Legislature(2007 - 2008)
11/06/2007 11:23 AM Senate FIN
| Audio | Topic |
|---|---|
| Start | |
| SB2001 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE BILL NO. 2001
"An Act relating to the production tax on oil and gas and
to conservation surcharges on oil; relating to the issuance
of advisory bulletins and the disclosure of certain
information relating to the production tax and the sharing
between agencies of certain information relating to the
production tax and to oil and gas or gas only leases;
amending the State Personnel Act to place in the exempt
service certain state oil and gas auditors and their
immediate supervisors; establishing an oil and gas tax
credit fund and authorizing payment from that fund;
providing for retroactive application of certain statutory
and regulatory provisions relating to the production tax on
oil and gas and conservation surcharges on oil; making
conforming amendments; and providing for an effective
date."
11:23:47 AM
Co-Chair Stedman said the subject for the meeting would be lease
expenditures, allowable deductions and how they effect operating
and capital expenditures. These expenditures are "upstream
costs".
11:24:56 AM
JON IVERSON, DIRECTOR, DIVISION OF TAX, DEPARTMENT OF REVENUE,
provided a brief overview of the current PPT provisions. He
specifically addressed lease expenditures outlined under AS
43.55.165 and explained that under PPT the upstream costs are
known as "lease expenditures": items that are deductible in
reaching the production tax value. Upstream costs are made up of
capital expenditures and operating expenditures. He clarified
that because capital expenditures are a subset of lease
expenditures, the qualified capital expenditures used for
purposes of receiving the credit under "lease expenditures"
would not be allowed as a qualifying capital credit.
Mr. Iverson stated that AS 43.55.165 sets forth what determines
allowable lease expenditures. These are the ordinary and
necessary costs incurred upstream to the point of production;
the direct costs of exploring, developing or producing oil or
gas. When determining what is an allowable lease expenditure
the Department applies typical industry standards and practices
in billing costs between companies (unit agreements) and also
the net profit share lease regulations. [This criterion is set
forth under statute.] Direct costs are deductable when
incurred, rather than depreciated, under current law. Capital
costs, under federal regulations, are assets that last longer
and have a useful life, longer than a year. Under PPT, capital
expenditures are allowed to be expended when incurred, thereby
not depreciated. Allowance for overhead is set forth in the
statute and is set as a percentage of direct costs.
11:28:29 AM
Co-Chair Stedman asked how capital costs are handled for federal
tax reporting purposes because they are still tax deductable and
depreciated. Mr. Iverson explained that, generally, items that
are considered a capital expenditure are depreciated. The value
of the asset would be recovered as a tax calculation over time.
PPT allows deductions in the year in which the costs occurred.
Co-Chair Stedman clarified that a capital item will show up, if
it is on a ten-year schedule, nine years post PPT, as a
deduction in a federal tax return and concluded that federal tax
treatment would not be affected. Mr. Iverson agreed.
Mr. Iverson explained that overhead is set as a percentage of
direct costs. He further clarified that specific costs such as
lobbying, advertising, etc., are not significant, in terms of
how they effect the tax calculation. He maintained that the
overhead allowance is a percentage of direct costs.
11:30:38 AM
Mr. Iverson outlined the current law regarding two provisions AS
43.55.165(c) and (d), costs billed under unit operating
agreements. He noted this would be discussed further when
addressing SB 2001. The PPT statute sets forth what is excluded
from lease expenditures. He noted that in addition to the
general structure of what is allowable, specific exclusions are
established in AS 43.55.165(e)(18). When a cost is excluded as
a lease expenditure, it is not allowed as a deduction.
11:32:24 AM
Senator Huggins asked if health clubs were allowable write offs
in PPT or any other state tax. Mr. Iverson noted they were not
and clarified that fringe benefits, such as health clubs, are
overhead costs, which is set as a percentage of direct costs.
The state only audits for direct costs.
Senator Huggins asked for the percentage of direct costs for
overhead. Mr. Iverson answered that the percentages are set in
regulation 15 AAC 55.270: three percent of non-overhead lease
expenditures that are qualified capital expenditures and nine
percent of direct lease expenditures that are operating
expenditures.
11:34:03 AM
Mr. Iverson added that there is a provision under AS 43.55.170
that establishes adjustments to lease expenditures. These
generally occur in instances where something has been claimed as
a lease expenditure in a prior period and when there is
recoupment cost.
