Legislature(2005 - 2006)HOUSE FINANCE 519
04/05/2006 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB488 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 488 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE BILL NO. 488
"An Act repealing the oil production tax and gas
production tax and providing for a production tax on
the net value of oil and gas; relating to the
relationship of the production tax to other taxes;
relating to the dates tax payments and surcharges are
due under AS 43.55; relating to interest on
overpayments under AS 43.55; relating to the treatment
of oil and gas production tax in a producer's
settlement with the royalty owner; relating to flared
gas, and to oil and gas used in the operation of a
lease or property, under AS 43.55; relating to the
prevailing value of oil or gas under AS 43.55;
providing for tax credits against the tax due under AS
43.55 for certain expenditures, losses, and surcharges;
relating to statements or other information required to
be filed with or furnished to the Department of
Revenue, and relating to the penalty for failure to
file certain reports, under AS 43.55; relating to the
powers of the Department of Revenue, and to the
disclosure of certain information required to be
furnished to the Department of Revenue, under AS 43.55;
relating to criminal penalties for violating conditions
governing access to and use of confidential information
relating to the oil and gas production tax; relating to
the deposit of money collected by the Department of
Revenue under AS 43.55; relating to the calculation of
the gross value at the point of production of oil or
gas; relating to the determination of the net value of
taxable oil and gas for purposes of a production tax on
the net value of oil and gas; relating to the
definitions of 'gas,' 'oil,' and certain other terms
for purposes of AS 43.55; making conforming amendments;
and providing for an effective date."
1:40:41 PM
BARRY PULLIAM, SENIOR ECONOMIST, ECON ONE RESEARCH, provided
background information about Econ One, an economic research
and consulting firm that has worked in Alaska since the
1980's. Mr. Pulliam gave an overview of today's
presentation and referred to a handout "Presentation on
Alaska Gas Pipeline Project" (copy on file.) He referred to
slide 2, the list of consulting services his firm provides.
He mentioned work for federal government agencies on energy-
related matters, as well as for foreign countries and
companies in the petroleum and natural gas industry.
Mr. Pulliam shared his working experience as listed on slide
3 of the handout. He informed the Committee of Dr.
Finizza's background and qualifications listed on slide 4.
1:46:25 PM
DR. TONY FINIZZA, SPECIAL CONSULTANT, ECON ONE RESEARCH,
focused on oil price issues. He said he wanted to make the
Committee aware that they should not be too certain about
the future. He referred to slide 6, which lists conclusions
and observations regarding oil price forecasts. Producers
are using $40 as a planning base case, with $30 as a stress
price case, to make their predictions. The majors may be
using a slightly lower price range than independents, but
are moving their views up. This range may be lower than
their best estimate, but is consistent with their prudent
planning approach. This range is also consistent with
recently observed oil asset purchases. This range is
consistent with publicly available forecasts although the
recent Department of Energy's forecast is above this range.
What really matters is what forecast the risk takers are
using. Forecasters have been humbled and will be humbled by
their forecasts.
1:49:12 PM
Dr. Finizza discussed factors suggesting continued higher
prices and those opposing higher oil prices, as seen on
slide 7. Continued higher prices are affected by strong oil
demand and a growing gap between global demand and global
non-OPEC supply.
Factors opposing higher prices include the fact that
conventional oil faces a threat from alternative sources of
liquids when prices are high. There will be a penetration
of alternative transportations vehicles. The economy cannot
sustain very large increases in prices. A $10 barrel
difference in oil prices is a $73 billion increase in total
consumer costs per year, effectively a tax on the consumer.
Dr. Finizza depicted Exxon Mobil's world liquids production
outlook on slide 8. Oil demand from Asian economies and
what appears to be a retarding of oil supply, suggests that
liquids from OPEC would grow and would keep prices high.
Slide 9 shows various oil price forecasts. One is the
Energy Information Agency's (EIA) Annual Energy Outlook
(AEO), January 2006, that forecasts oil prices through 2030,
converted to WTI by Econ One. Others are the International
Energy Agency in Paris, a Reuters Poll of 18 oil analysts
for WTI in 2010 from March 2006, and NYMEX Futures Market,
which all generally say prices will be in the $40 per barrel
range for a while.
Slide 10 depicts EIA's annual energy outlook for 2006, based
on probability. Looking at 2030, real prices should be in
the $30-$70 range 60 percent of the time.
