Legislature(2017 - 2018)BARNES 124
04/16/2018 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB288 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 288 | TELECONFERENCED | |
HB 288-OIL AND GAS PRODUCTION TAX
1:37:00 PM
CO-CHAIR TARR announced that the only order of business would be
HOUSE BILL NO. 288, "An Act relating to the minimum tax imposed
on oil and gas produced from leases or properties that include
land north of 68 degrees North latitude; and providing for an
effective date."
[The committee substitute (CS) for HB 288, Version 30-LS1155\D,
Nauman, 3/27/18, was adopted on 4/2/18, and Version D was before
the committee.]
REPRESENTATIVE RAUSCHER directed attention to CS for HB 288
beginning on page 5, line 31, and asked whether AS 43.55.011(j),
(k), and (o) were referred to elsewhere in the bill.
CO-CHAIR TARR said the abovementioned proposed [subparagraph
(C)] relates to underlying statute, thus the entire existing
statute is part of the language of the bill. The change brought
by the bill to the existing statute is found on page 8, line 9,
and on page 10, line 3; otherwise the legislation does not
change.
REPRESENTATIVE RAUSCHER surmised the bill represents "a
multiplier for them to make payments on a prepayment schedule
...."
1:41:23 PM
CO-CHAIR TARR said the bill on page 1, [line 5], amends Section
1. AS 43.55.011(f), which is the existing minimum tax statute
that would be changed. [Sec. 2 AS 43.55.020(a)] begins on page
4, line 23, and the change brought by the proposed bill is on
page 8, line 9.
REPRESENTATIVE RAUSCHER restated his question as to whether the
bill includes a payment schedule.
CO-CHAIR TARR said the bill does not change the way tax payments
are made but would change the amount of the minimum tax.
REPRESENTATIVE RAUSCHER concluded the existing method of payment
would be realigned to comport with other changes.
CO-CHAIR TARR said yes.
1:43:46 PM
CO-CHAIR TARR opened public testimony on HB 288.
1:43:53 PM
PETER MORGAN said he has lived in Alaska for 54 years and is
testifying in opposition to HB 288. He opined HB 288 is a
terrible policy. Mr. Morgan said he works in the construction
industry and has seen the detrimental effects of low oil prices
on the economy. In addition to the direct impact to those who
work in the oil and gas industry, he has seen the ripple effects
throughout the economy as businesses cut back on expenses and
employees are laid off, much of which can be directly correlated
with oil industry spending. He pointed out he could not run his
business if the taxes were changed, or were proposed to change,
every year. He questioned whether multiple proposed oil tax
changes would increase jobs or investments. Although there is
talk of a fiscal plan, the legislature is silent on how to grow
jobs or opportunities, except for those in state government. He
stressed raising taxes on the oil industry not only impacts big
corporations but raising taxes on the industry can impact
everyone. He urged for no votes on "this shortsighted bill,"
which is not in the best interest of Alaska.
REPRESENTATIVE BIRCH stated his agreement with Mr. Morgan and
asked whether Mr. Morgan is involved in the [oil and gas]
industry.
MR. MORGAN restated he is in the construction business. In
1985, his business did $3 million worth of business, an amount
that was seriously reduced by the downturn in 1987. He urged
the committee to "show some integrity and some consistency with
these oil ... companies," and said businesses cannot operate in
an environment of [changing tax policies]; in fact, big
companies will leave, and smaller companies will follow.
REPRESENTATIVE JOHNSON agreed that actions taken by the
legislature can dramatically affect small businesses.
1:48:49 PM
MR. MORGAN stressed the importance of a consistent and long-term
[tax] policy; he said he would never want an adjustable rate
mortgage, and neither would oil companies, who would choose
another bank.
REPRESENTATIVE DRUMMOND asked how businesses reacted to the tax
changes made by the federal government in December, [2017],
which lowered taxes.