Mr. Iverson addressed SB 2001 noting that the first provision
sets forth an affirmative provision that would allow Department
of Revenue (DOR), by regulation, to set out allowable lease
expenditures. He explained that PPT established a very broad
base of allowable costs with a number of exclusions. The new
provision establishes a narrower base of what is allowed
initially. The intent is to improved clarity and decrease
future litigation by delineating allowable expenditures.
11:36:38 AM
Mr. Iverson referred back to AS 43.55.165(c) and (d) and
explained the difficulty of implementing these sections from an
administrative perspective, as well as policy perspective. There
are two primary drivers behind PPT provision: an administrative
side and a policy side. He explained that AS 43.55.165 (c)
provides that if the Department of Revenue (DOR) makes the
finding that parts of a unit operating agreement are
substantially consistent with general standard of allowable
lease expenditures, then the Department would authorize the
producer to treat, as its lease expenditures, the costs that
would be billable under the operating agreement. Alaska Statute
43.55.165 (d) takes the provision further; it establishes that
costs billed under the agreement are allowed as lease
expenditures if DOR makes the finding of "substantial
consistency" and at least one working interest owner in a unit
has the substantial ability and is effectively auditing.
Mr. Iverson said the administrative concern is one of
implementation. The Department of Revenue would have to
carefully track the unit operating agreements and the terms of
those agreements. Those agreements are "moving targets" and the
accounting procedures are often in flux. This also sets forth a
subjective finding where a determination needs to be made of
what is "substantially consistent" with the regulations and the
statutes. He maintained that it is a grey area of whether or
not to accept joint audit findings based on this "effectively
auditing criteria". Ultimately, it means a multi track audit as
opposed to auditing what costs were billed. The audit that is
incurred by the joint interest owners, as well as the operating
agreement, would require auditing. He concluded that this sets
up a multilinear track of confusion. He added that substantial
compliance with standards set forth in the statute is not in
precise correspondence with the statute and the regulations. As
a result, a variance could be allowed between what a tax payer
is claiming and what is actually allowed in statute. Under these
circumstances, some producers could be treated somewhat
differently as to what is actually deducted.
Mr. Iverson maintain that the previously discussed concerns are
the reasons the Department supports the repeal of AS 43.55.165
(c) and (d).
11:39:20 AM
Mr. Iverson further noted that there is imprecision regarding
cost allowances under the agreements. As a policy matter, there
is concern regarding a shift in responsibility from the
Department to the tax payer, for determining what costs are
allowed as lease expenditures. He asserted that the Department
is not comfortable with the shift and does not feel it is
appropriate. These determinations put the Department in a
difficult position of having to use an agreement that had been
formulated in the past to predict the future. He clarified with
an example of looking at an operating agreement and attempting
to discern whether the companies are continuously staying
"substantially consistent" with the standards set for the in the
statute.
Mr. Iverson noted the added provision in ACES for the exclusion
of costs incurred for repair, replacement, or deferred
maintenance on a facility undertaken in response to a failure of
an unscheduled "disruption in production", spill or hazardous
substance event. The Department feels that "disruption in
production" is a more usable and workable standard than
"improper maintenance". The provision proposed by the
Department provides for the Department to assess whether there
was an "unscheduled disruption in production". He maintained
that determining "unscheduled disruption of production" is a
more objective filing.
Mr. Iverson said, within the provision, costs are allowed to be
deducted if the costs were the result of something that could
not have been prevented by the taxpayers such as acts of war,
God, etc.
11:43:01 AM
Mr. Iverson added that there is an exclusion for the costs
incurred to construct, operate, or acquire a refinery or crude
topping plant. If the crude oil topping plant is on or near the
premises of the property, and the plant is creating a product
used on the lease, the difference (the value of the improvement
to the product itself) would be considered an allowable lease
expenditure. He explained that the amount allowed as expenditure
is the difference of fair market value and the prevailing value
of the crude.
Senator Huggins emphasized concerns regarding the safety of
transporting fuel. He said he is interested in looking at
feasible alternatives that allow the state to partner with
companies to support topping plants. Mr. Iverson responded that
the Department has studied the issue and assumed results to be
forthcoming.
Senator Huggins reminded Mr. Iverson that Senate Finance is the
last committee of referral and stressed the importance of
receiving the information in a timely manner.
11:44:55 AM
Co-Chair Stedman added that there was limited time for the
special session and for the information to be forthcoming. Mr.
Iverson understood.
Co-Chair Stedman requested that the Administration bring forth
any current cost estimates to the treasury as a result of the
shutdown (corrosion issue).
