Legislature(2023 - 2024)BARNES 124
04/05/2024 01:00 PM House RESOURCES
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Audio | Topic |
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Start | |
HB394 | |
HB393 | |
HB388 | |
HB359 | |
Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
+= | HB 393 | TELECONFERENCED | |
+= | HB 388 | TELECONFERENCED | |
+= | HB 349 | TELECONFERENCED | |
+= | HB 394 | TELECONFERENCED | |
+ | TELECONFERENCED | ||
+= | HB 359 | TELECONFERENCED | |
HB 393-COOK INLET/MIDDLE EARTH GAS ROYALTIES 3:58:41 PM CHAIR MCKAY announced that the next order of business would be HOUSE BILL NO. 393, "An Act relating to oil and gas leases and royalty shares; and providing for an effective date." 3:59:11 PM REPRESENTATIVE MEARS moved to adopt Amendment 1 to HB 393, labeled 33-LS1006\R.1, Nauman, 4/4/24, which read as follows: Page 8, line 17, following "(7)": Insert "except as provided in (nn) of this section, and" Page 8, line 27: Delete "a new subsection" Insert "new subsections" Page 8, line 28: Delete "Notwithstanding" Insert "Except as provided in (nn) of this section, and notwithstanding" Page 9, following line 4: Insert a new subsection to read: "(nn) The royalty share modifications in (f)(7) and (mm) of this section terminate on January 1, 2035." 3:59:17 PM CHAIR MCKAY objected for the purpose of discussion. 3:59:22 PM REPRESENTATIVE MEARS explained that Amendment 1 would put a sunset date on royalty relief, so the legislature could revisit the program in 10 years. She expressed the opinion that this would be reasonable; otherwise, the state would be locked in to never receiving royalties from Cook Inlet. 4:00:06 PM MR. JEPSEN stated that he has no comments on Amendment 1, and he suggested that this be left up to the will of the committee. 4:00:27 PM REPRESENTATIVE SADDLER stated that there would be a long lead-in time for investments for these projects, and time would go by quickly. He suggested that future legislatures would have the ability to put a sunset date on this once its effectiveness is realized. He expressed the opinion that a hard sunset date put in place in the beginning would erode the value of the royalty reduction. He expressed opposition to Amendment 1. 4:01:16 PM REPRESENTATIVE ARMSTRONG moved to adopt Conceptual Amendment 1 to Amendment 1, on page 1, line 15, to replace "2035" with "2045". There being no objection, Conceptual Amendment 1 to Amendment 1 was adopted. 4:02:06 PM REPRESENTATIVE SADDLER commented that even though this would be a longer time, the same argument applies; however, he stated that he would add some more thought to this. 4:02:39 PM CHAIR MCKAY commented that gas wells decline rapidly, and the opportunity to tax and gather royalties would not last very long. He suggested that the gas wells would most likely be shut in, and something else would be happening. He expressed the opinion that in 20 years the point would be mute. 4:03:19 PM REPRESENTATIVE ARMSTRONG stated that the 2045 sunset would be reasonable because it is 20 years away, and she expressed the belief that future legislatures could easily extend this date, while the public would be assured the current gas crisis is not being used to enact an indefinite fix. She expressed the importance of having a sunset clause. 4:04:08 PM TREVOR JEPSEN, Staff, Representative Tom McKay, Alaska State Legislature, on behalf of the sponsor, the House Resources Standing Committee, of which Representative McKay served as chair, addressed the proposed sunset clause in Amendment 1, as amended, to HB 393. He stated that the reason there is a zero- royalty rate is because this concerns Alaskan gas, and any tax on this would be passed to the consumer. He expressed the opinion that there should not be any tax that would be passed through to Alaskans. He added that to have the cheapest gas, it should be royalty free. 4:04:45 PM REPRESENTATIVE ARMSTRONG commented that the proposed legislation is not only impacting natural gas, but it also would be impacting oil royalties, and currently there is not an oil crisis in the state. 4:05:05 PM REPRESENTATIVE SADDLER expressed opposition to Amendment 1, as amended, for the same reasoning he expressed earlier. 4:06:00 PM CHAIR MCKAY expressed the belief that Amendment 1, as amended, would make no difference, and he expressed support for the amendment. [The committee treated the objection as if it were maintained.] 