1:53:54 PM
Slide 11 deals with the Reuters poll forecast for WTI in
2010 from 18 oil analysts. The median is about $40 per
barrel. Slide 12, IEA's oil price forecasts, shows a
similar pattern all lower than prices today. Slide 13
depicts WTI prices with selected NYMEX strips - the history
and the market forecast in nominal dollars. It predicts
that prices will be lower than today's prices.
Slide 14 shows producers' views of future oil prices. He
noted that producers have been burned by forecasts of high
oil prices in the past. Dr. Finizza predicted that
producers will test their projects against a price path that
is below their most likely view, which might be $35 to $40
per barrel. He thought that producers will also stress test
their projects at $30 per barrel. He emphasized that the
consequences of error are not symmetrical. If producers
overstep the future path of prices, they will be severely
punished by Wall Street.
Slide 15 shows implied oil company price views of Marubeni,
Norsk Hydro, and Statoil. Slide 16 shows some examples of
humbling oil price forecasting, one by the EIA and another
by polls of "experts" from the Society of Petroleum
Evaluation Engineers (SPEE). Slide 17 shows EIA's annual
price outlooks, all of which were higher than the actual
forecast. Slide 18 shows SPEE's annual Delphi poll forecast
compared with the actual value through May 15, 2004.
Slide 19 comes off of the British Petroleum website and
shows historical crude oil prices, in nominal and in real
dollars, nearing or above today's prices. He pointed out
that until now, $40 dollar forecasts were only breached in
the 1970's and early 80's.
Mr. Finizza summarized that "the oil price analysis for
looking at the impact on producers and explorers, I think,
should center on the price scenarios they're thinking
themselves," and is a reasonable forecast for Alaska to
consider.
2:00:23 PM
Dr. Finizza spoke about the economics of new fields. He
began with his conclusions, as shown in Slide 21. Without
ANWR opening, expectation of large oil discoveries is
unlikely, due to the field size distribution of remaining
economic reserves. At low prices, 25/20 helps the explorer
more than 20/20 because of the way it shelters the costs.
Incentives are required at low prices, although alternative
approaches could work. For example, a production tax
holiday might work. The sunset provision in the Senate CS
is not going to provide incentives for exploration because
the timing is wrong. At low prices, both tax plans are
preferred over the status quo in order to incent
exploration. Exploration is still a risky business. Under
either 20/20 or 25/20, the remaining reserves to be explored
are economic reserves, except at very low prices.
2:03:09 PM
Dr. Finizza depicted a stylized lifecycle of a new field in
slide 22. There is an exploration and appraisal period of
four years, a development capital period of three years, and
a production phase of 5-20 years. He pointed out that there
is a 7-year lag from the time of exploration to production.
He opined that the sunset provision expires at the point of
production; therefore, the model is without the sunset
provision.
Slide 23 is a table comparing the reserves that might be
available for exploration in the Central North Slope vs. in
ANWR. They are undiscovered technically recoverable oil
reserves. The best estimate of oil reserves in the Central
North Slope is 4 billion; in ANWR it is 10.4 billion. The
USGS is saying that 22 percent of the oil in ANWR is likely
to be found in fields over 1 billion barrels. In the
Central North Slope that amount is zero. In the Central
North Slope the amount to be found in fields smaller than 64
million barrels is 51 percent, whereas, in ANWR it is only 1
percent. This makes it tough for exploration projects.
2:05:52 PM
Senator Wilken asked why the estimates in NPRA are not
considered. Dr. Finizza said they should be included. They
would be analogous to the Central North Slope numbers.
Slide 24 looks at the size distribution of undiscovered
fields in the Central North Slope. The expected number of
fields with more than 500 million barrels is one; with more
than 50 million it is 21. Slide 25 shows that ANWR has a
lot larger fields.
Slide 25 shows economic oil reserves in the Central North
Slope at alternative prices. At WTI $40, 1.89 billion
barrels would be economically recoverable.
Slide 27 shows the expected discoveries under alternative
prices in the Central North Slope. At the $40 level, the
expected number of discoveries would be about 20 fields,
over time, of which 60 percent would be small. Slide 28
shows the likely distribution of new field discoveries.
Slide 29 depicts how an explorer might look at the
exploration proposition. One way would be to calculate the
Net Present Value of all outcomes, weighted by the
expectation of the outcome. The most likely outcome is a
dry hole. He highlighted the example on the slide.
