04/04/2001 01:05 PM House RES

SB 77-NET PROFIT SHARE UNDER/OVERPAYMENTS                                                                                     
                                                                                                                                
CO-CHAIR MASEK announced  that the first order  of business would                                                               
be  SENATE BILL  NO. 77,  "An  Act repealing  the exception  that                                                               
applies to collection and payment of  interest of $150 or less on                                                               
royalty or  net profit share underpayments  and overpayments; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 0135                                                                                                                     
                                                                                                                                
DARWIN PETERSON,  Staff to Senator  John Torgerson,  Alaska State                                                               
Legislature, came forth on behalf  of Senator Torgerson, sponsor,                                                               
to give  a brief overview  of SB 77.   He explained that  in 1998                                                               
the  legislature exempted  the  Department  of Natural  Resources                                                               
(DNR)  from   calculating  interest  on  small   overpayments  or                                                               
underpayments  of royalty,  if  the interest  was  $150 or  less.                                                               
Prior  to 1998,  these small  overpayments or  underpayments were                                                               
calculated  manually,  using  Excel  spreadsheets;  the  cost  of                                                               
manually  calculating the  payments  was more  than the  interest                                                               
received or the credit applied.                                                                                                 
                                                                                                                                
MR. PETERSON informed  members that with the state's  new oil and                                                               
gas  royalty  accounting  system,  interested owed  on  even  the                                                               
smallest  amount   is  calculated  electronically,   and  royalty                                                               
payments   are  sent   electronically.     Furthermore,  if   the                                                               
legislature does not  repeal the statute in  question, both [DNR]                                                               
and  the  payers  of  royalties would  have  to  reprogram  their                                                               
computer  systems to  not compute  underpayments or  overpayments                                                               
payments of  interest in the amount  of $150 or less;  that would                                                               
be  an unnecessary  expense for  all the  parties involved,  when                                                               
there is a much easier option available, such as [SB 77].                                                                       
                                                                                                                                
Number 0258                                                                                                                     
                                                                                                                                
CO-CHAIR  MASEK asked  Mr. Peterson  whether the  sponsor expects                                                               
there to  be a positive  fiscal note.   She asked how  much money                                                               
will be gained by passage of SB 77.                                                                                             
                                                                                                                                
MR.  PETERSON replied  that the  amount in  question is  minimal.                                                               
For the 12 months prior to  October 31, 2000, the state processed                                                               
1,716 royalty  filings with interest  amounts between  a negative                                                               
$150 and a  positive $150; the net gain was  $4,096 to the state.                                                               
He deferred  to the  DNR to  explain why  there isn't  a positive                                                               
$4,096 in the fiscal note.                                                                                                      
                                                                                                                                
BILL VAN  DYKE, Lease Administration/Royalty,  Division of  Oil &                                                               
Gas,  Department  of  Natural  Resources  (DNR),  testifying  via                                                               
teleconference,  noted that  Mark Meyers,  Director, Division  of                                                               
Oil & Gas, had asked him to fill  in for him and that Jim Stoffer                                                               
(ph), head  of royalty  accounting, was  with him.   He  said, as                                                               
aforementioned, the amounts of some  of the returns are negative,                                                               
while  some  are  positive.    Although  the  sample  size  taken                                                               
resulted in a  slightly positive number, the  same analysis taken                                                               
over more years  would produce results closer  to zero; sometimes                                                               
royalty  payers overpay,  and sometimes  they  underpay, but  the                                                               
number should average zero over a long enough time period.                                                                      
                                                                                                                                
Number 0475                                                                                                                     
                                                                                                                                
REPRESENTATIVE FATE moved  to report SB 77 out  of committee with                                                               
individual  recommendations  and  the accompanying  fiscal  note.                                                               
There  being no  objection,  SB 77  was moved  out  of the  House                                                               
Resources Standing Committee.