4:06:18 PM A roll call vote was taken. Representatives Armstrong, Mears, and Dibert voted in favor of Amendment 1, as amended, to HB 393. Representatives McCabe, Saddler, Wright, and McKay voted against it. Therefore, Amendment 1, as amended, failed to be adopted by a vote of 3-4. 4:07:21 PM REPRESENTATIVE MEARS moved to adopt Amendment 2 to HB 393, labeled 33-LS1006\R.2, Nauman, 4/4/24, which read as follows: Page 1, line 1, following "shares;": Insert "relating to disclosure of information related to oil and gas production taxes;" Page 9, following line 4: Insert new bill sections to read: "* Sec. 3. AS 43.55.890 is amended to read: Sec. 43.55.890. Disclosure of tax information. Notwithstanding any contrary provision of AS 40.25.100 or AS 43.05.230, [AND REGARDLESS OF WHETHER THE INFORMATION IS CONSIDERED UNDER AS 43.05.230(E) TO CONSTITUTE STATISTICS CLASSIFIED TO PREVENT THE IDENTIFICATION OF PARTICULAR RETURNS OR REPORTS,] the department shall make publicly available [MAY PUBLISH] the following information under this chapter, [IF AGGREGATED AMONG THREE OR MORE PRODUCERS OR EXPLORERS,] showing by month or calendar year and by lease or property, unit, or area of the state: (1) the amount of oil or gas production; (2) the amount of taxes levied under this chapter or paid under this chapter; (3) the effective tax rates under this chapter; (4) the gross value of oil or gas at the point of production; (5) the transportation costs for oil or gas; (6) qualified capital expenditures, as defined in AS 43.55.023; (7) exploration expenditures under AS 43.55.025; (8) production tax values of oil or gas under AS 43.55.160; (9) lease expenditures under AS 43.55.165; (10) adjustments to lease expenditures under AS 43.55.170; (11) tax credits applicable or potentially applicable against taxes levied by this chapter. * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to read: APPLICABILITY. AS 43.55.890, as amended by sec. 3 of this Act, applies to information collected on or after the effective date of sec. 3 of this Act." Renumber the following bill sections accordingly. 4:07:33 PM REPRESENTATIVE SADDLER objected for the purpose of discussion. 4:07:38 PM REPRESENTATIVE MEARS spoke to her perspective on transparency and accountability for Alaska's resources. Looking specifically at Cook Inlet gas, she expressed the belief that smaller operators would have no problem sharing their financials. She pointed out that the largest operator [Hilcorp] also operates in Texas, where there is fiscal transparency. She stated that adding the amendment to the proposed legislation would be on par with other business practices in the country, and she opined that businesses in Alaska should not be treated any differently. 4:08:32 PM MR. JEPSEN deferred to the chair. 4:09:16 PM The committee took an at-ease from 4:09 p.m. to 4:10 p.m. 4:10:01 PM CHAIR MCKAY stated that the discussion is on forcing S corporations operating in Alaska to reveal competitive financial information. He pointed out that this could be damaging to current and future operations. He expressed opposition to the proposed amendment. 4:10:33 PM REPRESENTATIVE MCCABE expressed the understanding that Hilcorp was invited to Alaska to do business 10 years ago, and at that time the state knew that Hilcorp was an S corporation, and it knew how Hilcorp reported its financials. He warned that the amendment would "change the game" with an oil company, and he argued that the state has done this over the past decades, and this is why oil companies "shy away from Alaska." He expressed opposition to Amendment 2. REPRESENTATIVE SADDLER maintained his objection to the motion to adopt Amendment 2. 4:11:25 PM A roll call vote was taken. Representatives Dibert, Armstrong, and Mears voted in favor of Amendment 2 to HB 393. Representatives McCabe, Saddler, Wright, and McKay voted against it. Therefore, Amendment 2 failed to be adopted by a vote of 3- 4. 