2:10:44 PM
Slide 30 shows the schematic of cash flow for this example,
which is negative 100 percent of the time for cash flow from
exploration, and negative 16.7 of the time for cash flow
from development and production. Slide 31 shows how to
avoid the "gambler's ruin". If the chance of drilling a
successful well is 1-in-6, an explorer will want to mitigate
the risk of failure by drilling more wells.
2:12:33 PM
Slide 32 is an illustration of a failed exploration program.
He gave a hypothetical situation under the current tax,
under 20/20, and under 25/20. Slide 32 shows oil production
profiles from the four types of fields. It depicts the
number in millions barrels per year and the number of years
from the start of development. Slide 34 depicts the
economics of a 6-well exploration program with a 50 million
barrel-per-day field, under high cost and with low
production, without a $60 million allowance. Slide 35
depicts the same information with a $60 million allowance.
2:16:46 PM
Slide 36 shows the economics of a 6-well exploration program
without a $60 million allowance.
Slide 39 is a comparison of tax proposals: the House CS,
status quo, 20/20 with a $73 million tax allowance, and the
Senate CS, with the producer net cash flow discounted at 10
percent. The three plans do better than the status quo at
low prices. Slide 40 shows the total state revenues
comparing the same tax proposals with a crossover point at
about $50. Slide 41 shows the impact of progressivity for
the same 4 proposals, and producer net cash flow. Slide 42
depicts the impact of progressivity on total state revenues.
Slides 43 and 44 depict the impact of 25/20 versus 20/20 on
producer net cash flow and on total state revenues.
2:20:32 PM
Slide 45 summarizes exploration forgiveness - an alternative
to tax free allowance. Dr. Finizza suggested, for each new
field, to give a "tax holiday" from the PPT for the first 10
million barrels of production, which is equivalent to the
tax re-allowance in dollar terms. This would provide an
incentive for new exploration because it helps improve
producers' cash flow in the early stages of production.
Producers could not seek royalty relief if they opt for the
tax holiday. It also provides an incentive to put the field
on early. The tax holiday would not be applied to existing
fields. The fiscal impact on the state would not be felt
until the field is producing.
The graph in slide 46 shows tax-free annual production in a
50 million barrel field. Slide 47 is the typical cumulative
production profile of a 100 MMB field. Slide 48 shows the
impact on producer economics, and slide 49 shows the impact
on state revenues. Slide 50 depicts the impact on small
field economics in a 50 MB field.
2:23:42 PM
Slide 51 explains how producers may look at results on a
probabilistic basis. Dr. Finizza used a mean of $40 and P20
of $25, and P80 of $55 ($40 plus or minus $15). Slide 52
shows the distribution of results - producer internal rate
of return( IRR). The blue line depicts the IRR from PPT
using the House CS versus the status quo. The table on the
right shows if the median value for IRR is 17.2 percent,
under the status quo it would be roughly 14 percent. Using
P20, the IRR under PPT is 9.5 percent and under the status
quo, 5 percent. The graph shows the chance of IRR under PPT
and under the status quo. Slide 52 deals with the
distribution of results and the producer IRR, and slide 53
shows its effect on total state revenues.
2:27:47 PM
Dr. Finizza summarized his observations regarding
exploration impacts in slide 54. Without ANWR opening, the
expectation of large oil discoveries is unlikely, due to the
field size distribution of remaining economic reserves. At
low prices, 25/20 helps the explorer more than 20/20.
Incentives are required at low prices, although alternative
prices would work as well. At low prices, 20/20 and 25/20
are preferred over the status quo, in order to incent
exploration. Exploration is still a risky business.
Probabilistic results using the "Industry View" of oil
prices yields a smaller chance of losing IRR under PPT than
under the status quo. There is a higher change of a revenue
loss for the state under PPT. Under either a 20/20 or 25/20
program, remaining reserves are economic except for at low
prices (<$30).
2:30:03 PM
Senator Con Bunde asked for an opinion about the likelihood
of $40 per barrel prices in the future. Dr. Finizza said he
believes the $40 amount is correct. The EIA has a $50 price
as their best guess. He maintained that $40 would match the
industry's predictions. Senator Bunde asked Senator Wilken
what this year's budget is based on. Senator Wilken said
$49.
2:31:37 PM
Mr. Pulliam turned the discussion to PPT and existing
fields. He referred to slide 56, the effective severance
tax rates over time for historical and projected fields,
under the status quo. He defined "effective tax rate" as
the nominal rate times ELF. The ELF will drive down the
effective tax rate. Over the next 24 years, the average of
all fields will be just over 5 percent, rather than just
over 12 percent. Slide 57 shows the same information by
field - Prudhoe Bay, Kuparuk, and Alpine. Slide 58 shows
the effective tax rates and wellhead prices over time on all
North Slope fields.
