Legislature(2015 - 2016)BARNES 124
02/10/2016 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB247 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 213 | TELECONFERENCED | |
| *+ | HB 282 | TELECONFERENCED | |
| += | HB 247 | TELECONFERENCED | |
| + | TELECONFERENCED |
HB 247-TAX;CREDITS;INTEREST;REFUNDS;O & G
1:04:04 PM
CO-CHAIR TALERICO announced that the only order of business is
HOUSE BILL NO. 247, "An Act relating to confidential information
status and public record status of information in the possession
of the Department of Revenue; relating to interest applicable to
delinquent tax; relating to disclosure of oil and gas production
tax credit information; relating to refunds for the gas storage
facility tax credit, the liquefied natural gas storage facility
tax credit, and the qualified in-state oil refinery
infrastructure expenditures tax credit; relating to the minimum
tax for certain oil and gas production; relating to the minimum
tax calculation for monthly installment payments of estimated
tax; relating to interest on monthly installment payments of
estimated tax; relating to limitations for the application of
tax credits; relating to oil and gas production tax credits for
certain losses and expenditures; relating to limitations for
nontransferable oil and gas production tax credits based on oil
production and the alternative tax credit for oil and gas
exploration; relating to purchase of tax credit certificates
from the oil and gas tax credit fund; relating to a minimum for
gross value at the point of production; relating to lease
expenditures and tax credits for municipal entities; adding a
definition for "qualified capital expenditure"; adding a
definition for "outstanding liability to the state"; repealing
oil and gas exploration incentive credits; repealing the
limitation on the application of credits against tax liability
for lease expenditures incurred before January 1, 2011;
repealing provisions related to the monthly installment payments
for estimated tax for oil and gas produced before January 1,
2014; repealing the oil and gas production tax credit for
qualified capital expenditures and certain well expenditures;
repealing the calculation for certain lease expenditures
applicable before January 1, 2011; making conforming amendments;
and providing for an effective date."
CO-CHAIR TALERICO noted that Commissioner Hoffbeck and Mr. Alper
will continue their PowerPoint introduction of HB 247 that was
begun on February 3, 2016.
1:04:51 PM
RANDALL HOFFBECK, Commissioner, Department of Revenue (DOR),
clarified that in discussions over the last week it became
apparent that the study being done by the Institute of Social
and Economic Research (ISER) will be more high level than the
expectation he had left the committee with at the 2/3/16
meeting. He said an executive summary from ISER is expected by
2/11/15, a draft report by 2/15/16, and that Gunnar Knapp from
ISER is willing to testify before the committee on the report.
The report, he explained, really is looking at the governor's
fiscal plan in general and the relative impacts of the decisions
that would be made on taxes versus cuts in employees versus cuts
in capital versus using portions of the earnings versus reducing
the dividend, and the relative impacts that each of those have
on the state's economy. The report, he continued, doesn't drill
down into the competitiveness of oil and gas based on which of
the credits remain and which ones don't.
1:06:27 PM
REPRESENTATIVE HAWKER offered his appreciation for this
clarification. He said the impact analysis that ISER had said
it would provide on all these alternatives - such as impacts on
the number of jobs and total incomes by the sector, industry,
region, and distributional impacts - had led him to think that
the report was going to address his concerns as a committee
member, rather than being at a high level. His concerns are
about what the economic impacts will be of the changes proposed
in HB 247 on the state's competitiveness, productivity, jobs,
economy, and people's lives. He asked who will do this for the
administration since it is not ISER.
COMMISSIONER HOFFBECK replied that at some level ISER is going
to do that but it won't be drilled down to the point of saying
that if a specific credit is reduced or eliminated what kind of
competitive imbalance that may create for a company and whether
the company will invest and what that has in long-term impacts
on production in the future. It will be more an issue of a
specific tax may affect a different region differently. In
general, it will be more at the level of how $100 million in new
taxes would affect the economy.
1:08:26 PM
REPRESENTATIVE HAWKER remarked that this seems to be relying on
the ISER study that Commissioner Hoffbeck said wasn't going to
do this. He asked whether ISER will be examining the aggregate
effects and giving an impact analysis of the effects of HB 247.
COMMISSIONER HOFFBECK responded he believes that it will only be
to the extent of a general statement on taxes and that $100
million in taxes would have this kind of effect generally on the
economy. It will not drill down into the details of the bill on
a specific credit and what the impact would be. It will be more
of an overview of general tax policy.
REPRESENTATIVE HAWKER inquired whether Commissioner Hoffbeck
thinks that that is an adequate economic analysis for
legislators to be able to make a valid judgement on HB 247.
COMMISSIONER HOFFBECK answered he doesn't believe the ISER
report will be sufficient for legislators to make the decision
based on that particular report. He said [the administration]
did not make the decisions in a vacuum - there were over 30
meetings with the various industry players and those that were
loaning against the credits. He pointed out that [DOR] has the
raw data that underlies the credits on where the credits have
been spent and what the results of those expenditures have been.
Good data was had in putting the bill together. Unfortunately,
however, most of the data is in a format that [DOR] cannot
readily share with the committee, but some of that information
will come out when industry representatives testify.
1:10:11 PM
REPRESENTATIVE SEATON related that he had not been anticipating
that the ISER study would be able to drill into competitive
advantages and disadvantages by individual areas of the state or
individual oil companies and how they proceeded with their
business. A general orientation cannot be expected to provide
the specific impacts on those elements because [ISER] doesn't
have the balance sheet or investment detail that the individual
oil companies have and he expected to get that from the
individual companies. He expressed his hope that the companies
will be specific to each one of these credits because each
credit impacts different companies in quite different ways.
REPRESENTATIVE JOSEPHSON agreed with Representative Seaton. He
said he attended as many of Senate Working Group meetings as he
could last fall and that industry attended all of the meetings
it was invited to, which may have been all of them. He noted
[the legislature] just renewed [a consulting contract] with
enalytica. He offered his understanding that opportunities have
been scheduled for industry to tell the committee its view.
1:12:25 PM
CO-CHAIR TALERICO asked whether, other than the ISER report,
anything more will be forthcoming that is a modeling-type
report. He presumed that industry could also provide the
committee with more of a structured-type model of how this would
all function.
KEN ALPER, Director, Tax Division, Department of Revenue (DOR),
replied that later in the presentation he will talk about the
economic impacts as well as how the various sectors will be
impacted. However, Co-Chair Talerico's question is a lot more,
and is sort of subjective as to how specific changes on specific
sectors are possibly going to influence industry decision
making. That is beyond what [the administration] was able to
do, beyond what was learned directly from talking to the
participants who will hopefully be coming before the committee.
He said he is sure that the consultants hired by the Legislative
Budget and Audit Committee will be offering their thoughts.
[The administration] did not go to outside consulting services
specifically to parse into the individual provisions of the
bill.
1:13:53 PM
REPRESENTATIVE HAWKER remarked:
It's your bill, you're asking us to pass judgement on
a major change in state's tax policy. This isn't just
a little tweak of tax credits, this is a major
economic shift in the way we approach oil and gas
taxation in this state. And you're simply offering it
to us without any advocacy, any explanation, any
economic ... impact analysis of the consequences of
the legislation that you are proposing. And you're
saying, "Ok, you guys figure it out on your own." And
if that's the case, that's great because then I don't
think you get the right to rebut what we do.
COMMISSIONER HOFFBECK responded that he can't totally disagree
with the aforementioned. He walked the committee through the
process of how [the administration] got to where it is:
Last year you saw the first cut of the first
indication of the impacts that the oil and gas tax
credits had ... on the budget issues when the governor
vetoed the $200 million in the credits last year,
essentially to start the discussion on what it was
that we could afford going forward in a credit
program. ... That created the series of meetings that
we had over the summer, including the meetings that
Senator Giessel sponsored, to try and just really give
the full understanding of the credits and who was
using them and how they were being used. ... It
started honing in on just how big of a pie did we
have? How much revenue do we have? And how much of
the credits would fit within that revenue pie? That
became the balance of what credits could we maintain,
which ones we simply couldn't, how we could
accommodate as many of the concerns ... as we possibly
could on the people that we had talked to and came up
with a balance of ... this is what we feel is what we
have available to offer for credits. ... We weren't in
the discussions saying whether credits were good or
bad or whether credits were [a good or bad policy].
What we were trying to do was retain as many of the
credits as we possibly could under the current
economic situation the state was in. So that was one
of the driving factor of the discussion.
1:16:46 PM
REPRESENTATIVE HERRON asked why [the administration] chose not
to hire the services of outside consultants.
MR. ALPER responded there are a number of reasons, the first
being that he is very proud of DOR's Tax Division staff and the
people at the Department of Natural Resources (DNR). These
employees have had "many years of experience working in this
field and we relied on their counsel and their thoughts and
their analysis." A lot of what is being done is number
crunching that doesn't necessarily require industry-specific
experience. He continued:
We are constrained. We don't have the money for
outside consulting services that we might have had
several years ago as part of the larger fiscal issues
of the State of Alaska. If you go back, Mr. Chairman,
to previous major oil and gas legislation that's been
before this body, although the administration's come
in with a lot of outside services, really it's been
quantitative services: this is how much money this
change would be if you ... did that different, the
dollar amount would change to that. No one was really
speculating on what changes in behavior might be.
They were modeling what the impact would be if certain
behaviors A, B, or C were to occur, not saying the
likelihood of any of them to occur. We could pin down
with some certainty what the dollar value of these
changes is, but what we don't believe we have the
ability to predict, which no one has the ability to
predict, is how any specific player in the industry is
going to react to these changes.
1:18:37 PM
REPRESENTATIVE HERRON inquired whether data and presentations by
DOR and Econ One for Senate Bill 21 were utilized [for HB 247].
He further inquired as to how involved was DNR in developing the
proposed policy and changes in HB 247.
