Legislature(2023 - 2024)BARNES 124

04/05/2024 01:00 PM House RESOURCES

Note: the audio and video recordings are distinct records and are obtained from different sources. As such there may be key differences between the two. The audio recordings are captured by our records offices as the official record of the meeting and will have more accurate timestamps. Use the icons to switch between them.

Download Mp3. <- Right click and save file as

* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 10 MIN Following Session --
+= HB 393 COOK INLET/MIDDLE EARTH GAS ROYALTIES TELECONFERENCED
Failed to Move Out of Committee
+= HB 388 COOK INLET RESERVE-BASED LENDING TELECONFERENCED
Moved CSHB 388(RES) Out of Committee
+= HB 349 RENEWABLE ENERGY PROJECT LEASES TELECONFERENCED
Scheduled but Not Heard
+= HB 394 RCA REGULATE NATURAL GAS STORAGE FACILITY TELECONFERENCED
Moved HB 394 Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 359 ONE-TIME PFD PAYMENT TELECONFERENCED
Failed to Move Out of Committee
          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