2:35:29 PM
Slides 59-61 show effective tax rates and wellhead prices
over time for Prudhoe Bay, Kuparuk, and Alpine fields.
2:36:08 PM
Mr. Pulliam discussed projected volumes. Slide 62 shows
projected North Slope crude oil production based on the
Department of Revenue's (DOR) 2005 fall forecast. The
spring update reduced the aggregate by 30,000 barrels per
day lower than what is shown on this graph. It is broken
down into three periods because the further out in time, the
less is known. The periods are FY 2007-2011, FY 2007-2016,
and FY 2007-2030. Without ANWR the volumes from known
fields are likely to be about 80 percent of what is
available on the North Slope. Prudhoe Bay is the big field
or about 45 percent of the projected volumes. Kuparuk added
in equals about 65 percent. With the addition of Alpine,
the total is about 75 percent of the total projected
volumes.
Mr. Pulliam discussed decline rates. The average decline
rate is about 3.5 percent per year over the next 24 years.
These volumes do not include Point Thompson or Oooguruk.
2:40:40 PM
Slide 63 shows the change in projected taxes under a 20/20
tax and is a DOR forecast production (FY 2007-2030). There
are a number of different production scenarios. He
suggested that enhanced volumes are not likely unless ANWR
opens. The price shown in the graph is an EIA base forecast
where ANS equals about $53 real average. The slide shows
the potential impact of the severance tax in three time
periods.
Mr. Pulliam distinguished between real - 2006 dollars - and
nominal dollars, which, after inflation, would be higher.
The charts all deal in real dollars. The blue area is the
first 5 years, and the yellow area is the next five years.
He highlighted the statistics in the box in the lower right
corner of the slide. He concluded that if the status quo
remains in place, the effective tax rate would be 7.1
percent. He noted that taxes are collected on wellhead
value. If tax is taken from the PPT and converted to a
percentage of wellhead value, it comes to a 12.2 percent PPT
effective rate or a 5-percentage point increase from the
status quo. He observed that 12 percent is the average rate
for the North Slope. He cautioned that forecasting is a
necessary exercise, but the further out, the less certain
the results.
2:48:31 PM
Mr. Pulliam referred to the table on slide 64, the change in
the projected 20/20 tax under different price levels. The
numbers are the same as the prior chart for the first five-
year period. The next three columns look at different price
levels. The tax collected is lower as prices are lower, but
the tax rate drops as well. He reviewed the fixed $40 ANS
price column. He noted that impacts of 5, 10, and 25 years
range between a $330 million increase in taxes to a $400
million increase per year. With PPT the tax rate would be
approximately 10.6 percent. The final three columns look at
the breakeven analysis.
2:51:33 PM
Representative Hawker referred to the fixed column and asked
if it refers to $40 nominal. Mr. Pulliam clarified that it
is $40 "real". In response to a question by Representative
Hawker, Mr. Pulliam considered all the scenarios to be
relevant.
Mr. Pulliam noted that the final three columns refer to the
average price that the old and new systems would produce the
same revenues and the same effective tax rates. The price
would fall over time because the status quo tax rate falls
over time.
2:54:40 PM
Mr. Pulliam reviewed the table on slide 65, the change in
projected taxes under a 20/20 tax with costs increased by 20
percent. He observed that PPT allows a deduction for
operating costs and for capital expenditures. It will also
give a credit for capital expenditures. If costs are
higher, the tax will be lower. He noted that tax rates fall
and the breakeven prices rise by approximately $4 a barrel
if costs are higher.
Mr. Pulliam noted that the graph on slide 66 looks at the
25/20 proposal.
Mr. Pulliam referred to slide 67 and noted that it reflects
the effective tax rate at different prices and breakeven
points. The breakeven price is $4 a barrel lower with the
25/20 proposal.
2:58:19 PM
Mr. Pulliam briefly noted slides 68, 69, and 70.
Mr. Pulliam reported that slide 71 reviews changes in the
projected taxes under the House Resources CS. Slide 72
shows the changes under the House Resources CS with
different price levels. The breakeven prices are very
similar to the 20/20 plan because at lower prices the two
don't differ much. Slide 73 shows the same information
affected by a 20 percent cost increase.