MR. ALPER answered that the modeling from Senate Bill 21 was
important in that it created the new model as to what the new
tax structure is. The changes proposed in HB 247 are built on
the base of Senate Bill 21. The tax rate, the per-barrel
credit, the new-oil-specific benefits are unchanged in the bill
before the committee. None of the modeling for Senate Bill 21
predicted an additional amount of new activity, that wasn't part
of the conversation. Likewise, [DOR] is not predicting new
activity or less activity through this process. He said DOR
conversed with DNR throughout as there are pieces of the bill
and pieces of existing law that tie in more closely to DNR's
operations than others. For example, DNR is very connected to
the Exploration Tax Credit system which has something of a pre-
approval process relating to data submission requirements. Over
the fall, DNR presented multiple times to Senator Giessel's
working group about how much value DNR perceives from the data
that it gets. In response to that, even as the Exploration
Credits begin to sunset this summer, [DOR] tried to find a
mechanism in this legislation to continue to ensure that DNR can
have that data for the function of its own planning purposes and
marketing of Alaska's resources to the world. He said Director
Feige [of DNR's Division of Oil & Gas] is a close colleague and
he and Director Feige spoke many times about this bill as it
worked its way through the development process.
1:21:07 PM
REPRESENTATIVE SEATON understood that DOR's presentation is on
the bill's impact on the state budget, the resources that the
state does or doesn't have, and how to pay for those. It is not
to supersede and say what the impact is on the industry or
individual players, but the impact on the budget.
COMMISSIONER HOFFBECK replied that the motivating factor behind
having to make a change was the impact on the budget. But, he
pointed out, a tremendous amount of work was done directly with
the participants who use these credits and loan against these
credits to find out what the impact on those particular
individuals would be before the specific selection of components
within the bill was put together. For [DOR's] purposes that is
more robust than what a consultant would tell [the department].
There is not a way to present that information to the committee
in this forum because most of that information is proprietary
information.
1:22:20 PM
REPRESENTATIVE SEATON proffered that these credits are an
investment of state dollars and he hopes that [DOR] has Net
Present Value calculations on what the value of those
investments would be over the life of a field. The state is
investing hundreds of millions of dollars and he would like to
know whether that is a good investment for the state based on
the Net Present Value of the impact that is going to occur.
COMMISSIONER HOFFBECK inquired whether Representative Seaton is
meaning the Net Present Value of what has already been invested
or what will be invested in the future.
REPRESENTATIVE SEATON clarified that if [the state] is making an
investment of $100 million through this kind of a credit, he is
meaning to get a feel of what is that Net Present Value going to
yield back to the state over time.
COMMISSIONER HOFFBECK responded there are two ways to address
that. One, DOR can look at the history of the credits that the
state has already paid and what the Net Present Value impact
effect of those credits are. He said DOR has hesitated to do
that because certain pieces are still unknown. Some of the
credit expenditures are on fields that are still in development
so it is hard to say what the Net Present Value of those credits
are until such time as some of these fields come online and
actually start to produce. As far as the go forward, he said
DOR can certainly within its data see where it would be best to
spend that $100 million because the history can be seen of what
has occurred up to this point in time and which fields are
progressing and which ones aren't. Unfortunately, that again
gets into that granularity of the data that is difficult for DOR
to bring forward to the committee.
MR. ALPER added that the Tax Division has over the last several
months developed a lifecycle field modeling structure that
didn't formerly exist. He said it was in many ways built in
honor of Mr. Janak Mayer of enalytica, the Legislative Budget
and Audit Committee's consultant, who developed a similar model
in looking at field costs and present values during various
pieces of oil legislation. So, for a typical 50 million barrel
field, DNR can now say what the upfront cost is, what the
upfront credits are, and what the state can expect to get in the
backend from production taxes, royalties, and the like, given
various cost and price options. And then from that there is a
cash flow to the state - a Net Present Value. The division has
run some scenarios in response to specific requests and is
prepared to share that model and its results with the committee
if asked. Where it gets hard is to talk about specific actual
fields because that gets into the internal decision making of a
specific company.
1:25:50 PM
REPRESENTATIVE HAWKER charged that Mr. Alper just threw this
back at enalytica. He stated enalytica is here to provide the
legislature independent analysis of what [the administration] is
doing, not to make the case for [the administration's] bill and
work for [the administration].
MR. ALPER apologized and stated:
We're not expecting enalytica to do our work for us.
What I just said was we tried to copy some of their
methodology and some of their modeling which we found
to be very insightful and very robust. And there is
no great magic to it as long as the analyst in
question has the mathematical skills to be able to
build the model. And we built a model that in many
ways replicated what they had previously done for the
legislature.
1:26:32 PM
REPRESENTATIVE HAWKER asked whether he is correct in recalling
that in earlier testimony it was said that the motivating factor
behind the construction of HB 247 was the impact on the budget.
COMMISSIONER HOFFBECK answered:
The motivation to go down this path and look at
credits was the budget. The motivation was not to go
in and redefine oil and gas taxes and credits within
the State of Alaska. It was just a recognition this
was a very large expenditure that the state was
carrying, that we needed to see whether there was a
way that we could reduce some of that liability during
tight budget times.
1:27:18 PM
REPRESENTATIVE HAWKER returned to earlier testimony that last
year's $200 million veto was motivated by the belief that the
state just didn't have that money to spend; it was a money
motivated and budget focused veto alone. He recounted that the
veto had profound consequences on the ability of Alaska's
working industries to secure financing, to the fact that an
entire consortium of international bankers withdrew money that
was on the table for Alaska's industry and literally threw them
into the tizzy that the administration had to deal with all
summer. He asked whether the administration had anticipated
that kind of consequence when making that budget decision.
COMMISSIONER HOFFBECK replied the administration expected it
would have some collateral effects. For some of the more stable
financing situations where the project was a long ways along and
driving towards the finish line, the administration probably
didn't recognize that those funds would be pulled back as well.
It took several conversations with the industry to explain the
process that the credits were still good. Then they felt
comfortable and essentially started to loan again. "We
recognized it would have some impact," he said. "There is no
doubt about that."
1:29:07 PM
REPRESENTATIVE HAWKER returned to an earlier statement by Mr.
Alper that the administration is not predicting new or lesser
activity through the enactment of this bill. However, he
argued, it seems there is evidence that a $200 million cut to
the tax program had profound ripples. As just acknowledged,
there were consequences on industry, some of which were
unanticipated. He asked whether [the administration] is truly
now not predicting new or lesser activity or that there will be
consequences of passing HB 247. He further asked whether [the
administration] cares about the consequences, wants to know what
they are, and what [the administration] thinks will be
precipitated through this bill on the economy.
MR. ALPER responded that the governor's veto was not the first
step in a process, the conversation began earlier in the 2015
session. He explained:
The governor published an op-ed that talked about our
credit spend being out of alignment with our greatly
reduced production tax revenue, that suddenly we were
spending more. There's a lot less elasticity in the
credit spend than there is in the revenue when the
price of oil goes down. Therefore, instead of the
credits being a reinvestment of some portion of a very
large revenue stream, had actually grown to become
larger than the revenue stream. So the idea was put
on the table we needed to do something different. The
veto was not the ideal method of solving the problem,
simply, but it was the only tool available to the
governor at that moment. As I said in my earlier
presentation, this is a two-step process. The credits
are earned because of industry activity. They're
claimed, they get audited, they get given a
certificate; a certificate is a paper asset. Those
certificates are then owned by companies, which they
could either use against tax liability if they have
tax liability; they could sell them to another company
who might have tax liability; or, with funds
available, sell them back to the state - have them
repurchased through the tax credit fund. What the
governor did was veto and cap the amount of money
available to the tax credit fund and didn't in any way
change the credits available on the street. In doing
so, there's a certain uncertainty because the credits
that belong to people are suddenly - who are expecting
to get paid back - aren't going to get paid back.
What we're attempting to do with this legislation is
actually create a little bit more certainty. If
there's fewer credits being earned but we're going to
ensure that the amount being earned is in line with
the funds available, then at least when people make
their decisions they can have some certainty that
they'll be able to get paid back on their credits.
What makes me nervous is the possibility of there
being hundreds of millions of dollars of credit
certificates out there without there being funds
available to buy them back. I think that causes more
of a ripple effect and uncertainty in the industry
than simply trying to pare back on the program itself.
1:32:07 PM
REPRESENTATIVE HAWKER stated:
That was the governor's own budget that had those
credits in it. ... Those were not legislative ads,
those were the governor's own budget that he committed
to the industry, to the banking industry, to the
expectations of what the word of this government was
going to be, and then he reneged on it. But, frankly,
this bill we've got in front of us, the governor also
campaigned very strongly on not touching the taxes
under Senate Bill 21, and we're here doing that. I
can understand the need to reassess. But again, if
you're going to reassess ... I would like to know what
you think the consequences are going to be on the
economy of the state of Alaska, jobs, our
competitiveness in the world, an analysis of what you
think is a fair share, how much government take are
you expecting, how much do you think is a fair share.
... What I keep hearing is that we're not going to get
that, we're supposed to figure it out on our own.
COMMISSIONER HOFFBECK answered:
Again, I think that some of that information will come
out when the producers testify. The decisions that
were made on this bill were done not in a vacuum, in
discussions with the people that use these credits.
... We talked very openly ... they shared with us what
the impact of these various credit changes might be
and that largely framed some of the decisions that we
made on ... what's still in the bill. Hopefully that
information comes out in that testimony. And as
Director Alper said, we can provide some information
based on past practice on ... what the impact of the
credits have been, but we're going to present it with
the caveat that I think the jury's still out on some
of that. And so if we come in and say that the Net
Present Value on a barrel of oil is X and then ...
somebody brings in a much larger field all of a sudden
that could change dramatically. We just want to make
sure ... that we don't draw too hard of a line in the
sand with that information. That's one of the reasons
we haven't been actively floating out that information
... it's early.
1:34:17 PM
REPRESENTATIVE TARR recounted that in 2013 the legislature
passed a bill repealing tax credits for other industries, such
as the film industry tax credit, which began the conversation
about whether the State of Alaska could afford all the credits
and industry incentives that had been put in statute. She
surmised that this wouldn't be the only industry credit that's
under consideration right now.