Mr. Iverson clarified that only the information disclosed by the
industry can be discussed. He added that currently there is
information under investigation that could not be revealed.
11:46:41 AM
Co-Chair Stedman understood that there could be costs claimed by
industry from the shutdown. Costs that survive the audit process
may be the same or substantially different depending on how
tight the disallowable costs language is.
Mr. Iverson agreed and believed the amendment the Administration
proposed regarding the exclusion of costs associated with
unscheduled shut downs, would tighten the language.
Mr. Iverson noted that there are items in CSSB 2001(JUD) that
cause the department concern. The language allows only lease
expenditures incurred in the state. He also said the insertion
of language regarding the exclusion from lease expenditures due
to unscheduled disruptions in production is problematic because
it means the Department has to determine "improper maintenance".
He concluded his presentation and asked for questions.
11:48:35 AM
Co-Chair Hoffman felt the problem with the ACES language was
that it was not definitive enough. He asked if the
Administration agreed with that.
Mr. Iverson said he would ask the Administration how to make the
language tighter. He emphasized that the proposed language was
the product of much consultative thought and effort.
Senator Thomas stated that he felt the "improper maintenance"
language was good.
11:50:36 AM
GARY ROGERS, PRODUCTION AUDIT MANAGER, TAX DIVISION, DEPARTMENT
OF REVENUE, referenced language in SCSSB 2001 and said that
determining "indirect costs" is the main audit challenge. Unit
operating agreements in Alaska typically allow more indirect
costs to be charged as direct costs than in other states. He
noted the various warehouses around the state. In other states
a warehouse would be considered an indirect cost. He asked if
these are the things under the proposed language that would be
excluded. He asked how a "direct cost" and an "indirect cost"
would be defined for auditing purposes. He emphasized the
importance of providing clarity around the language. He
maintained that these terms would be the reason for future audit
disputes.
11:53:22 AM
Co-Chair Stedman asked how corporations attempting to synergize
engineering and administrative duties out of state would be
treated in terms of allowable costs.
Mr. Rogers said the normal practice is that engineers charge
their time to a specific project which is more easily
determinable. He said the cost of shared facilities such as
warehouses, freight, shipping, and fringe benefits are more
ambiguous.
11:55:55 AM
Co-Chair Stedman observed that due to lack of labor force in the
Pacific Northwest and in Canada, as well as some parts of the
U.S., it is highly likely engineering and drafting would be done
in India. He asked if the current language would impact those
costs directly.
Mr. Rogers replied that if there are no clear regulations for
indirect costs, different auditors/lawyers could come to
different conclusions on what are indirect costs.
11:57:03 AM
Senator Elton inquired if there is language in any of the bill
versions that makes it easier or harder to draft regulations
that would clarify the issue. He further emphasized the
difficulty of drafting legislation outlining specific details
such as whether a warehouse is a direct or indirect cost.
Mr. Rogers said the Administration's proposal that repeals AS
43.55.165 (c) and (d), and the added amended language AS
43.55.165 (a) and (b), which allows the Department to write
regulations while considering unit operating agreements and net
profit share lease regulations, would work. He felt this would
be adequate to address the issue.
Senator Elton asked if there was language in the any of the
committee substitutes that does not work.
Mr. Rogers emphasized that the current language in AS 43.55.165
(e) 22, CSSB 2001 JUD, "other indirect costs", caused him great
concern as an auditor.
11:58:44 AM
Senator Huggins asked Mr. Iverson to elaborate on his concerns.
Mr. Iverson clarified that there may be other issues in addition
to the concern about the ambiguity of "indirect costs".
Delineation of allowable lease expenditures being only costs
"incurred within the state" is problematic as an audit issue. He
explained that there are not always resources available within
Alaska to take care of regular costs of exploration and
development. He provided an example. Though a seismic shoot may
be done in Alaska, it may be exported to Alberta for analysis.
He observed that the language in ACES regarding "improper
maintenance" provides a clearer definition of how to meet the
policy objective than that outlined in SB 80.
12:01:14 PM
Senator Huggins emphasized the reality that only a few days
remained for the special session and the importance of getting
the language correct.
Senator Thomas asked if the language "unscheduled reduction in
production" would necessitate a determination of cause.
