Legislature(2013 - 2014)BARNES 124

03/14/2014 03:15 PM LABOR & COMMERCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 203 REIMBURSEMENT OF HEALTH INSURANCE CLAIMS TELECONFERENCED
Heard & Held
+= HB 282 LANDLORD AND TENANT ACT TELECONFERENCED
Heard & Held
+= HB 230 AIDEA BONDS FOR PROCESSING FACILITIES TELECONFERENCED
Heard & Held
+= HB 316 WORKERS' COMPENSATION MEDICAL FEES TELECONFERENCED
Scheduled But Not Heard
          HB 230-AIDEA BONDS FOR PROCESSING FACILITIES                                                                      
                                                                                                                                
4:26:23 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON  announced that the  next order of business  would be                                                               
HOUSE  BILL  NO. 230,  "An  Act  allowing the  Alaska  Industrial                                                               
Development and  Export Authority  to issue bonds  for an  oil or                                                               
gas   processing  facility;   and  creating   the  oil   and  gas                                                               
infrastructure fund to finance construction  or improvement of an                                                               
oil or gas processing facility."                                                                                                
                                                                                                                                
REPRESENTATIVE PAUL SEATON, Alaska  State Legislature, offered to                                                               
provide a brief refresher on HB  230.  He stated that the purpose                                                               
of  the  bill  is  to increase  the  throughput  in  Trans-Alaska                                                               
Pipeline System  (TAPS).  He  noted water constraints on  some of                                                               
the  processing facilities  on the  North Slope  and difficulties                                                               
accessing others  mean some  small producers  the ability  to put                                                               
oil in  TAPS.  This bill  provides a means to  finance processing                                                               
facilities on the North Slope to increase the flow through TAPS.                                                                
                                                                                                                                
4:28:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER  made  a  motion to  adopt  Amendment  1,                                                               
[labeled 28-LS1053\U.1, Nauman, 2/24/14], which read                                                                            
                                                                                                                                
     Page 4, line 23:                                                                                                           
          Delete "loan"                                                                                                         
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
4:28:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON explained this  will delete the word "loan"                                                               
that   was  inadvertently   put   into   the  Alaska   Industrial                                                               
Development and Export  Authority (AIDEA) revolving fund.   It is                                                               
not a loan fund.                                                                                                                
                                                                                                                                
CHAIR OLSON removed objection. There  being no further objection,                                                               
Amendment 1 was adopted.                                                                                                        
                                                                                                                                
4:28:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER made a motion to adopt Amendment 2,                                                                      
[labeled 28-LS1053\U.2, Nauman, 2/24/14], which read:                                                                           
                                                                                                                                
     Page 5, line 2:                                                                                                            
          Delete "(1)"                                                                                                          
                                                                                                                                
     Page 5, line 3:                                                                                                            
          Delete ";"                                                                                                            
          Insert "."                                                                                                            
                                                                                                                                
     Page 5, lines 4 - 8:                                                                                                       
          Delete all material and insert:                                                                                       
        "* Sec. 6.  AS 44.88.900 is amended by  adding a new                                                                  
     paragraph to read:                                                                                                         
               (18)  "oil or gas processing facility" means                                                                     
     a project that is a  facility that separates and cleans                                                                    
     crude oil  or natural  gas by separating  impurities to                                                                    
     make  the  product  suitable for  transport  through  a                                                                    
     pipeline  or   a  facility  that   chemically  converts                                                                    
     natural gas  to a liquid  form; "oil or  gas processing                                                                    
     facility" does  not include a facility  that uses phase                                                                    
     conversion of natural gas to liquid form."                                                                                 
                                                                                                                                
     Renumber the following bill section accordingly.                                                                           
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
4:29:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SEATON  explained   this  amendment   moves  the                                                               
definition  of  "Oil  and  Gas  Processing  Facility"  from  this                                                               
section  statute to  AIDEA's  general statute.    This change  is                                                               
technical and does not change the definition.                                                                                   
                                                                                                                                
CHAIR OLSON removed his objection.  There being no further                                                                      
objection, Amendment 2 was adopted.                                                                                             
                                                                                                                                
4:29:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER made a motion to adopt Amendment 3,                                                                      
[labeled 28-LS1053\U.4, Nauman, 2/24/14], which read as follows:                                                                
                                                                                                                                