MR. MORGAN stated taxes haven't gone down for him. He added he
does not agree with the current [federal] administration's
action regarding tax policy. He again urged for consistency and
said, " ... if you were to build into this bill 'we will keep
this rate for 15, or 20, or like a 30-year mortgage' people
could deal with that, oil companies could deal with that." He
concluded both the federal and state governments must control
their debt.
REPRESENTATIVE RAUSCHER expressed support for the speaker's
testimony.
CO-CHAIR TARR recalled at the time the current oil tax policy
was enacted, oil was $110 per barrel, [the impact of] lower oil
price was not discussed, and the current 4 percent minimum tax
is the lowest in state history. She expressed her hope lessons
have been learned after oil prices dropped to $27 per barrel and
legislators would now consider a broader range of oil prices.
Co-Chair Tarr pointed out CS for HB 288 that has been adopted by
the committee would have a fiscal impact of $64 million for
fiscal year 2019 (FY 19), of $139 million in FY 20, and never
would be above $250 million.
MR. MORGAN gave the example of a home loan that is executed at a
certain rate and remains the same after interest rates decrease.
1:55:08 PM
MARLEANNA HALL, Executive Director, Resource Development Council
for Alaska, Inc., informed the committee her organization is a
statewide trade association comprised of entities from Alaska's
oil and gas, mining, forest products, fisheries, and tourism
industries, and 12 land-owning Alaska Native corporations;
members of her organization believe the best approach to
generate state revenue is to produce more oil, attract more
tourists, harvest more fish and timber, and mine more minerals.
She said HB 288 represents the third straight year of increasing
oil and gas production taxes, which would increase costs and
reduce Alaska's competitiveness and new oil production.
Further, increased throughput in the Trans-Alaska Pipeline
System (TAPS) would help move the state out of recession and
would generate more revenue than would HB 288. Ms. Hall urged
the committee to carefully consider the impact of the bill on
competitiveness and further production. She pointed out the
competition faced by the oil and gas industry due to the high
cost of development in Alaska. When combined, state and federal
government share is higher than that of the producers, and the
state is paid royalty, property tax, and a gross production tax
when companies are operating at a loss. She opined the present
tax system is working. Ms. Hall urged the committee to reject
the proposed legislation.
1:57:59 PM
AVES THOMPSON, Executive Director, Alaska Trucking Association,
informed the committee the Alaska Trucking Association is a
statewide organization representing the interests of 200 member
companies that move freight across the state. He observed late
in the legislative session, HB 288 is being heard for the first
time and proposes another tax increase on the oil industry.
Over the past few years, the oil industry - with difficulty -
has adjusted to lower oil prices, while continuing to pay
royalties, property tax, and a gross production tax; in fact,
businesses are beginning to recover and "this is not the time to
penalize them ... further by increasing taxes." Mr. Thompson
said increased North Slope activity has demonstrated the current
fiscal system is working and [Senate Bill 21, passed in the
Twenty-Eighth Alaska State Legislature] has improved
competitiveness and made Alaska more attractive to investors.
However, HB 288 would highlight Alaska's poor reputation in the
oil and financial sectors, jeopardize new investment, and would
represent the eighth major tax change in the last 13 years. In
addition, HB 288 would do nothing to encourage production or
provide jobs but would raise costs and harm the industry and the
state's economy. Mr. Thompson said the Alaska Trucking
Association is opposed to HB 288.
CO-CHAIR TARR clarified HB 288 was the first bill heard by the
House Resources Standing Committee in January [2018] so that
legislators would have sufficient time for its consideration.
REPRESENTATIVE JOHNSON expressed agreement with Mr. Thompson and
opined hearing the bill is "somewhat irresponsible" due to the
message sent to industry.
CO-CHAIR TARR asked Mr. Thompson how his industry suggests the
state fund a fiscal plan and a capital budget that are necessary
to build infrastructure and make investments in the state.
MR. THOMPSON stated his industry supports a state capital
budget; however, the freight industry also needs a robust oil
and gas industry to provide jobs for drivers and trucks.