4:12:14 PM REPRESENTATIVE MEARS moved to adopt Amendment 3 to HB 393, labeled 33-LS1006\R.3, Nauman, 4/4/24, which read as follows: Page 1, line 1, following "shares;": Insert "establishing an income tax on certain entities producing or transporting oil or gas in the state;" Page 9, following line 4: Insert new bill sections to read: "* Sec. 3. AS 43.20 is amended by adding a new section to read: Sec. 43.20.019. Tax on income attributable to a qualified entity. (a) If an entity has qualified taxable income over $4,000,000 in a tax year, the entity shall pay a tax of 9.4 percent on the qualified taxable income over $4,000,000. (b) The tax under this section does not apply to a corporation paying tax under AS 43.20.011. (c) The department may aggregate the qualified taxable income of two or more entities for the purpose of determining the tax due under this section if the department determines that, without the provisions of this section, the qualified taxable income would reasonably be expected to be attributed to a single entity. (d) In this section, (1) "entity" means a (A) sole proprietorship; (B) partnership; or (C) entity that has elected to file federal returns under 26 U.S.C. 1361 - 1379 (Internal Revenue Code); (2) "qualified taxable income" means income from the production of oil or gas from a lease or property in the state or from the transportation of oil or gas by pipeline in the state before deductions for (A) dividends and gifts; and (B) wages, salaries, bonuses, or other similar payments to owners, partners, members, or shareholders of the entity. * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to read: APPLICABILITY. AS 43.20.019, added by sec. 3 of this Act, applies to the tax year of an entity beginning on or after the effective date of sec. 3 of this Act." Renumber the following bill sections accordingly. 4:12:19 PM REPRESENTATIVE SADDLER objected. 4:12:23 PM REPRESENTATIVE MEARS stated that the subject of Amendment 3 has been discussed by the committee before. She stated that the amendment is most colloquially known as "closing the S corp loophole." She noted that when Hilcorp took over BP's assets, the result was a lack of income to the state. She noted that Hilcorp pays corporate income taxes in Texas, but this does not happen in Alaska. In looking at the state's financials, she suggested that revenue should be compared with the needs of the state. She maintained that it has been a decade since the oil and gas tax structure in the state was examined. She argued that this tax structure has not been working for Alaska, and the revenue from the oil and gas industry needs to be examined. 4:13:46 PM CHAIR MCKAY expressed disagreement with Representative Mears. He argued that the permanent fund dividends have been decreasing because of the cost of government. He stated that the production on the North Slope has been increasing, with new fields opening because the tax structure has not been changed. He continued that tax stability and certainty is vital to long- term industry investment. 4:14:33 PM REPRESENTATIVE SADDLER argued that the tax structure created 10 years ago has been benefiting the state, and the amendment would undo this progress. He provided examples of success with the current tax structure. He noted Hilcorp's expertise in obtaining more oil and gas out of mature fields. He restated his opposition to Amendment 3. 4:15:31 PM CHAIR MCKAY refocused the discussion to Cook Inlet, not the North Slope. He expressed gratitude that Hilcorp came to the state and "rescued Cook Inlet." Representative Saddler maintained his objection to the motion to adopt Amendment 3. 4:16:04 PM A roll call vote was taken. Representatives Mears, Dibert, and Armstrong voted in favor of adopting Amendment 3 to HB 393. Representatives McCabe, Saddler, Wright, and McKay voted against it. Therefore, Amendment 3 failed to be adopted by a vote of 3- 4. 4:16:58 PM REPRESENTATIVE MCCABE moved to report HB 393 out of committee with individual recommendations and the accompanying fiscal notes. REPRESENTATIVE MEARS objected. 4:17:17 PM A roll call vote was taken. Representatives McCabe, Saddler, Wright, and McKay voted in favor of reporting HB 393 out of committee with individual recommendations and the accompanying fiscal notes. Representatives Armstrong, Mears, and Dibert voted against it. [The tally was 4 yeas and 3 nays, but without a 5-person majority of the full membership in favor, the vote was not valid, and HB 393 was reported as failed to move out of the House Resources Standing Committee.]
Document Name | Date/Time | Subjects |
---|---|---|
AM1 HB 394.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 394 |
AM2 HB 394.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 394 |
AM3 HB 394.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 394 |
AM4 HB 394.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 394 |
AM1 HB 393.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 393 |
AM2 HB 393.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 393 |
AM3 HB 393.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 393 |
AM1 HB 388.pdf |
HRES 4/5/2024 1:00:00 PM |
HB 388 |