Mr. Iverson explained that the language is a strict liability
provision so a determination of negligence or whether the
facility has been improperly maintained is not required. Costs
are excluded if they are incurred in response to an event that
results in an unscheduled interruption of production. The area
of production is a more familiar area as production is
monitored, which makes the interruption in service more easily
determinable. He noted that one of the provision of ACES is that
any "unscheduled interruptions in production" have to be
reported. He maintained the provision also encourages scheduled
and planned maintenance. The provision provides clarity in that
the reports would support a deductable cost of maintenance.
12:04:09 PM
Senator Thomas referred to a comment by Mr. Rogers who said
there was too much subjectivity in the language regarding
"indirect costs". He specifically noted the example of a
producer who owns a warehouse used for production in the state
and whether it would be allowed as a deduction.
Mr. Iverson deferred to Mr. Rogers.
12:05:00 PM
Mr. Rogers affirmed the audit issue. He reiterated difficulty of
determining the costs of warehouses for two reasons. These
facilities save companies on shipping costs, which are generally
considered a direct cost. The other issue is that, based on
industry standards, the warehouse facilities are considered
indirect costs. He went on to say that within the unit operating
agreement, the costs are considered direct costs. He maintained
that such ambiguity will result in a dispute.
Senator Elton said he struggles with this issue. He posed an
example of a "pig run thru a line" that detected corrosion
problems before a spill occurred, but those corrosion problems
could be attributed to a lack of proper maintenance or deferred
maintenance. At that point maintenance could be scheduled, or
it may occur before there was a spill or an event that would
trigger unscheduled maintenance. It seems as though the problem
with the language in the Governor's bill is that all of those
decisions that had been made for a period of years that led to
the discovery of the corrosion, still cost the state. In the
example, someone was able to schedule maintenance before there
was an event. Senator Elton maintained that that was not right.
In both cases, whether there was a spill event that triggers the
maintenance or not, decisions made for years before the
discovery of a problem led to that cost. He did not believe
that tax should be credited against the company's taxes.
12:08:06 PM
Mr. Iverson acknowledged that Senator Elton had a valid concern
and that there is a concern with "scheduling". He felt this was
something that needed to be addressed in regulation. He
maintained that though there are still some concerns with the
language in ACES, it provides more clarity than the current
language.
Co-Chair Stedman asked if members had questions for Mr. Mintz.
RECESS: 12:09:11 PM
RECONVENED: 1:50:47 PM
Co-Chair Stedman continued the discussion of lease expenditures,
allowable deductions, and the impact on operating and capital
expenditures.
1:52:11 PM
PATRICK GALVIN, COMMISSIONER, DEPARTMENT OF REVENUE, spoke to
the concerns of the legislature and the Department's position on
those concerns. He addressed lease expenditures included and
excluded. He identified changes in the "corrosion fix",
subsection 19, in the original bill, page 44, beginning on line
27. The primary change in the Judiciary Committee was the
inclusion of language from SB 80. He clarified that the intent
of SB 80 was to ensure that costs associated with the
replacement of improperly maintained equipment should not be
deductible. The Department recognized the difficulties
associated with the ability to implement the language of SB 80
because it dealt with a standard that was improperly maintained,
according to industry practices. When attempting to craft the
language for ACES, the Department worked closely with auditors
within the Department, as well as with consultants in the
auditing field. He maintained that what developed was language
that would identify an event which would prompt an auditor to
look more closely at specific expenditures to determine if they
were acceptable.
1:55:55 PM
Commissioner Galvin explained that if there is an interruption
of flow caused by improper maintenance, then that would act as
trigger for looking at costs associated with a repair. He
maintained that the language in the original bill would provide
greater clarity for the standard. The Senate Judiciary Committee
added a more subjective standard of "improperly maintained"
equipment, which would not be deductible. He felt the language
creates a more complicated and difficult administrative burden.
1:57:08 PM
Senator Elton countered that there are many events that would
not be covered by the suggested language. He provided examples
and maintained that things could be addressed by a company to
preclude an interruption of service. Under the ACES language
costs would be deductable even if a company was careless in
responding to concerns that ultimately cause an interruption in
production.
Commissioner Galvin recognized that the language is a trade off.
When a standard is established due to an association with an
event such as an unplanned interruption, things will be missed;
some costs will be excluded when the result of properly
maintained equipment breaks down unexpectedly. He indicated the
question was not whether the provision could result in more or
less costs because that is uncertain. He maintained the
provision could be implemented in a way to provide auditors with
a clearer direction. He further claimed that the ability to
prove "improper maintenance" would require additional outside
information, whereas "interruption is production" is a more
easily determinable factor.