3:00:55 PM
Mr. Pulliam reviewed the chart on slide 74, the difference
in projected taxes between the House Resources CS and a
20/20 tax, using the ANS real price of $52.70. He observed
that the levels are going to be higher than $50 and
therefore impacted by progressivity. Projections over time
show higher nominal prices.
3:02:21 PM
Representative Hawker referred to earlier charts showing a
rise in taxes with the House Resource Committee version
containing progressivity. He observed that the HRES version
contains a windfall tax based on gross receipts. He
suggested that there could be an alternate progressivity
mechanism based on margin. He questioned how they would
differ.
Mr. Pulliam observed that with progressivity based on
margin, the differences would not be as great. There would
still be significant differences because of high prices.
3:04:16 PM
Mr. Pulliam examined the chart on slide 75. He noted that
the difference between the plans opens up after 30 years as
progressivity "kicks in".
In response to a question by Senator Bunde, Mr. Pulliam
explained that 25/20 causes the decline of the rise due to
the slope of progressivity. The Senate version kicks in at
a lower price level, but has a lower slope. The House
version kicks in later but has a steeper slope.
3:07:02 PM
Mr. Pulliam reviewed slide 76, which depicts the change in
projected taxes under the Senate Resources CS.
Mr. Pulliam observed that slide 77 has the same sensitivity
at different price levels. Breakeven prices are lower here
than under the 20/20 plan by about $4 per barrel.
3:08:10 PM
Senator Bunde referred to slide 77 and noted that in the
first 5-year period, under the $33.40 scenario, the
effective tax rate is still at 17 percent. Mr. Pulliam
observed that high prices ($50 a barrel) are being projected
for the next five years. The $33.40 reflects the average
forecast over the next 24 years. He referred back to slide
10, which shows the EIA forecast. The EIA projects prices
over $40 a barrel.
3:10:35 PM
Representative Kelly concluded that the $40 would "provide
better behavior" over time. Mr. Pulliam observed that the
$40 is based on small incremental increases, but the market
doesn't generally move in that manner. The EIA is
attempting to reflect what the market would do. He
suggested that if prices return to $40, that they would do
so in a steep decline.
3:12:42 PM
Mr. Pulliam turned to slide 78, which is consistent with
previous slides.
Mr. Pulliam reported that slide 79 looks at the difference
in projected taxes between the Senate Resources CS and a
20/20 tax. The EIA Base Forecast would result in average
revenues of about $700 million.
Slide 80 looks at the difference between the Senate CS and
20/20 at different price levels.
3:13:50 PM
Representative Kelly asked about the 20 percent price cost
increase. Mr. Pulliam replied that the increase is in
production costs. Representative Kelly inquired if the
costs have been projected into the future. Mr. Pulliam said
yes.
3:15:25 PM
Mr. Pulliam showed slide 81, effective severance tax rates
over time. The next several charts build on each other.
Tax rate is a function of price. Slide 82 depicts the
effective average tax rates at various price levels. It
shows the average historical rate of 12 percent, which does
not vary with price. Slide 83 shows the addition of the
projected status quo for the next ten years at various
prices. Slide 84 adds projections for Prudhoe Bay of about
11.6 percent. Slide 85 adds on the 20/20 plan. He noted
that operating and capital costs are deducted. The
percentage rises as prices rise. Costs are a fixed number
and are deductible, which results in the curve.
Mr. Pulliam addressed the breakeven price in the graph. As
prices rise, the impact of the deduction for operating costs
and the credit is smaller. These are 2006 prices. The kink
in the graph is at $40, and is the impact of the transition
credit in the governor's plan to recoup the last five years'
capital costs. As the $40 line is crossed there is a
reduction in the effective tax rate.
Slide 86 is a comparison with 25/20, and it has the same
kink as in the previous slide. The historical average is at
$33. Slide 87 adds the House Resources CS, which is about
equal to 20/20 until $40. It has no kink because it does
not have the transition payment, but it has progressivity.
Slide 88 depicts the Senate Resources CS line. It starts
out with a lower tax rate because it has a transition plan,
or 2-for-1 credit. It rises above all of the other plans.
3:23:32 PM
Slide 89 compares the House CS and the Senate CS plans. The
lines move toward each other after time because the
progressivity feature impacts both plans. He addressed the
validity of the volume projection by the DOR. He maintained
that there would have to be a lot more investment for that
to happen. Slide 90 looks at the impact of increased
investment on the various plans. PPT would reduce the
effective tax rate considerably by about 4 percentage
points. Under the 20/20 plan, if $2.5 billion is invested
at a $40 price rate, the effective tax rate would be reduced
quite a bit to that of the projected status quo.