COMMISSIONER HOFFBECK replied "exactly correct," and added that
last year there was a fairly substantial bill that removed the
film tax credit from the statutes and with many of the similar
conversations.
1:35:21 PM
CO-CHAIR TALERICO requested Mr. Alper to continue [the
administration's] PowerPoint presentation, "Oil and Gas Tax
Credit Reform, HB 247," which he had begun presenting at the
2/3/16 committee meeting.
MR. ALPER recapped slides 1-22, noting that [on 2/3/16] he
discussed the first two of the presentation's four sections: 1)
the history of how the tax credit system developed and the
system's aggregate cost, and 2) how the different features of
the bill would work, such as the changes that would be made to
exploration, to the Cook Inlet system, and to the minimum tax.
He explained that today he will discuss the third section of the
presentation which is a sector specific analysis. Before
addressing slide 23 he noted there is not a lot of government
take in the bill, it's primarily a reduction in government
outlay. The only place that government take is substantially
impacted is in the sections regarding the minimum tax.
1:36:59 PM
MR. ALPER turned to slide 23, "Bill Impact: Example Scenarios,"
to outline how the changes proposed in HB 247 would impact a
North Slope major producer. He said very little would happen to
a North Slope producer. If oil prices are high, at the level
they've been in recent history, there is no change. The 35
percent base tax rate of Senate Bill 21 is in place and the
sliding scale per-barrel credit is in place if that oil
production is eligible for the Gross Value Reduction (GVR);
there are no changes made to those fundamental aspects of the
system. If the prices drop below approximately $85 a barrel,
that's the point at which the minimum tax is typically
triggered; it varies from producer to producer based on that
producer's individual economics. But in that world they are
currently paying a 4 percent minimum tax under existing law.
The bill would increase that minimum tax to 5 percent. That 1
percent increase in the minimum tax reflects roughly $50 million
in revenue in the fiscal note. If there is an extended period
of very low prices, as is the case right now, a second aspect of
the change to the North Slope major producer would kick in.
[Currently,] once a major producer goes negative for one year,
the producer can use the percentage of its operating loss, the
Operating Loss Credit, to offset taxes and go below the minimum
tax and pay at a zero level until the producer works its way
through its Operating Loss Credit. House Bill 247 would harden
the floor - it would make it so that these credits can't be used
to reduce the payments below the minimum tax. The minimum tax
would need to be paid at the 4 percent, or, if that provision
survives, at 5 percent. The credits remain alive, the producer
in question would carry those credits forward to a subsequent
calendar year when hopefully prices have recovered sufficiently
that the producer has tax liability and can use its operating
loss to offset its tax liability in a future year.
1:38:57 PM
REPRESENTATIVE HAWKER recalled Mr. Alper's prefacing statement
as being that HB 247 would have very little impact on a North
Slope major producer.
MR. ALPER offered his belief that the sentence in question was
completed with "at the prices we've seen in recent years." At
higher prices there's no impact (indisc.--sound interruption)
producers and that he then highlighted what the specific impacts
would be as prices are lower, both mildly lower or as it is
right now in an extended period of very low prices.
REPRESENTATIVE HAWKER noted that the committee doesn't have the
impacts from [the administration]. He asked whether Mr. Alper
would change his opinion on the bill if it is documented by the
producers that there would be significant impacts on a North
Slope major producer.
MR. ALPER responded that there is another change in the bill
(indisc.--sound interruption) that would impact large companies
coming to do work in Alaska that aren't current major producers,
similarly sized companies who don't currently exist here. Those
companies would be prevented from being able to cash in their
credits; they would have to hold them and use them against
future tax liability. Right now, the existing law for many
years has been that the large producers cannot get cash for
their credits and must carry them forward. The hardening of the
floor is tied intimately with the idea that they can't get cash
for their credits, that they have to carry them forward, and the
bill is saying that now the major producers are being asked to
carry them forward another year and not use them to offset their
minimum tax payments. The administration believes strongly that
people should pay the minimum tax; if there is a minimum tax the
minimum tax should actually be the number that's paid. What is
being attempted to do here is prevent situations where certain
credits could be used to reduce payment below the minimum tax.
"If a multi-billion dollar company sits before us and says that
that's going to fundamentally consequentially harm their ongoing
operations, I look forward to hearing that testimony," Mr. Alper
said. "But we're talking about a relatively small number in the
broader scope of this bill, we're talking about the 4 percent
minimum tax."
REPRESENTATIVE HAWKER remarked that the aforementioned response
finally got to the answer he was looking for.
1:41:32 PM
REPRESENTATIVE JOSEPHSON inquired whether the third bullet on
slide 23 is the provision where under current law a North Slope
producer could essentially pay no taxes and, through the Net
Operating Loss Credit, the State of Alaska would be
inadvertently paying for the production without seeing any
revenue except perhaps from royalty.
MR. ALPER answered that royalties, corporate income tax, and
property tax are not impacted by this bill and are not impacted
by these credits in any way. Modeling has been done for
scenarios in which oil prices stay at a fixed price for a
certain number of years. What starts happening in the second
and third year of lower prices is that there's enough Operating
Loss Credits from the major producers that they are able to
completely offset their minimum tax. He posed a scenario for an
oil price of $50, the price predicted in fiscal year 2016 by the
Revenue Sources Book, which is about $40 gross after
transportation cost. About 160 million taxable barrels is
produced from the North Slope every year. That's about $6.5
billion worth of value, that's what the oil is worth at the
wellhead. A 4 percent minimum tax is $250 million. In a pure
minimum tax that's the production tax revenue DOR would expect.
Currently this year DOR is expecting $150 million. The
difference between those two is: about $50 million is being
offset by the Small Producer Credit being used to reduce tax
liability below the minimum tax and another $50 million from
Operating Loss Credits from major producers. If low prices
continue for a couple of years, that number will reduce to zero
and DOR would expect to get nothing from the production tax.
COMMISSIONER HOFFBECK noted that there is another provision in
the bill that deals with new oil, which may be the one that
Representative Josephson is more concerned about and could
actually drive the credits to something greater than the value
of the loss.
REPRESENTATIVE JOSEPHSON surmised that is where it gets into the
stacking phenomena.
COMMISSIONER HOFFBECK offered a correction, stating that that is
another circumstance.
MR. ALPER added that the stacking provisions are not so much
relevant on the North Slope anymore because of the so-called
"spending-based credit" - the Capital Expenditure Credit - which
was repealed through Senate Bill 21. Also, the Exploration
Credit will sunset this summer. So, it is unusual that the same
project would be getting two credits for the same expenditure in
the North Slope today.
1:44:15 PM
REPRESENTATIVE SEATON inquired about how and when the Net
Operating Loss Credit is calculated. As an example, he noted
that one oil company doing business in Alaska does publish
public reports and this company's consolidated income statement
shows a loss of $67 million, but the adjusted earnings show a
positive earnings of $482 million.
MR. ALPER replied that the Alaska production tax code is very
much a cash flow based tax. The entire sector - the North Slope
as a whole, Cook Inlet as a whole - is commingled for tax
purposes: how much did the company earn and how much did the
company spend, and that includes not just operations of the
company's current field, but, for example, investment in a
future field on the North Slope counts towards the tax
calculation. Not considered, however, is depreciation for
example, which is a factor of the federal tax code that impacts
corporate income taxes but doesn't impact Alaska's production
tax. He offered his belief that it doesn't include other taxes,
noting that current code (AS 43.55.165(e)) has a long list of
all the ineligible deductions, such as lobbying expenditures,
spill cleanup from lack of deferred maintenance, and other
things added as part of the production profits tax (PPT) and the
2007 bill, Alaska's Clear and Equitable Share (ACES). It's a
calculation of allowable expenses from actual revenue, that's
the loss. There aren't these adjustments that are seen in the
federal tax code with the biggest and most obvious one being
depreciation. The Operating Loss Credit is a flat multiplier, a
percentage of that number. In calendar year 2015 that number on
the North Slope was 45 percent. So, a company that shows it
spent $100 million more than it earned would have a $100 million
operating loss. The company would earn a $45 million Operating
Loss Credit that, in the aforementioned scenario of a few
minutes ago, could be used to reduce its taxes below the minimum
tax to the extent of that $45 million.
1:46:35 PM
REPRESENTATIVE SEATON asked whether any credits that a company
earns from the State of Alaska, other than the Net Operating
Loss Credit, count into that cash flow or are accounted for
separately.
MR. ALPER deferred to Mr. Lenny Dees for a definitive answer.
LENNIE DEES, Audit Master, Production Audit Group, Tax Division,
Department of Revenue (DOR), responded that other credits are
not counted in that particular loss calculation. The loss
calculation is done by what are called segments; for instance,
the North Slope oil and gas production is a particular segment
for a company. That loss calculation only takes into account
the revenues from the oil and gas that's produced and sold by
that particular company for that segment, less the annual lease
expenditures for that particular segment. The annual lease
expenditures for that segment are comprised of the operating and
capital expenditures. To the extent that those lease
expenditures exceed the revenues for that particular segment, a
company would have a net operating loss for that segment.
1:48:15 PM
REPRESENTATIVE SEATON inquired whether the 35 percent credit
against lease expenditures counts into the revenue picture or
lowers expenses before the loss is calculated.
MR. DEES answered that the 35 percent is the value of a
deduction for a company regardless of whether there is a loss or
profit for that particular segment. For instance, if a company
has a positive production tax value, which is when the revenues
exceed the lease expenditures, the impact of those lease
expenditures on the taxes is calculated such that for every
dollar of lease expenditure that the company spends it gets a 35
percent deduction against the actual taxes that will be due for
that particular segment. But, if a company doesn't have a
positive production tax value, i.e. it has a net operating loss,
the 35 percent is then applied to the excess of the lease
expenditures over the revenues to determine the credit for that
particular segment.