     Page 2, line 16, through page 3, line 12:                                                                                  
          Delete all material and insert:                                                                                       
        "* Sec. 2. AS 43.20.049(e)(3) is amended to read:                                                                     
               (3)  "qualified oil and gas service industry                                                                     
     expenditure"                                                                                                               
               (A)      means    an   expenditure   directly                                                                
     attributable  to an  in-state  manufacture or  in-state                                                                    
     modification of tangible personal  property used in the                                                                    
     exploration for,  development of, or production  of oil                                                                    
     or gas deposits;                                                                                                       
               (B)      means   an   expenditure   for   the                                                                
     construction   or  improvement   of  an   oil  or   gas                                                                
     processing    facility,    flow   lines,    or    other                                                                
     infrastructure  of the  facility  north  of 68  degrees                                                                
     North latitude;                                                                                                        
               (C)  [, BUT] does not include components or                                                                  
     equipment  used   for  or  in   the  process   of  that                                                                    
     manufacturing or modification.                                                                                             
        *  Sec. 3.  AS 43.20.049(e) is  amended by  adding a                                                                  
     new paragraph to read:                                                                                                     
               (4)  "oil or gas processing facility" has                                                                        
     the meaning given in AS 44.88.168."                                                                                        
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
4:29:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON explained  that  Amendment  4 deletes  the                                                               
repetition  of the  tax credit  language  and refers  to the  tax                                                               
provisions in SB 21 and keeps the provisions the same.                                                                          
                                                                                                                                
4:30:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  asked for  explanation of  Amendment 3,                                                               
which is "U.4."   He asked for clarification  of subparagraph (B)                                                               
in terms of its direct economic benefits to Alaskans.                                                                           
                                                                                                                                
REPRESENTATIVE  SEATON responded  that  this  envisions that  the                                                               
components for  a facility being  constructed on the  North Slope                                                               
might  be manufactured  outside  the state  and those  components                                                               
would  not qualify  for tax  credit.   He clarified  that if  the                                                               
module was made in Alaska, it  would qualify for tax credits, but                                                               
if it is made outside the state  it would not qualify for the tax                                                               
credits.   He characterized the  construction process as  being a                                                               
combination resulting in a completed processing facility.                                                                       
                                                                                                                                
4:31:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON expressed  concern that litigation might                                                               
arise from the suggestion that the  tax credits should apply.  He                                                               
wondered whether  the tax credits  are "tight enough"  to reflect                                                               
the sponsor's intent.  He asked whether he had any concern.                                                                     
                                                                                                                                
REPRESENTATIVE  SEATON  answered  no.     It  seems  to  be  well                                                               
understood that  the goal is  building a processing  facility. He                                                               
highlighted that  subparagraph (A)  relates to  tangible personal                                                               
property and  wouldn't relate to  the structure.  Thus,  it would                                                               
be necessary to  segregate out parts of  the processing facility.                                                               
He related  that this doesn't  relate to intangible  property but                                                               
subparagraph  (B) does  include the  entire processing  facility;                                                               
however, it is limited to expenditures made in Alaska.                                                                          
                                                                                                                                
4:33:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON, with  respect to  Amendment [3],  said                                                               
that the  existing statute, listed  in subparagraph  (A), relates                                                               
to  in-state manufacture  or  in-state  modification of  tangible                                                               
personal  property; however,  subparagraph (B),  does not  do so.                                                               
He said he likes this bill, but is curious about that aspect.                                                                   
                                                                                                                                
TED LEONARD, Executive Director,  Alaska Industrial Development &                                                               
Export Authority  (AIDEA), Department  of Commerce,  Community, &                                                               
Economic  Development   (DCCED)  related  that  this   issue  was                                                               
previously discussed,  although AIDEA  can't answer  questions on                                                               
the  tax credit  itself.    He recalled  that  the Department  of                                                               
Revenue  (DOR)  previously testified.    He  clarified that  this                                                               
statute  is not  under Alaska  Industrial Development  and Export                                                               
Authority (AIDEA).                                                                                                              
                                                                                                                                
4:34:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  recalled that this was  discussed with the                                                               
Legislative Legal  and Research  attorney.   He stated  that this                                                               
language was already  adopted in SB 21 and is  merely inserted in                                                               
this section of statute.                                                                                                        
                                                                                                                                
4:35:55 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 4:35 p.m. to 4:43 p.m.                                                                       
                                                                                                                                
4:43:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  JOSEPHSON   referred  to  Amendment   [3],  which                                                               
includes language for  the definition of a qualified  oil and gas                                                               
service  industry  expenditure.    He  asked  when  an  audit  or                                                               
accounting  is  completed  whether  it would  be  deemed  legally                                                               
significant   that   [subparagraph]   (A)  refers   to   in-state                                                               
manufacturers and modification and [subparagraph] (B) doesn't.                                                                  
                                                                                                                                