3:27:49 PM
Slide 91 shows projected government take under the different
plans, at various price levels.
Representative Kelly asked about the increase in investment
and the decline of oil. Mr. Pulliam said he does not know
if revenues would be higher. Representative Kelly asked
about the 6-well scenario and the ability to predict the
state's take. Mr. Pulliam noted these slides deal with
investment in existing fields. Exploration is a different
experience. Representative Kelly requested information on
the sensitivity of exploration.
3:31:13 PM
Mr. Pulliam returned to slide 91 and government take. The
statistics look at net revenues divided between the
government and the industry after costs are removed.
3:32:57 PM
Mr. Pulliam's final topic dealt with progressivity issues as
listed on slide 92: choice of threshold price, WTI vs. ANS,
real vs. nominal, deductibility, and cap. He pointed out
that both plans use a threshold price; the House uses WTI
$50 per barrel and the Senate uses ANS $40. He said that
WTI is a good benchmark and he is not concerned with the
difference between WTI and ANS. DNR and DOR feel that both
prices are representative. A threshold price that moves
back to the North Slope could be used.
3:36:28 PM
Slide 93 shows Platt's WTI and ANS prices since 1996. The
numbers move together for the most part. In only one year,
the difference was greater than more than $1, and less than
$3. He said he has no concern about WTI.
Mr. Pulliam spoke about the issue of real vs. nominal
dollars. Both CS's use nominal dollars. He deemed it
appropriate to include an indexing system. DOR will be
collecting cost information and they could calculate the
change in the cost of transportation from year to year.
3:40:06 PM
Mr. Pulliam addressed deductibility. Both CS's allow for
the deductibility of the progressive portion of the tax,
which is the tax based on wellhead value. He said that is
appropriate.
Mr. Pulliam spoke about the cap. Slide 94 shows the
progressive portion of the tax rate in the House Resources
CS and potential alternatives at various price levels. He
said the jump at 18 percent seems inappropriate. If the
goal is to cap out the rate at 37 percent, it should be
allowed to rise until it hits that amount. He suggested
that the Senate plan have a cap.
3:43:13 PM
Representative Kerttula asked why limit the ability to
progress. Mr. Pulliam suggested it could progress at a
diminishing increment. Representative Kerttula asked if a
model could be made to depict that. Mr. Pulliam said that
could be done.
3:44:34 PM
Senator Wilken referred to slide 91 and said he is struck by
the minimal changes when moving between categories. He
expected it to be more. He looked at Alaska's take and the
original tax regime. He inquired if the table were shown to
producers, if there would be agreement. Mr. Pulliam said
there should be no argument - maybe different estimates of
cost. He addressed the first statement as a piece of the
puzzle. He pointed out that the severance tax is
deductible.
Senator Wilken related a suggestion that could cause a 20
percent change in investment. He wondered if the changes on
91 were enough to drive significant investment.
3:48:14 PM
Co-Chair Meyer noted there is plenty of heavy oil. He
inquired if the 20/20 would be enough investment to go after
the heavy oil. Mr. Pulliam said it depends on price. Co-
Chair Meyer asked about the $45 price and the need to
attract investment. Dr. Finizza suggested not categorizing
it by heavy oil. At $45 it should not be a problem.
3:51:36 PM
Senator Wilken asked about progressivity and the incremental
rate as a fraction of the market rate. He wondered about
the cost to lift a barrel. Mr. Pulliam stated if it jumps
from $40 to $60, it will cost about the same to lift a
barrel. Senator Wilken asked for a rule of thumb. Mr.
Pulliam said he would think about that. In the context of
progressivity, he suggested that the committee consider
building in a feature that would index it with rising
prices.
3:53:51 PM
Dr. Finizza added that there may be a rule that he could
research.
Representative Holm wondered about phasing out incentives at
lower prices. Dr. Finizza related that one idea is to
reduce tax on the first "so many" barrels of production.
Mr. Pulliam added that a tax holiday is another mechanism.
3:55:35 PM
Senator Bunde referred to Slides 63, 66, 71, and 74. On 74
there is a huge decline beginning in 2012 in the House
Resources CS at the base of 20/20. Mr. Pulliam clarified
that it is the decline in the difference between the House
Resources CS and the 20/20. Senator Bunde asked if slide 63
is the same. Mr. Pulliam said yes.
HB 488 was heard and HELD in Committee for further
consideration.
| Document Name | Date/Time | Subjects |
|---|