COMMISSIONER HOFFBECK offered to put together some slides that
show the calculations because it is easier to see them then it
is to explain them.
REPRESENTATIVE SEATON said that would be helpful.
MR. ALPER pointed out that the back pages of the December [2015]
Revenue Sources Book have a stylized, simplified version of the
production tax calculation in the aggregate for fiscal years
2015, 2016, and 2017. From these it can be seen how the barrels
are calculated, and then the per-barrel spending, and how the
different elements of the calculation work through.
1:50:44 PM
REPRESENTATIVE HERRON commented that Commissioner Hoffbeck has
come up with a great idea. For example, the Econ One analysis
was presented in slides, graphs, and modeling that were easy to
see. Being able to look at pictures is helpful and he would
therefore recommend that Commissioner Hoffbeck and Mr. Alper
show the committee in graphs and slides what they are trying to
explain.
MR. ALPER agreed to provide the aforementioned type of
presentation when the administration is next invited before the
committee.
1:51:53 PM
MR. ALPER resumed his presentation, turning to slide 24 to
address the bill's impacts on North Slope new or smaller
producers. He explained that these are the companies in
production and operating fields that aren't the three major
producers. These companies, for the most part, came to Alaska
in the last 10 years or so. At higher oil prices where the
underlying tax system of Senate Bill 21 remains in place, these
companies won't have any change. They will have their
production, Gross Value Reduction, taxation, and $5 per barrel
credit; for the most part those new fields are eligible for the
Gross Value Reduction, the new oil benefit from Senate Bill 21.
He continued, noting that prices below $85 barrel will be
material to these companies. Under the structure of current law
the per-barrel credit for new oil can reduce tax liability to
zero, as opposed to legacy oil where the minimum tax, the 4
percent floor, kicks in and must be paid. House Bill 247 would
add the 4 percent minimum tax to so-called new oil, to oil
eligible for the Gross Value Reduction, and therefore the newer
and smaller producers would be asked to pay a minimum tax on
their production. Another impact on these companies, he said,
is one of the more technical provisions. Currently, if a
company has an actual operating loss, the Operating Loss Credit
isn't tied to the loss, it ties to the loss as additionally
subtracted from by the Gross Value Reduction, thus creating a
larger loss, a paper loss, which has led to circumstances where
[the State of Alaska] has paid Operating Loss Credits greater
than 100 percent of the amount of the loss. Under HB 247 that
ability would be lost by those companies - the Operating Loss
Credit would be limited to the size of the actual loss.
1:53:58 PM
MR. ALPER moved to slide 25 to discuss the bill's impacts on a
North Slope new project developer, an entity that is not yet in
production and has a project or discovery that is in the
development phase. He explained that these companies earn the
Net Operating Loss Credits as a normal part of their business.
The annual cycle is that every year [DOR] gets applications, the
companies prove up their expenditures, and DOR writes them a
check. Under HB 247 the 35 percent Net Operating Loss Credit
would continue to be earned without change. However, what could
change is the method by which those credits are paid back, and
there is a fork in the road in that it depends on the nature of
the company. A large multi-national company, which is defined
in the bill as having annual revenues in excess of $10 billion,
would no longer be eligible to get cash for its credits and
would have to hold onto its certificates until the future year
when it is in production and has a tax liability and can fully
offset future tax liability against the loss credits that the
company has earned during the development stage.
REPRESENTATIVE HAWKER asked whether this provision would apply
only to multi-national companies or to both multi-national and
domestic corporations.
MR. ALPER replied that a large American company with $10 billion
worth of annual revenue that doesn't operate in any other
country would fall under this provision. The specific language
in the bill says global revenues in the prior calendar year in
excess of $10 billion.
1:55:47 PM
MR. ALPER returned to slide 25 of his presentation to address
the alternative fork in the road, explaining that a smaller
company that doesn't meet that threshold would be able to
continue to get cash rebates for its tax credits. The
limitation that would be imposed by HB 247 is to put a $25
million per company per year cap on the amount of State of
Alaska cash that it can get. Amounts in excess of that would
have to be carried forward to a subsequent year and it is
possible that it could take multiple years to use up the credit
depending on the size of the project. The number of $25 million
was not pulled out of thin air, it is from historic state
statute that was put in place with the PPT bill in 2006. Prior
to 2006 there was no ability for the State of Alaska to
repurchase credits. In 2006 the ability to do so was added with
a specific cap at $25 million per company that was subsequently
eliminated with the passage of the ACES bill in 2007.
1:56:48 PM
REPRESENTATIVE JOSEPHSON inquired whether there have been small
companies that have sought more than $25 million for new
development. If the answer is yes, he further inquired as
whether it would be an example of what Representative Hawker was
talking about where there could be some observable slowdown of
the incentive to develop a new project.
MR. ALPER confirmed that [the State of Alaska] has paid credits
well in excess of $25 million to individual companies within a
year, small companies as well. When the definition of small is
less than $10 billion a year in annual revenue, that's different
than the mom and pop grocery store down the street and, yes,
[the State of Alaska] has spent well in excess of that per
company and it is reasonable to say that corporate decisions
might be made differently if a limitation is put on that, if the
State of Alaska is no longer going to be spending more than $25
million per company per year.
1:57:57 PM
MR. ALPER moved to slide 26 to discuss the bill's impact on a
Cook Inlet existing producer. He explained that this is the
person who is producing oil or gas, selling the oil through the
refinery, and/or selling the gas through the local utilities or
the liquefied natural gas (LNG) plant in Cook Inlet. Currently,
Cook Inlet existing producers pay very low or in most cases zero
taxes because of the Cook Inlet tax cap. In those cases where a
company is required to pay the 17 cent per thousand cubic feet
(MCF) gas tax, that tax is often offset nearly completely, or
completely, by the Small Producer Credit in Cook Inlet. So, the
State of Alaska receives very little, if any, tax revenue from
Cook Inlet, yet those companies that are currently in production
and not paying taxes are eligible for the current credit
repurchase through the capital and well lease expenditure
programs. [The State of Alaska] pays these companies for 20-40
percent of their capital and well spending regardless of their
profitability or whether or not they are paying taxes. As the
bill is written, repeal of those credits means simply that the
producer that doesn't have operating loss is not earning
refundable credits; the producer would continue to pay zero
taxes and the tax caps under current law would remain in place
through the end of 2021.
1:59:16 PM
REPRESENTATIVE JOSEPHSON related that a member of the other body
applauded the effort in toto but said the administration should
reverse this proposition and tax the production while retaining
the credits because the net effect to Alaskans would be better
doing that. He asked whether this is something that the
administration has thought about.
MR. ALPER responded that the administration hasn't specifically
modeled it, but has talked about it. To put the numbers in
perspective, he pointed out that the entire wellhead value of
all oil and gas production from the Cook Inlet last year was
about $800-$900 million. He said he doesn't know offhand what
the profitability of that is and what the production tax or the
net profits tax implication would be. This specific provision
eliminating those spending credits is $150 million or so out of
the fiscal note. The administration is not necessarily opposed
to talking about reintroducing the Cook Inlet tax or eliminating
the Cook Inlet tax caps; it's not part of the bill before the
committee. If the administration was to go there, simply
repealing the cap language would likely be insufficient. The
underlying tax regime in Cook Inlet is something of a hybrid of
multiple existing taxes and would require some modification.
The administration would need to work on a specific proposal for
a new Cook Inlet tax regime.
2:00:53 PM
REPRESENTATIVE HAWKER recalled that as recently as five or six
years ago the communities reliant on Cook Inlet gas were having
blackout drills in expectation of not having adequate gas to
keep the heat and lights on in the middle of winter.
Legislation was passed that specifically targeted and intended
to promote exploration and development and to increase and
provide energy security in Southcentral Alaska. He inquired
whether the administration can tell him and give him any kind of
assurance that the consequences of implementing HB 247 as it is
being presented will not cause the industry to revert to the
practices it had before those legislative changes were made.
Regarding the word practices, he explained that it was not like
anybody intended, it just didn't work economically in the Cook
Inlet. The legislature made economic changes, the Cook Inlet
Recovery Act recovered the inlet, so he is asking for assurance
that an analysis has been done that shows these proposed changes
will not cause the inlet to revert to the status it was before
and put his community back at risk of blackout drills and not
having enough energy for heat and lights in winter.
COMMISSIONER HOFFBECK answered that the dynamics of Cook Inlet
are dramatically different today than five years ago when it was
a market looking for gas and no gas behind the pipe to fill the
pipe. The incentives that were put in place worked. There is
now gas behind the pipe and several fields are not being
developed simply because they lack a market to spend the capital
to finish the development. He said he cannot give the assurance
that ten years from now Southcentral won't be back in that
situation. But he can say that right now that is not an issue
and there is additional gas that can be brought online in the
near future when a market exists. Qualifying that he is not
trying to be too cavalier, he asked whether victory can be
declared and move onward. Maybe the particular set of credits
that were in place for the time they were in place worked.
Things are at a stable point now. Maybe five years down the
road credits might have to be introduced if it is seen that a
shortage is on the horizon, but to continue to pay credits at a
point in time where, quite frankly, the credits might be going
to pay for an export project at a time when the State of
Alaska's budget is tight is something [the administration]
doesn't see as being the proper use of state resources.
2:04:01 PM
REPRESENTATIVE HAWKER stated the aforementioned is disturbing
because investments requiring long lead times are involved.
It's like turning an aircraft carrier, the wheel is spun but the
carrier doesn't turn on a dime and that is what is being dealt
with in regard to these Cook Inlet oil fields. He said he would
love to declare victory and go home, but is asking to be shown
some evidence that victory can be declared. At the last meeting
he was asked to trust the administration and while trust is a
wonderful thing, when it comes to the economics here he doesn't
know that he wants to put his community at risk on faith.
COMMISSIONER HOFFBECK replied that [DOR] will work with DNR to
put something together.
REPRESENTATIVE HAWKER requested that in addition to DNR he would
like to receive assurance from Southcentral utilities that they
feel comfortable there will be adequate gas remaining behind
their pipes for the foreseeable future.