4:44:35 PM                                                                                                                    
                                                                                                                                
EMILY NAUMAN,  Legislative Legal  Counsel, Legislative  Legal and                                                               
Research Services,  stated that she  was unsure from  an auditing                                                               
perspective; however,  she agreed that it  is true [subparagraph]                                                               
(A) requires  the taxable  or tax  credit event  to occur  in the                                                               
state whereas  the new  language in  [subparagraph] (B)  does not                                                               
require the activity to occur in  state.  She deferred to the DOR                                                               
to answer any questions on auditing.                                                                                            
                                                                                                                                
REPRESENTATIVE SEATON pointed out  that this refers to facilities                                                               
north of 68  degrees North latitude.  He suggested  that it could                                                               
specify Alaska, if necessary.                                                                                                   
                                                                                                                                
4:45:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER referred to page  2, line 2 [of Version U]                                                               
to  a reference  to  the  "pipeline."   He  asked  whether it  is                                                               
necessary to  specify the TransAlaska  Pipeline System on  page 2                                                               
and again on page 4 to similar references.                                                                                      
                                                                                                                                
MS. NAUMAN  noted this  is legislative intent  language so  it is                                                               
not  legally binding;  therefore,  it  might not  need  to be  as                                                               
specific but it could be clarified.                                                                                             
                                                                                                                                
REPRESENTATIVE  SADDLER  stated  that  the sponsor  said  it  was                                                               
acceptable.                                                                                                                     
                                                                                                                                
4:46:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SADDLER   made  a  motion  to   adopt  Conceptual                                                               
Amendment 1  on page  2, line  2, to  change pipeline  to "Trans-                                                               
Alaska Oil Pipeline"  and any other place in the  bill that it is                                                               
necessary  to  clarify  the  pipeline  to  the  Trans-Alaska  Oil                                                               
Pipeline.                                                                                                                       
                                                                                                                                
REPRESENTATIVE SADDLER withdrew  his amendment since procedurally                                                               
an amendment was already on the table.                                                                                          
                                                                                                                                
4:47:31 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON withdrew his objection to Amendment 3.                                                                              
                                                                                                                                
There being no further objection, Amendment 3 was adopted.                                                                      
                                                                                                                                
REPRESENTATIVE  SADDLER   made  a  motion  to   adopt  Conceptual                                                               
Amendment 1,  on page 2, line  2, remove the word  "pipeline" and                                                               
insert "Trans-Alaska Oil  Pipeline" and again on page  2, line 4,                                                               
and any  place else  in the  bill where it  is necessary  to make                                                               
that clarification.                                                                                                             
                                                                                                                                
There being no objection, Conceptual Amendment 1 was adopted.                                                                   
                                                                                                                                
4:48:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER made a motion to adopt Amendment 4,                                                                      
labeled 28-LS1053\ U.5, Nauman, 3/11/14, which read as follows:                                                                 
                                                                                                                                
     Page 5, lines 14 - 16:                                                                                                     
          Delete "The processing facility, flow lines, and                                                                      
     other surface infrastructure for  the facility shall be                                                                    
     used to secure bonds issued under this section."                                                                           
                                                                                                                                
     Page 5, line 17, following "exceed":                                                                                       
          Insert "the sum of"                                                                                                   
                                                                                                                                
     Page 5, line 18:                                                                                                           
          Delete "may include"                                                                                                  
          Delete "other"                                                                                                        
          Insert "the"                                                                                                          
                                                                                                                                
     Page 5, lines 19 - 22:                                                                                                     
          Delete "Notwithstanding AS 44.88.140, an oil or                                                                       
     gas processing facility, flow  lines, and other surface                                                                    
     infrastructure   for   the  facility   constructed   or                                                                    
     financed  by  the  oil   and  gas  infrastructure  fund                                                                    
     (AS 44.88.168)  are   subject  to  taxes   and  special                                                                    
     assessments of the state or  a political subdivision of                                                                    
     the state."                                                                                                                
                                                                                                                                
     Page 5, following line 22:                                                                                                 
          Insert new subsections to read:                                                                                       
          "(b)  The bonds authorized in this section may be                                                                     
               (1)  issued as either bonds that are a                                                                           
     general  obligation  of  the authority  or  as  revenue                                                                    
     bonds  payable exclusively  from the  income and  other                                                                    
     money  derived   from  the   oil  and   gas  processing                                                                    
     facility, as the authority considers appropriate;                                                                          
               (2)  used to provide financing under another                                                                     
     program of the authority.                                                                                                  
          (c)         Notwithstanding    AS 44.88.140    and                                                                    
     AS 29.45.030(a),  an oil  or  gas processing  facility,                                                                    
     flow lines,  and other  surface infrastructure  for the                                                                    
     facility  constructed or  financed by  the oil  and gas                                                                    
     infrastructure  fund  (AS 44.88.168)   are  subject  to                                                                    
     taxes  and  special  assessments  of  the  state  or  a                                                                    
     political subdivision of the state."                                                                                       
                                                                                                                                