Although capital budgets are important, most important is to
keep industry investment and jobs in Alaska, which the current
tax regime achieves.
CO-CHAIR TARR pointed out oil revenue from oil and gas projects
that will be in production soon will not be enough to stabilize
the state's financial situation; in addition, after many years
of not funding a capital budget, Alaskans are asking legislators
to do so.
MR. THOMPSON advised industry is not willing to invest in Alaska
because Alaska does not compete very well in the global capital
market due to high costs and cheaper alternatives.
2:05:22 PM
CURTIS THAYER, President/CEO, Alaska State Chamber of Commerce
(Alaska Chamber), said Alaska Chamber is a 65-year-old
organization representing over 700 members, collectively with
100,000 employees. He said Alaska Chamber is strongly opposed
to HB 288 because Alaska is struggling to recover from a
recession and the proposed legislation would prolong the
recession. He agreed with previous speakers that Alaska's tax
policy has had several changes; he observed this year the
legislature wants to provide stability [to the Department of
Education and Early Development] by forward funding education
for two years, but will not give the same stability to the oil
and gas industry, which provides 80 percent of the state budget.
He urged the committee to "take a pause, not look at new tax
structure, and allow what we have to continue to work."
Further, the way to fund the budget is to reduce spending, which
is supported by 72 percent of Alaskans. Alaska Chamber is
opposed to HB 288.
CO-CHAIR JOSEPHSON related the Alaska state budget is
approximately $4 billion [80 percent of $4 billion is $3
billion] and the total of severance taxes and royalty is less
than $3 billion. He asked Mr. Thayer to clarify his statement.
MR. THAYER explained:
Well, when I say the industry accounts for
approximately, it's, 77 percent of Alaska's
unrestricted general fund revenues that we have right
now. When you at when we pay with royalty, when you
look at property tax, when you look at the income tax,
and the severance tax, the oil industry represents the
majority of the taxpayer ... by my references it's 77
percent.
REPRESENTATIVE RAUSCHER asked Mr. Thayer how HB 288, if enacted,
would affect the state in the next two to three years.
MR. THAYER opined [passage of the bill] would continue to
indicate Alaska is an unstable place to do business because it
makes changes to tax policy. He noted the state budget has
increased by $500 million and Alaska seeks to raise taxes on the
oil and gas industry to pay for the increase; further, Alaska
does not have a reputation of being able to control its expenses
and reduce the footprint of government.
CO-CHAIR TARR referred to a poll conducted by the Alaska Chamber
and questioned whether the poll asked respondents to indicate
specific areas where the legislature should make spending cuts,
which would be helpful.
2:10:12 PM
MR. THAYER answered people want to cut the legislature's budget.
Furthermore, he related in the previous year, the Walker
administration did a study on healthcare costs which found
consolidating healthcare amongst public employees would save the
state $655 million over seven years; Mr. Thayer opined this is a
perfect example that there are still areas to cut and reduce
government, without affecting programs and jobs. He offered to
share polling and other information with the committee.
CO-CHAIR TARR said she would distribute data provided by the
Alaska Chamber to the committee.
REPRESENTATIVE BIRCH recalled testimony at a previous committee
meeting related to legislation [House Bill 331, passed in the
Thirtieth Alaska State Legislature] proposing [bonds would be
issued to pay the outstanding tax credit certificates] the state
owes to 37 beneficiaries. He asked Mr. Thayer whether the
proposed bill would affect any members of the Alaska Chamber.
MR. THAYER said the Alaska Chamber supports the concept of the
aforementioned bill, because the state clearly owes the money,
and returning the money to circulation for industrial investment
and investment in Alaska is a way to move forward.