COMMISSIONER HOFFBECK agreed that would be good testimony, but
noted he is not the one who can get those utilities before the
committee.
CO-CHAIR TALERICO said he will see what can be done in this
regard.
2:05:13 PM
REPRESENTATIVE SEATON requested that the analysis include the
price of gas because at the time the legislature went forward
with the credits gas producers were losing money producing the
gas. Since then the Regulatory Commission of Alaska (RCA) has
changed the structure so that now gas produced in the Cook Inlet
is the most profitable gas in the whole U.S., and people will
invest when they can make a profit. Heavy subsidies are needed
when a regulation is in place that means something will be sold
at a loss, and that's the situation Cook Inlet was in. He said
he would therefore like to see those coincident timings of when
the credits came in as well as when the gas price went from
$2.25 to $7.00 per MCF, meaning that it became profitable. This
needs to be investigated as a subsidy, he continued, because
[the State of Alaska] is subsidizing these companies, these new
developments, and if the only use for that gas is export then it
must be looked at very strenuously to see if it is in the
state's best interest to be subsidizing and the state maybe
losing the entire net value as well as its royalty value,
corporate income tax, and any small amount of production tax for
a company to export and make profit overseas. He further
requested that the analysis be put into a graphic format.
COMMISSIONER HOFFBECK agreed to include those numbers in the
analysis, but cautioned that it will be very difficult to parse
what was a credit effect versus a price effect.
MR. ALPER added that some of these issues were talked about in
the Senate Working Group presentations. There was definitely,
frankly, a political dynamic in Cook Inlet. The RCA at the time
was rejecting supply contracts that had higher prices to them.
That led to the producers doing less work, and some of the
supply shortages were due not necessarily to lack of gas but to
lack of work done to develop that gas. He allowed that this is
a disputable concept, but said those issues have largely been
resolved not just through Alaska's tax credit system but through
the increase in the price of gas, suddenly it is more economical
to produce gas in the Cook Inlet. He noted that he earlier gave
the number of $800-$900 million as the entire value of the
annual production from Cook Inlet. A number he gave during last
week's presentation to the committee was that about $400 million
was paid in tax credits by the State of Alaska to Cook Inlet oil
and gas explorers and developers. So, a little bit less than
half of the entire value of the entire resource was paid by the
State of Alaska through tax credits last year.
2:08:25 PM
MR. ALPER turned to slide 27 to discuss the bill's impact on a
Cook Inlet new field developer. He explained that the Net
Operating Loss Credit is currently being received by those
individuals who are not operating, aren't yet selling resource.
The Net Operating Loss Credit is 25 percent in [Cook Inlet], but
that is typically stacked, meaning it could be received
alongside either the 20 percent Capital Credit or 40 percent
Well Lease Expenditure Credit. Typically an expenditure will be
one or the other. The companies will try to get as much as
possible into the 40 percent category, of course, and those
expenses which might not qualify for the 40 percent will
typically qualify for the 20 percent. So a weighted average in
the 30-35 percent range is typical stacked with the Net
Operating Loss Credit. That means 50-60 percent of the cost of
a new field development is being directly subsidized by the
State of Alaska through the refundable tax credit program under
current law. With the repeal of the Cook Inlet credits, the
Capital and Well credits, the State of Alaska would continue to
support that activity but at a reduced level of 25 percent,
which is the Cook Inlet Net Operating Loss. He returned to
something he said earlier about reinstituting the tax, noting if
that were to happen that's one of the oddities out there - the
Cook Inlet's underlying tax is the 35 percent tax from Senate
Bill 21, but the Cook Inlet Net Operating Loss is the 25 percent
from ACES, so it is something of a hybrid system. Limited by
that 25 percent Net Operating Loss Credit there would be the
same fork in the road that he described for the North Slope: a
large company, national or multi-national, with $10 billion of
annual revenue would have to hold its credits for use against
future tax liability; a smaller company would be limited by that
$25 million per company per year cap and would have to carry
forward numbers in [excess] of that. Typically the Cook Inlet
projects are smaller in scale than the North Slope projects, so
more of the companies operating in Cook Inlet are likely to fall
into that $25 million cap situation, whereas some of the
newcomers coming to the North Slope are more likely to fall into
the $10 billion situation.
2:10:44 PM
REPRESENTATIVE HERRON inquired whether that $25 million [cap]
would hurt those companies that are not large and are not small.
MR. ALPER responded that currently in Cook Inlet a company
investing $100 million a year, which is a good-sized company,
would at the end of the year get a $50-$60 million credit. If
HB 247 passes and the company did the exact same activity it
would get a $25 million credit. So, it would hurt the company
to the extent that it would be getting $25-$35 million less
state dollars for its project. To the extent which that makes
that project feasible or more or less profitable is impossible
to say without looking at individual specific projects.
REPRESENTATIVE HERRON returned to slide 25 to ask the same
question. He said there are people who are not large multi-
national but they're definitely not smaller, and this new
limitation would definitely hurt barrels going into the
pipeline.
MR. ALPER answered by posing a scenario in which a mid-sized
company is spending $400 million a year on the North Slope,
thereby earning $127 million from the 35 percent Net Operating
Loss Credit. If that company could only cash in $25 million per
year, it would mean the rest of the credits would roll forward
into the next year and the next year. If the company were to
keep investing $400 million a year and it becomes a multi-
billion dollar project - yes, there would be a big stack-up of
deferred credits that might become a large future liability for
the State of Alaska or those credits start to sunset after 10
years. He posed another scenario in which under current law a
company spends $2.5 billion on a major project on the North
Slope that takes 10 years. While that is great for barrels in
the pipeline, jobs, and economic development, that $2.5 billion
at 35 percent is $875 million - the State of Alaska would be
writing $875 million in checks to that company in advance of the
first dollar that the State of Alaska received in production
taxes, corporate income taxes, or anything else, although maybe
a little bit of property tax. The intent of HB 247, he said, is
to simply constrain the State of Alaska's cash flow to what is a
feasible number given its fiscal realities.
2:13:43 PM
REPRESENTATIVE HAWKER opined that over the years discussions
have occurred throughout the Capitol about the importance of
having a tax structure that levels the playing field, of giving
every company equal access and ability to do work in the state.
He maintained that HB 247 is clearly defining a prejudice and a
discrimination against bigger companies, which may or may not be
a good thing. If it's good to discriminate against those big
companies and it is wanted that they have to use their credits
only against their own future tax liability, then why not apply
that to everybody? Equal footing would be that all companies
use the credits offered by the state to offset their own future
earnings. He posed a scenario in which a big multi-national
company that operates almost exclusively in southwest Africa
decides to invest a small amount of capital on a small project
in Alaska and asked why it would be wanted to discriminate
against that investment. Throwing statutory, intentional
discrimination into Alaska's tax code seems problematic, so, he
asked, why not just have everybody use the certificates against
their future liability and save the State of Alaska the cash
that [the administration] is concerned about.
2:15:33 PM
MR. ALPER disagreed that there's some inherent discrimination in
this. He continued:
There's existing discrimination in current law - if
you want to call it that - that says if a company
produces more than 50,000 barrels per day in Alaska
they're not eligible to get cash for their tax
credits. Those companies must hold those certificates
and carry them forward. That was written to apply to
basically three companies - the major North Slope
producers. The expectation was those companies would
have relatively large tax liabilities and would offset
their credits against their liability. But if they
don't, which is the circumstance we're in right now,
they're forced to carry them forward. But part of the
rationale there, I believe, is that these are by their
nature large companies with balance sheets and bank
accounts and diversified investment portfolios that
they could afford better than a smaller company to
hold the tax credit certificate on their balance sheet
and get the value for it later rather than coming to
the state for cash. ... What we realized in discussing
possible future liability, and some of this
conversation started when we were before this
committee talking about [the Arctic National Wildlife
Refuge (ANWR)] during the previous session, is the
large companies who don't operate in Alaska are in
many ways very similar to the large companies that do
operate in Alaska - they're global, diversified, have
bank balances, balance sheets - and we don't need
necessarily to be writing checks to those companies.
They can hold those credits on their balance sheets.
It's the smaller company, especially the company that
might be forming itself for the purpose of an Alaskan
investment that's going to have the more imminent cash
flow need and that's why if we were going to protect
to a limited extent state cash for credits, we wanted
to limit it those who most likely were going to be in
need of that cash in the short term. So we created a
line that said "if you aren't in this large company
category then you can get the cash, but if you are you
can wait." That was the decision we made and we chose
a number. I don't believe that number is carved in
stone, but the theory behind it, I believe, is sound.
2:17:35 PM
REPRESENTATIVE TARR asked whether this is to also address the
issue of a company that is not well resourced that then goes out
of business prior to having a tax liability and the state is
left having given the credits to the company.
MR. ALPER responded that the State of Alaska doesn't want anyone
to go bankrupt to save the state tax credit money. That would
be an unfortunate reality. Bankruptcies are awkward for all
concerned and the state is facing some smaller ones in the
industry right now. To a certain extent, if the benefit package
gets too generous, if the State of Alaska is paying too large a
percentage of things, it is possible that certain inefficient
decisions might be made, that more speculative or less likely
for success projects might be funded due to a company's
expectation that its risk is much smaller because the state is
going to pay close to two-thirds of its money and the company
could take that loss. It is reasonable to say that perhaps the
projects that do go forward are the ones that have better
fundamentals and are more likely to result in success.
COMMISSIONER HOFFBECK added that this doesn't do anything
directly to protect the State of Alaska from having to pay the
credits if a company goes bankrupt. He explained that if a
company has earned the credits, the credits become an asset of
whoever is doing the bankruptcy proceedings; the State of Alaska
cannot stop from paying the credits if a company earns them.