     Reletter the following subsections accordingly.                                                                            
                                                                                                                                
     Page 5, line 23, following "AS 44.88.095(g).":                                                                             
          Insert "The bonds authorized in this section may                                                                      
      not be considered in calculating the authority's 12-                                                                      
     month bonding limitation under AS 44.88.095(a)."                                                                           
                                                                                                                                
     Page 5, lines 24 - 27:                                                                                                     
          Delete all material.                                                                                                  
                                                                                                                                
4:49:15 PM                                                                                                                    
                                                                                                                                
CHAIR OLSON objected for the purpose of discussion.                                                                             
                                                                                                                                
REPRESENTATIVE SEATON stated that  AIDEA recommended the language                                                               
in Amendment [4].  He explained  that AIDEA was concerned that it                                                               
might limit  revenue bonds;  and depending  upon the  rates, it's                                                               
important to  have the flexibility  to issue revenue  and general                                                               
obligation bonds as their normal  process and AIDEA would use the                                                               
most financially beneficial bonding for the project.                                                                            
                                                                                                                                
4:49:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON,  with respect  to Amendment  [4], asked                                                               
about  the first  deletion.   He related  his understanding  that                                                               
under existing law facilities could  be used to secure bonds, but                                                               
now they cannot be used.                                                                                                        
                                                                                                                                
REPRESENTATIVE SEATON  answered that  is not intent  of Amendment                                                               
4.   He  suggested the  Legislative Legal  and Research  attorney                                                               
could further  explain.  He  reiterated that the intention  is to                                                               
insert  suggested language  from AIDEA  to allow  either type  of                                                               
bonds to be used.                                                                                                               
                                                                                                                                
MS. NAUMAN  responded that  omitting the  language does  not mean                                                               
that the  processing facility flow lines  or other infrastructure                                                               
for the  facility can't be used  to secure bonds.   Instead, this                                                               
section is silent and leaves the option open.                                                                                   
                                                                                                                                
4:51:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON assumed  the idea is to  give AODEA more                                                               
flexibility on financing.                                                                                                       
                                                                                                                                
MS. NAUMAN answered that is her best guess about the purpose.                                                                   
                                                                                                                                
4:51:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON referred  to  a letter  from Ted  Leonard,                                                               
executive   director   of   AIDEA  stating   what   he   believed                                                               
Representative Josephson just said.                                                                                             
                                                                                                                                
4:52:18 PM                                                                                                                    
                                                                                                                                
MR. LEONARD responded  that the deletion is to  assure that AIDEA                                                               
has the  flexibility to use either  GO bond or revenue  bond.  He                                                               
indicated that  AIDEA's financial  advisors indicate  that rating                                                               
agencies  and  the  parties  buying the  bonds  would  assume  it                                                               
referred to a revenue bond based  on the current language.  Thus,                                                               
Amendment 1 deletes  the language and inserts  the new subsection                                                               
that indicates that  AIDEA could fund this based  on the revenues                                                               
and project.  He  referred to page 2, line 19 of  Version U, to a                                                               
general description.   He reiterated that the  bonds issued could                                                               
be either GO bonds of the authority or a revenue bond.                                                                          
                                                                                                                                
CHAIR  OLSON  removed his  objection.    There being  no  further                                                               
objection, Amendment 4 was adopted.                                                                                             
                                                                                                                                
4:54:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON asked  if the goal is to  give credit on                                                               
corporate taxes but not production taxes, up to $10 million.                                                                    
                                                                                                                                
REPRESENTATIVE SEATON answered yes.   He explained that Amendment                                                               
4 would give  a 10 percent credit to stimulate  in-state work and                                                               
faster "flow" into the Trans-Alaska Pipeline System (TAPS).                                                                     
                                                                                                                                
4:55:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOSEPHSON  asked whether  the purpose of  the bill                                                               
is to aid independent [producers] more than others.                                                                             
                                                                                                                                