2:13:35 PM
CHERYL BOWIE said she is Alaska Native and a former oil spill
employee of Alyeska Pipeline Service Company. She said she
misses the investment climate and the work that previously
existed in Alaska. After her experience working in the medical
field, there is research she would like to pursue; however, the
restrictive investment environment in the oil field industry has
hampered the hemp research she seeks to conduct related to
hydrocarbons and plants. Ms. Bowie further described her
research and goals that have been "on hold for years and years
now because of this really restrictive environment." She stated
her opposition [to HB 288] and her support of extracting
Alaska's mineral resources.
CO-CHAIR TARR specified that the bill being heard is HB 288
which would increase the minimum tax on oil and gas severance
tax.
MS. BOWIE explained her testimony is relevant to the topic of
massive layoffs in the oil and gas industry and less production
in the oil fields, which impacts all businesses in Alaska.
Further, additional restrictive, high tax legislation is
"bleeding over into everything and it needs to stop."
REPRESENTATIVE DRUMMOND inquired as to the research on hemp Ms.
Bowie is conducting.
MS. BOWIE said cannabis is a plant with "high capacity of uptake
in soil ...." She described in detail how growing cannabis
benefits the environment and production, and related multiple
uses for cannabis and cannabis fibers.
REPRESENTATIVE DRUMMOND urged Ms. Bowie to contact her office
regarding Senate Bill 6, [passed in the Thirtieth Alaska State
Legislature].
MS. BOWIE said, "... but yes, I absolutely support this oil tax
[current oil tax regime] ... I absolutely support the
advancement of our oil industry here."
2:21:33 PM
ALICIA SIIRA, Deputy Director, Alaska Miners Association (AMA),
informed the committee AMA is a nonprofit membership
organization established in 1939 to represent the mining
industry throughout Alaska; AMA has a diverse membership
composed of more than 1,500 members from eight statewide
branches in Anchorage, Denali, Fairbanks, Haines, Juneau, Kenai,
Ketchikan, Price of Wales, and Nome. Members include
prospectors, geologists, engineers, miners, small family mines,
junior mining companies, major mining companies, oil and gas
support services, and mining support services. Although AMA's
mission is to promote responsible mineral development in Alaska,
she said AMA is testifying in opposition to HB 288 because a
healthy oil and gas industry is crucial to a healthy mining
industry and good for Alaska. Ms. Siira characterized HB 288 as
an oil tax bill that would raise taxes and discourage must
needed investment in Alaska. As a policy, AMA urges the state
to maintain an equitable and stable tax and royalty structure on
state-owned resources. Further, the mining industry recognizes
the importance of increased oil production and urges the
committee to reject the bill.
2:23:39 PM
The committee took a brief at ease. The committee took an at-
ease from 2:24 p.m. to 2:30 p.m.
2:30:08 PM
CO-CHAIR TARR stated a correction to the PowerPoint entitled,
House Bill 288 CS Version D Fairness in Oil Taxes," presented at
the hearing of HB 288 on 4/2/18. She said slide 7 was compiled
from page 6 of a report entitled, "2016 Oil and Gas Taxation
Comparison for the State of Idaho," dated 1/19/17, [included in
the committee packet] and a corrected slide 7 [changing Arkansas
to Alaska] would be provided to the committee. She urged the
committee to review the report in its entirety.
2:33:34 PM
REPRESENTATIVE BIRCH expressed opposition to the bill and said
he is concerned about the "process." For example, the [working
group that is a provision of House Bill 111, passed in the
Thirtieth Alaska State Legislature] was to be organized to
consider all the impacts of a tax overhaul. Further, "a
wholesale ... change in the oil tax structure that didn't even
come to [the House Resources Standing Committee], it went
straight to [the House Finance Committee], and ... I don't think
[HB 288] has had any of the benefit of the collaboration and the
discussion as I thought the study group was set up to do ...."
Representative Birch restated his concern about not hearing the
tax overhaul bill and pointed out testimony has shown HB 288 is
a tax increase that has not benefited from a deliberative
process during interim. He opined hearing HB 288 is a strenuous
exercise, without purpose, and questioned whether committee
hearings would continue.