REPRESENTATIVE SEATON noted that bankruptcy is an issue and is a
real issue for Alaska suppliers. For example, Buccaneer went
bankrupt. Suppliers sold fuel to Buccaneer, were paid by
Buccaneer, and Buccaneer burned the fuel. Then suddenly the
bankruptcy court comes back to the suppliers saying that they
got paid within 90 days of when Buccaneer decided to declare for
bankruptcy and now the suppliers must return to the bankruptcy
court the money that was paid for the fuel that Buccaneer burnt.
The same thing occurred with the services provided in the Homer
harbor where the dockage had to be refunded. He announced he
has an amendment on the bankruptcy issue that he will be
bringing forward when the committee gets to amendments.
2:20:25 PM
REPRESENTATIVE SEATON, addressing the high amounts of the
credits, stated that the credits are predicated on the idea that
it is much more expensive to do projects in Alaska than anyplace
else in the U.S. Because the credits would lower the cost of a
project going forward, Alaska would then get a competitive final
investment decision because the credits would equalize costs.
He related that last summer Hilcorp testified before the Senate
Working Group that it had worked out procedures that have
lowered its costs to the same as in the Lower 48. Hilcorp
further testified that it was moving those procedures to the
North Slope and anticipated having equivalent costs on its
activities there. At some point in time, he opined, the credits
must be looked at, and how much is being given, and whether the
credits are promoting inefficiencies in companies; the State of
Alaska shouldn't be subsidizing inefficiencies. He said he
would like to see it addressed as to how much the State of
Alaska is offsetting or subsidizing and how much is really
necessary with some of the technical and new company innovations
that are coming.
2:22:01 PM
CO-CHAIR TALERICO pointed out that a small company can be a $50
million investment or a $400 million investment or upwards of $2
billion if the company is not going to bring in $10 billion.
The time value to the money that a company invests is critical
to that company continuing forward, more so than an attached
number. Given [the administration's] earlier statement that
there may be flexibility in the proposed number, he urged that a
percentage basis be considered rather than a number because it
is hard to define a certain number when there is such a big gap.
MR. ALPER agreed that the time value of money is substantial and
material and that the talk is about asking people to defer
receiving cash from the state for potentially a number of years.
He said the corollary to that is the status quo of continuing to
spend half a billion dollars year towards a program in an
environment where the State of Alaska's annual general fund
revenue is less than $2 billion, down approximately two-thirds
from what it was a couple of years ago. All these factors are
what's before the legislature to weigh as members look at this
bill and other legislation moving forward.
2:23:58 PM
MR. ALPER moved to slide 28 to discuss the bill's impacts on the
Interior/Frontier area explorer. He explained he is limiting it
to the explorer because there is no real production yet in the
Interior/Frontier areas. Explorers are currently receiving the
65 percent credit for exploration and 50-60 percent for
development. What does that mean? It's a stack of things. The
Exploration Incentive Credit is about 40 percent and the Net
Operating Loss Credit is at 25 percent, and these explorers are
eligible for both. Once past the exploration phase it becomes
more of a development activity where there is the weighted
average of the Well and Capital Expenditure credits of 30-35
percent stacked with the 25 percent Net Operating Loss Credit
for the 50-60 percent. [Under HB 47] the Capital and Well
credits would go away; so, under the development phase, projects
in the Frontier areas would only receive the 25 percent Net
Operating Loss Credit, which is comparable to what the change
would be in Cook Inlet. However, under a provision inserted
into the exploration statutes as an amendment to Senate Bill 21,
the exploration credits extend through 2022. So, the qualified
expenditures of companies in the Frontier areas of the state
where new production is wanted, and many of which are Native
corporations, will get paid by the State of Alaska at the 65
percent rate for at least another five or six years while they
prove up their exploration.
2:25:34 PM
REPRESENTATIVE JOSEPHSON noted that Senate Bill 21 provides for
the State of Alaska to pay 65 cents on the dollar to the folks
in the Nenana Basin for their efforts. He said he has been to
presentations by these folks and thinks they are earnest and
honest about their prospects. He understood that there hasn't
yet been any production.
MR. ALPER replied correct. He recounted that in presentations
before Senator Giessel's working group, Doyon, Limited, sounded
like it is in something approaching active development and is
hoping to bring some production online. Modeling was presented
showing that even though the State of Alaska supports it with
credits at this level and even though the taxes are quite low
due to caps in other statute for the Interior, the State of
Alaska will receive royalties that will more than offset its
investment. However, he pointed out, the prevalence of state
land is not as widespread in the Frontier areas. The central
North Slope is state land and so are large areas of Cook Inlet
where the oil and gas development has been, which means the
State of Alaska receives the royalty. But, for a major project
on privately held land or corporation land, even if that project
would be eligible for hundreds of millions of dollars in credit,
there might not be any material amounts of revenue coming in
simply because the State of Alaska doesn't get the royalties,
someone else does.
2:27:16 PM
MR. ALPER reviewed the bill's revenue impacts outlined on slides
29-30. Qualifying that it is a rough estimate because there are
so many moving parts, he said [the administration] believes the
bill is worth about $500 million in the fiscal year 2017 budget.
Of that $500 million, approximately $200 million [per year] in
credit certificates would not be issued, things that currently
result in credits being issued that are no longer going to
exist. This is primarily from the repeal of AS 43.55.023(a) and
(l), the Capital Expenditure and the Well Lease Expenditure in
the non-North Slope areas; those are worth roughly $150 million.
The remaining $25-$50 million worth of credits would be from
elimination of the so-called loopholes - the ability to increase
the size of an operating loss and a few other minor provisions.
Regarding the second set of $200 million [per year] in credits,
he said [the administration] could legitimately be accused of
kicking the can down the road. There are $200 million worth of
certificates that are going to be earned, that are going to be
held, but are simply not going to be cashable this year. They
are going to be used against some future year's tax liability in
a year where hopefully there is more tax revenue. These are the
entities that fall under the repayment capped at $25 million or
the $10 billion large company cap. That gets it to $400 million
with the rest being $100 million in additional revenue. About
$50 million of that $100 million comes from raising the floor
from 4 percent to 5 percent. About another $50 million comes
from hardening the floor - preventing certain credits from being
able to be used to reduce payments below the minimum tax. A bit
of additional money, probably less than $25 million, comes from
the increase in interest rate. That number would increase a
little bit over time, but because it is mostly tax assessments,
delinquent taxes, it is money that would find its way into the
Constitutional Budget Reserve once it is eventually paid, rather
than the general fund.
2:29:35 PM
REPRESENTATIVE JOSEPHSON surmised that if a constituent was to
ask him what the historic cut is under this proposal, it would
be more accurate for him to say $300 million rather than $500
million because the other $200 million will be paid by the State
of Alaska if there is a future tax liability, which is a huge
contingency.
MR. ALPER agreed that that is a legitimate point to make. He
concurred that the net effect would be about $300 million. The
immediate effect when talking about balancing the budget that's
before the legislature this session is $500 million, meaning the
impact on the fiscal year 2017 budget.
2:30:22 PM
REPRESENTATIVE HAWKER inquired as to what the total government
take on industry would be in the fiscal year 2017 budget as a
percent rate of expected revenues based on the currently
projected low oil price scenario.
MR. ALPER answered that remodeling has not been done of total
government take including tax credits in the current low price
scenario. He said there is a bit of an unusual circumstance now
because the minimum tax does lead to some very high government
take calculations. For a company losing money and paying a
minimum tax it creates an infinite government take on the
production tax. However, the tax credits are something of an
offset to that that haven't previously been built into the
government take calculations. He said he would like to get back
to the committee on that as he is very curious. It's only fair
to look at the change in government take, both on the tax side
and on the credit side, in the aggregate. The conversation on
government take is a little bit misleading when tax credits are
not included in the conversation, he continued. During the
hearings on Senate Bill 21, tax credits were not discussed when
government take was being discussed. The baseline number, the
consensus number, on Senate Bill 21 was an expectation of total
government take in the 65-68 percent range across a wide range
of prices, but today's prices are outside that expected range.
Mr. Alper allowed he doesn't know to what extent those numbers
have moved given current reality and he would like to find out.
2:32:09 PM
REPRESENTATIVE HAWKER asked whether he heard Mr. Alper say that
the intent of this bill is to take an industry that today is
actually losing money and impose an infinite increase in taxes
on them by basically saying "you're losing money but we're going
to raise your taxes."
MR. ALPER replied these are large companies that operate over
multi-year cycles. Their business model, as he understands it,
expects highs and lows and things are very much in a low swing
right now. A small increase in the minimum tax would increase
their down at this moment of the cycle and that could be said
without hesitation.
REPRESENTATIVE HAWKER concluded that the short answer is yes,
[the administration] intends to increase taxes on companies
already losing money in the state of Alaska.
MR. ALPER responded yes.
2:33:03 PM
REPRESENTATIVE OLSON noted that DOR recently completed the 2008
ACES production tax credit and that DOR has seven more to go
that are overdue. He understood that [the Tax Division] cut
back one of its master tax auditors and didn't look for any
additional people for oil and gas audits. He inquired how
things are going to get done on these proposals if the division
is already seven years behind.
MR. ALPER answered he doesn't like to think of it as being
behind. [The Tax Division] is on target and hasn't missed any
deadlines, he said. While closer to the statute of limitations
than he is comfortable with, [the division] has zero intent of
missing any deadlines and everything will be done before the
deadline. [The division] is also on an active program to speed
up somewhat. Qualifying he isn't sure what Representative
Olson's audit master question is exactly about, he said that
during the last legislative session one audit master position
was cut in the current year's budget. That position was held by
a person who was promoted and became a deputy commissioner and
[the division] chose not to refill the position. An audit
master position is being eliminated in the current budget, but
that person has really not been working on production tax issues
and has been functioning in more of an economic research role.
The core audit staff doing the day-to-day work of reviewing the
information from companies, being in communication with the
companies, doing all the calculations and making sure that the
numbers add up, is a solid core group of workforce that [the
division] is not looking to cut.
2:34:38 PM
REPRESENTATIVE OLSON understood the 2008 audit generated $285
million.