REPRESENTATIVE SEATON answered that HB  230 is not a subsidy, but                                                               
the  purpose  is  to  incentivize  a  more  rapid  build  out  of                                                               
processing  facilities to  allow additional  oil into  TAPS.   He                                                               
offered his  belief that it may  affect one project or  more.  He                                                               
related that he  was aware of one  smaller independent [producer]                                                               
that  this  could  aid;  however,  there  are  other  independent                                                               
[producers] and major producers that  may have some use, as well.                                                               
The  legislature has  already  adopted  the in-state  manufacture                                                               
credit.    This  ensures  that it  is  applicable  to  processing                                                               
facilities to promote production to TAPS.                                                                                       
                                                                                                                                
4:56:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHENAULT  expressed concern about tax  credit.  He                                                               
asked what else the bill will  do, for example, does it eliminate                                                               
AIDEA's capacity for bonding.                                                                                                   
                                                                                                                                
REPRESENTATIVE SEATON answered  no.  He explained  that AIDEA has                                                               
a $400 million  general cap on bonds.  This  bill would establish                                                               
a separate $200 million for  oil and gas processing facilities in                                                               
addition to the $400 million.                                                                                                   
                                                                                                                                
4:57:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE CHENAULT  asked whether  AIDEA's bond  capacity is                                                               
limited to  $600 million or if  it removes the limit  for bonding                                                               
capacity for the processing facilities.                                                                                         
                                                                                                                                
REPRESENTATIVE  SEATON  answered  that  it does  not  remove  the                                                               
limit.  It  would give [AIDEA] a $200  million [bonding capacity]                                                               
for oil and  gas processing facilities.  He  explained that AIDEA                                                               
could not take the $200 million  and invest in some other kind of                                                               
project  other  than  oil  and gas  processing  facilities.    He                                                               
acknowledged that  it is  someone limited  in that  respect, such                                                               
that it does  not increase their general  bonding limit; however,                                                               
removing  the $200  million from  their  bonding authority  would                                                               
"squeeze" many other projects around the state.                                                                                 
                                                                                                                                
4:58:40 PM                                                                                                                    
                                                                                                                                
CHAIR  OLSON,  after first  determining  no  one else  wished  to                                                               
testify, closed public testimony on HB 230.                                                                                     
                                                                                                                                
[HB 230 was held over.]                                                                                                         

Document Name Date/Time Subjects
HB203 ver N.pdf HL&C 3/14/2014 3:15:00 PM
HB 203
HB203 Sponsor Statement.pdf HL&C 3/14/2014 3:15:00 PM
HB 203
HB203 Sectional Analysis.pdf HL&C 3/14/2014 3:15:00 PM
HB 203
HB203 Fiscal Note-DCCED-DOI-03-07-14.pdf HL&C 3/14/2014 3:15:00 PM
HB 203
HB203 Fiscal Note-DOA-HPA-03-07-14.pdf HL&C 3/14/2014 3:15:00 PM
HB 203
HB203 Supporting Documents-AK Health Plan comments-Premera.pdf HL&C 3/14/2014 3:15:00 PM
HB 203
HB203 Supporting Documents-Letter Ward Hulbert 3-07-2014.pdf HL&C 3/14/2014 3:15:00 PM
HB 203
HB203 Supporting Doucments-Alaska Care-Summary of Benefits - Network vs Non-Network.pdf HL&C 3/14/2014 3:15:00 PM
HB 203
HB203 Draft Proposed Blank CS ver C.pdf HL&C 3/14/2014 3:15:00 PM
HB 203
HB282 Supporting Documents-Letter Cathleen Hahn 03-11-14.pdf HL&C 3/14/2014 3:15:00 PM
HB 282
HB282 Draft Propose Amendment O.1.pdf HL&C 3/14/2014 3:15:00 PM
HB 282
HB282 Memo - Legal Services re Draft Amendment O.1 02-28-14.pdf HL&C 3/14/2014 3:15:00 PM
HB 282
HB230 Draft Proposed Amendment ver U.1.pdf HL&C 3/14/2014 3:15:00 PM
HB 230
HB230 Draft Proposed Amendment ver U.2.pdf HL&C 3/14/2014 3:15:00 PM
HB 230
HB230 Draft Proposed Amendment ver U.4.pdf HL&C 3/14/2014 3:15:00 PM
HB 230
HB230 Draft Proposed Amendment ver U.5.pdf HL&C 3/14/2014 3:15:00 PM
HB 230
HB282 Opposing Documents-Letter Richard Block 3-14-2014.pdf HL&C 3/14/2014 3:15:00 PM
HB 282
HB230 Summary of Changes ver A to ver U.pdf HL&C 3/14/2014 3:15:00 PM
HB 230
HB316 Draft Proposed Amendment O.1.PDF HL&C 3/14/2014 3:15:00 PM
HB 316