CO-CHAIR TARR did not anticipate scheduling many more meetings
as the committee has heard most of its referrals. Regarding the
working group, she said the intention of the group was to meet
during [the 2017] interim and bring recommendations before the
legislature [in 2018]; however, because of special sessions, the
working group held one meeting. Senator Giessel and she, co-
chairs of the working group, have recommended that the working
group continue for a full calendar year, and expect to
reconvene. Co-Chair Tarr clarified the goal of the working
group is not necessarily to draft a tax increase bill, but to
respond to recommendations from consultants and thereby improve
various aspects of the state's oil and gas policy. She further
reviewed provisions in House Bill 111 that were not included in
the final version.
2:39:50 PM
CO-CHAIR JOSEPHSON recalled the minimum tax issue has been
addressed in various proposed legislation before the committee
since 2016; further, today's hearing was the fifth hearing of HB
288. He related the committee has a recent referral before it
and therefore, may meet until adjournment of the legislature.
REPRESENTATIVE BIRCH encouraged the working group to seek advice
from a qualified consultant and to share the consultant's
recommendations with the committee.
CO-CHAIR TARR said Senator Stedman chairs the Legislative Audit
and Budget Committee and requests in this regard should be
directed to him.
HB 288 was held over with public testimony open.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB288 Sponsor Statement 1.21.18.pdf |
HRES 1/22/2018 1:00:00 PM HRES 1/26/2018 1:00:00 PM HRES 1/29/2018 1:00:00 PM HRES 3/30/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/13/2018 1:00:00 PM HRES 4/14/2018 2:00:00 PM HRES 4/16/2018 1:00:00 PM |
HB 288 |
| HB288 ver A 1.16.18.PDF |
HRES 1/22/2018 1:00:00 PM HRES 1/26/2018 1:00:00 PM HRES 1/29/2018 1:00:00 PM HRES 3/30/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/13/2018 1:00:00 PM HRES 4/14/2018 2:00:00 PM HRES 4/16/2018 1:00:00 PM |
HB 288 |
| HB288 Fiscal Note DOR-TAX 1.20.18.pdf |
HRES 1/22/2018 1:00:00 PM HRES 1/26/2018 1:00:00 PM HRES 1/29/2018 1:00:00 PM HRES 3/30/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/13/2018 1:00:00 PM HRES 4/14/2018 2:00:00 PM HRES 4/16/2018 1:00:00 PM |
HB 288 |
| HB288 Sectional Analysis 1.21.18.pdf |
HRES 1/22/2018 1:00:00 PM HRES 1/26/2018 1:00:00 PM HRES 1/29/2018 1:00:00 PM HRES 3/30/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/13/2018 1:00:00 PM HRES 4/14/2018 2:00:00 PM HRES 4/16/2018 1:00:00 PM |
HB 288 |
| HB 288 CS Version D 3.27.18.pdf |
HRES 3/30/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/13/2018 1:00:00 PM HRES 4/14/2018 2:00:00 PM HRES 4/16/2018 1:00:00 PM |
HB 288 |
| HB 288 Fiscal Analysis for Version D 3.27.18.pdf |
HRES 3/30/2018 1:00:00 PM HRES 4/2/2018 1:00:00 PM HRES 4/13/2018 1:00:00 PM HRES 4/14/2018 2:00:00 PM HRES 4/16/2018 1:00:00 PM |
HB 288 |
| HB 288 Letter of Support 4.16.18.pdf |
HRES 4/16/2018 1:00:00 PM |
HB 288 |
| HB 288 Letters of Opposition 4.16.18.pdf |
HRES 4/16/2018 1:00:00 PM |
HB 288 |
| HB 288 Summary of Changes Version A to Version D 3.29.18.pdf |
HRES 4/16/2018 1:00:00 PM |
HB 288 |
| HB288 Supporting Document - 2016 Oil and Gas Taxation Comparison for the State of Idaho 1.21.17.pdf |
HRES 4/16/2018 1:00:00 PM |
HB 288 |