MR. ALPER replied $265 million in assessments and pointed out
that not all of that was paid, some is under dispute right now
through the appeals process with one or more of those producers.
REPRESENTATIVE OLSON surmised a lot of money is hanging out on
the other seven audits.
MR. ALPER offered his belief that just as DOR has gone through a
learning curve on what is and isn't legal in the world of a net
profits tax, so are the companies. He said he expects that over
time the audits will go cleaner and faster as all of the bugs,
rules, and procedures get worked out. Once DOR has rejected
something a couple of times industry is going to stop claiming
it again. While he is not exactly sure how much money is on the
table, he said he will be able to talk to this and other
committees before the end of this session about the 2009 audit
completions and those numbers, as well as DOR's strategy for
accelerating its audit process and catching up on these audits.
2:36:02 PM
REPRESENTATIVE JOSEPHSON understood that this is not unusual
historically in Alaska and has been the history of oil and
royalty debates since 1977. For example, the ARCO tax period in
the 1980s wasn't resolved until the 1990s, which was several
hundred million dollars, and Amerada Hess which was over a
billion dollars.
MR. ALPER answered, "It's a litigious industry and ... there's a
lot of vague transactions that are prone to differences in
interpretation." It's a complicated topic. The aforementioned
cases were more multi-year lawsuits that resulted in large back
payments. The money in these two lawsuits, as well as the
current tax assessments in which [DOR] says a company owes money
for short-paying its taxes in a prior year, is not general fund
money and does not balance the budget. The entirety of that
money goes to the Constitutional Budget Reserve. If the money
in question results from a royalty shortfall, which was the case
for a lot of the older lawsuits, the appropriate percentage goes
to the permanent fund and the remaining to the Constitutional
Budget Reserve. He pointed out he doesn't want to hope for a
couple billion dollars because that means people were abusive in
their tax filings. Rather, he wants to hope that the number is
zero and everything is buttoned down just right. However, if
there is a large amount of money that comes to the state it's
not going to have any immediate impact on the budget deficit.
2:37:50 PM
REPRESENTATIVE OLSON asked whether it is advantageous to the
state to have it take seven years, given [the state] would be
making 11.5 or 12 percent interest.
MR. ALPER replied the interest rate through January 1, 2014, was
11 percent. With the effective date of Senate Bill 21 the
interest rate, including on old things, reset to the statutory
rate of 3 percent over the federal discount rate. It moves
every quarter and this current quarter is 4 percent. He said he
doesn't want to speculate on industry behavior, but when it was
11 percent and DOR assessed the tax, companies tended to pay it
and then go through the protest process because if companies got
paid back they got paid back with interest. Now it's more in
their interest to not pay the assessment and protest because the
additional cost of more time is only 4 percent.
REPRESENTATIVE OLSON understood that almost two-thirds of the
2008 audit was interest.
MR. ALPER responded no, about $150 million was tax and about
$115 million was interest, roughly 40 percent.
REPRESENTATIVE OLSON asked whether the interest goes to the
Constitutional Budget Reserve (CBR).
MR. ALPER answered yes, the entirety of the payment goes to the
CBR and there is a process for that. The CBR is also used to
pay refunds if there is an assessment and an appeals process in
which the company wins or a settlement is made somewhere in the
middle. The CBR also pays reversed tax assessments.
2:39:19 PM
REPRESENTATIVE HAWKER paraphrased Mr. Alper's earlier statement
as being "that the oil and gas industry in the state of Alaska
was ... 'litigious.'" He said one definition of litigious that
he came across defines it as being "unreasonably prone to go to
law to settle disputes." He asked whether Mr. Alper believes it
is unreasonable for the oil and gas industry in the state of
Alaska to have legitimate challenges with assessments of taxes.
MR. ALPER replied he was not specifically limiting his comment
to Alaska. The industry engages in very large transactions in
very diverse areas all over the world and oftentimes there are
disputes over valuation. Saying he doesn't want to question the
dictionary definition or the reasonableness of anything, he
noted that everyone has the right to the legal process whether
the simplest citizen, or the largest company, or the State of
Alaska itself; that's why the legal process exists.
REPRESENTATIVE HAWKER asked whether Mr. Alper believes the oil
and gas industry is unreasonably prone to go to law to resolve
those disputes.
MR. ALPER responded no, he does not believe that anyone is being
unreasonable.
REPRESENTATIVE JOSEPHSON stated that what he heard was "it's a
litigious business" and that he thinks Mr. Alper was referring
to both sides.
MR. ALPER thanked Representative Josephson for clarifying.
2:41:15 PM
MR. ALPER drew attention to slide 30, "Revenue Impact," noting
that DOR's fiscal note is a little bit unusual. He explained:
We are able to highlight $500 million in the immediate
year, but our forecast of future tax credit expense
tends to decline as you go into the out years. And
that's not necessarily tied to actual expectation of
less credits being spent, it's actually tied to our
production forecast. We can only forecast oil
production if we know the project has been sanctioned
and is going to happen. We tend to add projects as we
get closer to the present. ... We are looking at
things three and four years from now; we don't know
what wells are going to be drilled; likewise we don't
know what credits are going to be earned. So there's
a natural tendency for our estimate of tax credit
spending to increase as you get closer to the present.
So when you look at the fiscal note before you ... you
will see smaller numbers as far as the savings and
expenditure. Those numbers are pegged to our official
forecast of tax credit spend, which is the Revenue
Sources Book, reduced by $50 million. We're
essentially saying that we expect to reduce our credit
spend to ... $50-$100 million per year in future years
from whatever the number would be as we get closer to
the present. ... Our forecast only includes known
projects. We have a very conservative forecasting
methodology and it's not for this committee and this
hearing, but we could discuss the evolution of our
forecasting methodology; it's actually gotten much
more conservative in recent years. Most new projects,
anything that folks might talk about and has come
before this committee when you speak to industry and
say "we want to do A, B, or C," those are projects
that haven't been sanctioned yet, are not yet in our
credit forecast, and if they were to actually happen
would increase the expected spend given current law.
2:43:07 PM
MR. ALPER moved to slides 31-32, "Implementation Cost," noting
that in the transition, most of the changes in HB 247 have an
effective date of July 1, 2016, meaning until that point current
law remains in place. He defined "honoring existing credits" as
meaning that $700 million in tax credits is expected to be
claimed this fiscal year but only $500 million is going to be
paid. That's the limitation of the appropriation, so there is
going to be $200 million hanging past at the end of fiscal year
2016. He said [DOR] is estimating $425 million in credits that
would under normal circumstances be paid next year. These are
almost entirely credits earned in the past calendar year - the
companies spent the money, did the projects, and are going to
file their taxes in March and claim all of these credits. Then
there is whatever would be earned in the first half of the
present calendar year before the effective date of the bill.
That gets to a number somewhere past $800 million, leaving a
little bit of room for unanticipated circumstances. Rounding
up, $1 billion would be put into the tax credit fund to ensure
there's adequate funds to clear the deck of whatever credits
might be earned prior to the effective date. The fiscal note is
a bit unusual in that the operating budget has $74.3 million in
it, a number that comes out of a statutory formula. The fiscal
note adds $926.6 million, which is the difference between that
number and $1 billion, for the so-called transition fund. It
would be an appropriation from the Constitutional Budget Reserve
into the oil and gas tax credit fund.
2:44:49 PM
REPRESENTATIVE HERRON recounted that the governor has said these
tax proposals are mostly written in pencil because the
legislature is going to weigh in on it. He requested that Mr.
Alper inform the committee as to which places are written in pen
and which places are must haves.
MR. ALPER replied, "I think the governor says it's all written
in pencil." The intent, the goal, he continued, is to reduce
the amount of money that the State of Alaska spends every year
from the current multiple hundreds of millions of dollars to a
more manageable number in line with the State of Alaska's
available resources. He said he has complete faith in the
ability of the committee and the rest of the legislature to come
up with a solution that does not need to be exactly what [the
administration] is proposing.
2:45:43 PM
MR. ALPER turned to slide 32 to continue his discussion of the
implementation cost. This is a bit larger than the fiscal notes
that will be seen on some of the other smaller revenue bills, he
pointed out, because a lot of reprogramming is involved. [The
Tax Revenue Management System (TRMS)] is a very complicated tax
system; it works very well to do the work but it's a little bit
hard coded, so when a change is made it requires bringing back
the programmers to recode things - for changing the way balances
are handled, which credits exist, how different transactions get
posted. He said [DOR] has requested the company that built the
system to come up with an estimate of implementing HB 247 the
way it is written. Because there is not yet a number, the
amount of $1.5 million is a placeholder; DOR expects the number
will be different and expects that it will be lower. Once a
real number is received from the contractor DOR will come before
whichever committee the bill is in front of at that moment to
adjust that number. These are one-time funds that would be a
capital appropriation or a supplemental appropriation. No
additional resources or staff will be needed to implement and
manage the ongoing tax program once the changes are made.
2:47:09 PM
COMMISSIONER HOFFBECK addressed slides 33-34, both entitled
"Closing the Budget Gap." He explained the slides outline the
New Sustainable Alaska Plan and where these various components
[shown in red] fit into two parts of the three-part plan. The
first part uses investment earnings and existing taxes, which
gets to $4.2-$4.3 billion of the $5.2 billion goal. The second
part hits in spending reductions at the rate of $400 million for
the coming fiscal year; not paying the credits is a reduction in
the State of Alaska's expenditures. This also fits in the third
part, the new revenue component, at $100 million, which is the
hardening of the cap and the increasing of the [minimum tax]
rate from 4 percent to 5 percent.
2:48:12 PM
REPRESENTATIVE HAWKER returned to the $1 billion capitalization
of the oil and gas tax credit fund. He said it is shown as a
fiscal year 2017 appropriation already requested [fiscal note
identifier: HB247-DOR-OGTCF-1-27-16] and that [page 1] of the
fiscal note states, "Initial version showing funding to Oil and
Gas Tax [Credit] Fund. This will be reflected in the Governor's
amended appropriation bill". He inquired as to where that $1
billion is in the appropriation process and whether it is in the
supplemental appropriation bill.
