $475  million                                                               
seemed appropriate.                                                                                                             
                                                                                                                                
On page  2, lines 13-14  state the  incentive provided by  SB 228                                                               
can never  amount to more  than 60 percent  of a tax  payer's tax                                                               
bill;  SB   228  only  foregoes  revenue   rather  than  offering                                                               
refundable tax credits.                                                                                                         
                                                                                                                                
The  applicability  of the  tax  credit  to  the mining  tax  was                                                               
completely eliminated from SB 228.                                                                                              
                                                                                                                                
On  page  two,  Section  2  [amending  AS  43.55.900(24)]  and  3                                                               
[amending  AS 43.500.900]  of SB  228 were  changed to  move away                                                               
from gas  to liquids  and towards  a definition  of manufacturing                                                               
which does  not include things like  liquefaction, fractionation.                                                               
SB 228 is intended to  relate to manufacturing, not just changing                                                               
the gas for transport.                                                                                                          
                                                                                                                                
5:19:33 PM                                                                                                                    
SENATOR WAGONER asked if SB  228 precludes people like Tesoro and                                                               
the North  Pole refinery from an  exemption for the gas  they use                                                               
in the manufacturing process.                                                                                                   
                                                                                                                                
MR. PAWLOWSKI replied  gas used as heat or fuel  in relation to a                                                               
manufacturing  process  qualifies.  Fractionation is  related  to                                                               
petroleum being refined in other products.                                                                                      
                                                                                                                                
SENATOR WAGONER  said the North  Pole refinery does not  have gas                                                               
but Tesoro does.  He asked why we are allowing  them that credit;                                                               
it is part of the state's revenue stream.                                                                                       
                                                                                                                                
CO-CHAIR MCGUIRE said she could get  more data on that. SB 228 is                                                               
intended to  get at gas  to liquid facilities and  to incentivize                                                               
the  manufacturing process  that goes  into gas  to liquids.  She                                                               
needs to  think further about  whether or not the  incentives are                                                               
justified.                                                                                                                      
                                                                                                                                
SENATOR  WAGONER suggested  that  Co-chair McGuire  find out  how                                                               
many cubic  feet of gas  Tesoro uses in a  year and see  what the                                                               
credit would amount to.                                                                                                         
                                                                                                                                
CO-CHAIR MCGUIRE said  the committee can decide to  tailor SB 228                                                               
to gas to liquids alone.                                                                                                        
                                                                                                                                
MR. PAWLOWSKI  added that  fractionation was put  in so  that the                                                               
exemption  would not  apply to  simple refining  but requires  an                                                               
actual  chemical transformation.  His understanding  is that  gas                                                               
used  as heat  or fuel  to power  that transformation  might also                                                               
apply but he would like the Department of Revenue to answer.                                                                    
                                                                                                                                
CO-CHAIR  MCGUIRE set  SB 228  aside saying  she would  bring the                                                               
Department of Revenue back to testify.                                                                                          
            SB 228-TAX INCENTIVES FOR GAS-TO-LIQUID                                                                         
                                                                                                                                
5:27:42 PM                                                                                                                    
CO-CHAIR MCGUIRE returned  to SB 228 and asked Mr.  Metz to begin                                                               
his presentation.                                                                                                               
                                                                                                                                
PAUL  METZ,  Director,   Mineral  Industry  Research  Laboratory,                                                               
University of Alaska  Fairbanks, said he will extract  a lot from                                                               
the presentation as it is longer than 30 minutes.                                                                               
                                                                                                                                
5:28:37 PM                                                                                                                    
SENATOR WAGONER said Mr. Metz' presentation is important.                                                                       
                                                                                                                                
5:28:59 PM                                                                                                                    
CO-CHAIR  MCGUIRE called  an at  ease from  5:28 p.m.  until 5:30                                                               
p.m.                                                                                                                            
                                                                                                                                
5:30:16 PM                                                                                                                    
CO-CHAIR MCGUIRE  called the meeting  back to order and  said the                                                               
committee has agreed to recess to  the call of the chair to allow                                                               
Mr. Metz to give his presentation tomorrow.                                                                                     
                                                                                                                                
5:31:16 PM                                                                                                                    
CO-CHAIR MCGUIRE recessed the meeting to a call of the chair.