MR. ALPER responded he doesn't have the document in front of him
and doesn't recall if it's going to be in the governor's
supplemental bill. He said he wrote some of that text but
cannot recall the specific sentence being referred to, so he
wants to look back at it. He said his expectation is that it's
a fiscal note that's attached to the bill so it would be
contingent on the passage of a version of the bill because that
is usually how these things are structured. He added that he
hasn't seen the governor's supplemental bill, the governor's
amended appropriation bill, to know if that's in there.
REPRESENTATIVE HAWKER agreed that the fiscal note is requesting
the $1 billion fund gap, but said he is confused by the
statement at the bottom of the fiscal note that this will be
reflected in the governor's amended appropriation bill.
COMMISSIONER HOFFBECK stated that [DOR] will clear that up.
2:50:05 PM
REPRESENTATIVE SEATON requested the committee be provided a
presentation on the Gross Value Reduction and what that does for
a net present value calculation for the State of Alaska's
investment. For example, if the State of Alaska is investing in
a new field, what the expected investment would be over time and
the CBR or permanent fund discount rate, and what is the net
present value both offsetting production tax and offsetting all
revenues that the general fund would receive. He said he would
like this presentation so that when the committee is considering
these tax credit investments, members will know whether the
State of Alaska will be making or losing money over the totality
of the project.
MR. ALPER responded that [DOR] envisions some scenario drill-
down in the more math oriented presentation that it expects to
bring before the committee next.
2:51:56 PM
MR. ALPER turned to the sectional analysis outlined on slides
35-44, saying he will concentrate on the sections that are the
most essential to the core changes that would be made by HB 247.
He explained that Section 7 [slide 35] proposes to increase the
interest rate tied to the Federal Reserve Discount Rate from 3
percent to 7 percent above the Federal Reserve Discount Rate.
This splits the difference between the historic pre-2014
interest rate and what was put in place by passage of Senate
Bill 21. Section 8 [slide 36] would provide a confidentiality
waiver - the ability to talk about specific spend by individual
companies. Section 8 would turn certain information currently
considered taxpayer proprietary and make it public information.
He noted that Section 17 [slide 37] is one of the "mother
sections" of the bill and describes the minimum tax and how it's
calculated. Section 17 defines the credits that, if the bill
passes, will no longer be able to reduce payment below the 4
percent level. Additionally, Section 17 would remove the
ability to move the Per-Taxable-Barrel Credit around from month
to month, instead turning it into more of a truly monthly
calculation so as to protect the State of Alaska from the need
for large tax refunds at the end of the year.
2:53:25 PM
MR. ALPER explained that Section 18 [slide 38] would impose the
minimum tax on the Gross Value Reduction eligible oil, new oil.
He noted this is something that doesn't currently exist - new
oil can pay as low as zero. Section 20 [slide 39] would add the
10-year sunset on credit certificates. Because the State of
Alaska would be deferring a lot of payment, that 10 year
provision is material and is something that should be discussed.
Section 22 relates to DNR's needs and would ensure that as the
exploration credits expire DNR will be able to receive seismic
and downhole data well logs for its own planning and strategic
purposes. This would be done by tying [the data requirements]
to other credits rather than to the exploration credits.
Section 26 [slide 40] talks about who is suddenly no longer
eligible to receive cash for their tax credits - the $10 billion
limit, the $25 million per year limit. This section amends AS
43.55.028(e), which is current law on other restrictions on who
can get cash - specifically the 50,000 barrel a day, the large
current producer exemption. Section 27 [slide 41] is the Alaska
hire restriction on credit rebate. Section 37 [slide 42] would
clean up the situation wherein a municipal utility selling a
small amount of production becomes eligible for sometimes very
large credits because of the way that law is currently
interpreted. Most of the rest of it is conforming. Section 39
[slide 43] would add a definition for "outstanding liability to
the state." Right now if a company owes taxes it cannot get its
credits - [DOR] pays their taxes out of the credit first.
Section 39 would broaden this to also pay other liabilities to
the state, such as royalties and the like, and to do this a
definition is needed of "outstanding liability to the state."
Section 44 [slide 44] is a retroactive effective date just
applying to Section 17, which is the floor hardening section.
Because of the specific situation with major producers using
operating loss credit to reduce their minimum tax payments, [the
administration] wants that to take effect this year so [the
State of Alaska] can recapture some of that money that it's
going to again lose at the end of January. [Section 45]
provides for an immediate effective date for transition language
and [Section 46] provides an effective date of July 1, 2016, for
the rest of the bill.
2:56:35 PM
CO-CHAIR TALERICO noted there is confusion among the people who
are actually working in the Frontier Basin, and that Mr. Alper's
presentation clearly says the Frontier Basin is still eligible
for the 65 percent tax credits until 2022. He said he has been
approached by several operators who have said those expire on
July 1, 2016, and he wants to be assured that he can tell those
operators that those would be extended to 2021 or 2022.
MR. ALPER said that in some ways two different things are being
talked about. There was a Frontier Basin Credit, a specialized
credit that was modeled in many ways on the Cook Inlet Jackup
Rig Credit which passed as part of a Frontier incentive bill
during the 2012 session. That credit, which is 80 percent of
certain expenditures with certain limits to the first well
[drilled] in the four or six basins, is expiring July 1, 2016.
However, the underlying Exploration Incentive Credit, a
statewide credit of 40 percent, has been specifically extended
for the Frontier basins through 2022. The 80 percent Frontier
Basin Credit has never been claimed or used and is going away.
Those explorers in the Frontier basins will be able to get the
Exploration Credit stacked with an Operating Loss Credit with a
total State of Alaska contribution of 65 percent.
2:58:01 PM
REPRESENTATIVE JOSEPHSON offered his understanding that HB 247
actually extends or replaces credits and asked whether Mr. Alper
considers any of the bill's features as being generous to the
industry in that respect.
MR. ALPER replied he doesn't want to answer broadly because it's
an open-ended question. He said no, the bill doesn't extend any
credits. There are credits in current law that have existing
sunsets of July 1, 2016: the bulk of the exploration credits,
the Frontier Basin credits, the Jackup Rig Credit. The Small
Producer Credit begins a slow sunset in May 2016. Under
previous legislation, Senate Bill 21, an amendment was made on
the House floor that extended the exploration credits
specifically in the areas outside the North Slope and Cook Inlet
to January 1, 2022, and HB 247 would simply maintain that.
[HB 247 was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB247 ver A.pdf |
HRES 2/3/2016 1:00:00 PM HRES 2/5/2016 1:00:00 PM HRES 2/10/2016 1:00:00 PM HRES 2/12/2016 1:00:00 PM HRES 2/22/2016 1:00:00 PM HRES 3/7/2016 1:00:00 PM HRES 3/7/2016 6:00:00 PM HRES 3/8/2016 1:00:00 PM |
HB 247 |
| HB247 Sponsor Statement.pdf |
HRES 2/3/2016 1:00:00 PM HRES 2/5/2016 1:00:00 PM HRES 2/10/2016 1:00:00 PM HRES 2/12/2016 1:00:00 PM |
HB 247 |
| HB247 Sectional Analysis.pdf |
HRES 2/3/2016 1:00:00 PM HRES 2/5/2016 1:00:00 PM HRES 2/10/2016 1:00:00 PM HRES 2/12/2016 1:00:00 PM HRES 2/22/2016 1:00:00 PM HRES 3/7/2016 1:00:00 PM HRES 3/7/2016 6:00:00 PM HRES 3/8/2016 1:00:00 PM |
HB 247 |
| HB247 Fiscal Note #1-DNR-DOG-01-11-16.pdf |
HRES 2/3/2016 1:00:00 PM HRES 2/10/2016 1:00:00 PM |
HB 247 |
| HB247 Fiscal Note - FUNDCAP-OIL & GAS TAX CREDIT FUND-2-1-16.pdf |
HRES 2/3/2016 1:00:00 PM HRES 2/5/2016 1:00:00 PM HRES 2/10/2016 1:00:00 PM HRES 2/12/2016 1:00:00 PM HRES 2/22/2016 1:00:00 PM HRES 3/7/2016 1:00:00 PM HRES 3/7/2016 6:00:00 PM HRES 3/8/2016 1:00:00 PM |
HB 247 |
| HB247 Fiscal Note - DOR-TAX-2-1-16.pdf |
HRES 2/3/2016 1:00:00 PM HRES 2/5/2016 1:00:00 PM HRES 2/10/2016 1:00:00 PM HRES 2/12/2016 1:00:00 PM HRES 2/22/2016 1:00:00 PM HRES 3/7/2016 1:00:00 PM HRES 3/7/2016 6:00:00 PM HRES 3/8/2016 1:00:00 PM |
HB 247 |
| HB 247 Production Tax Credits FY07-FY25 Excel Table_Figure 8-4_Fall 15 RSB.pdf |
HRES 2/3/2016 1:00:00 PM HRES 2/5/2016 1:00:00 PM HRES 2/10/2016 1:00:00 PM HRES 2/12/2016 1:00:00 PM HRES 2/22/2016 1:00:00 PM HRES 3/7/2016 1:00:00 PM HRES 3/7/2016 6:00:00 PM HRES 3/8/2016 1:00:00 PM |
HB 247 |
| HB 247 Oil Credit Bill - Key Features 2-2-16.pdf |
HRES 2/3/2016 1:00:00 PM HRES 2/5/2016 1:00:00 PM HRES 2/10/2016 1:00:00 PM HRES 2/12/2016 1:00:00 PM HRES 2/22/2016 1:00:00 PM HRES 3/7/2016 1:00:00 PM HRES 3/7/2016 6:00:00 PM HRES 3/8/2016 1:00:00 PM |
HB 247 |
| HSE RES 2.9.16 - Impacts of Alaska fiscal options-Summary of preliminary conclusions-Gunnar Knapp.pdf |
HRES 2/10/2016 1:00:00 PM |