2:01:04 PM
Senator Elton provided other examples maintaining his point.
The Commissioner reiterated that under the ACES provisions there
may be some inequity on both sides.
2:03:19 PM
Co-Chair Stedman asked the Commissioner about his communications
with the industry regarding deductions associated with the
shutdown.
Commissioner Galvin said he had not received enough information
to quantify what costs are associated with the shutdown or to
determine whether the costs would be covered under one standard
or another. The Department has asked for more detailed
information in order to make those determinations.
Co-Chair Stedman said that many were surprised at the magnitude
of the repairs due to the shutdown. He pointed to British
Petroleum's 20f filing projected cost of $550 million for
integrity management. He asked the Commissioner if this had
been factored into the analysis and what impact it would have on
the treasury.
Commissioner Galvin informed the committee that the $550 million
had been factored into the production forecasting numbers. He
added that the expense for integrity management had been
reflected in future cost expectations. He said the industry
stated that the integrity management cost piece is expected to
remain in place for the long term.
2:06:43 PM
Co-Chair Stedman asked if the $550 million was an aggregate
amount or specific to one company. Commissioner Galvin
responded that he could not be certain, but the numbers
generally used for projections are an aggregate number. He
further noted that what is not known is how much this commitment
to infrastructure will affect investment in other areas. He
maintained that this is why the state needs to provide a
forecast as it relates to the expectations of expenditures.
2:08:47 PM
Co-Chair Stedman asked how long it would take before information
could be provided to the legislature, if the language was
approved.
Commissioner Galvin hoped that with the passage of the bill and
implementation of the requirements, the next revenue forecast
would be available in the spring, before the budget process is
complete.
2:09:52 PM
Commissioner Galvin expressed concern with language in CSSB 2001
(JUD) regarding "costs incurred within the state". He pointed
out the difficulty in auditing and provided an example. If a
piece of equipment is manufactured elsewhere and is delivered to
Alaska to use in production, it is difficult to determine at
what point it is "incurred in the state".
Commissioner Galvin noted the second aspect of concern relates
to tax code in Alaska. He emphasized the Administration's
support of any effort to provide jobs located within the state,
associated with North Slope production. He maintained that he
did not feel it appropriate to establish that within the tax
code. He maintained that a more appropriate standard would be
to allow for deductable costs related to "production" within
Alaska.
2:13:14 PM
Senator Huggins asked the Commissioner if he felt that the
language was punitive.
Commissioner Galvin responded that the issue under discussion is
not punitive, but he maintained that that Administration is
concerned with the overall "package" that is produced.
Senator Huggins asked for clarification of what the Commissioner
meant when he said "messaging of our tax code".
Commissioner Galvin emphasized the importance of the entire tax
package and the ability to provide a fair share while also
attracting oil investment. In doing so the tax package must be
balanced with both concerns.
2:15:37 PM
Senator Huggins explained his expectations of the Department to
do its best to implement the law within its means and ability to
do so. He asked the Commissioner if that expectation was an
accurate expectation.
Commissioner Galvin responded in the affirmative.
Commissioner Galvin drew attention to changes in CSSB 2001(JUD),
page 41, regarding allowable deductions definitions. He said
that some of the changes are good clarification, whereas others
cause some confusion. With regard to the language, on line 6,
(i), "for properties on which oil and gas development
exploration, development, or production", he clarified that all
credits and deductions had to be related to oil and gas
development. He added that the language is in some provisions
and not in others. {He maintained the inconsistency gave the
negative inference that the other provisions are not similarly
required to be related to oil and gas development.} He felt the
language should be removed.
Commissioner Galvin addressed joint interest billings, noting
changes on page 41 of CSSB 2001(JUD). He explained that it is
the lead into the section that provides authorization to the
Department to use join interest billings as a method to provide
structure to the audit and identify appropriate expenditures.
On line 25, language changed from "shall" to "may". The
Administration supported the change.
2:19:04 PM
Commissioner Galvin discussed exclusions from lease
expenditures. He addressed added language on page 42, line 23,
CSSB 2001(JUD): "violation of law, or failure to comply with an
obligation under a lease, permit, or license issued by the state
or federal government." He said the language could be added to
the section dealing with the corrosion issue. The language
addresses concerns regarding the corrosion issue, which are
outlined on page 44, line 27.
2:21:43 PM
Commissioner Galvin addressed an issue that he said had
continually surfaced in both the public and the legislative body
regarding expenses associated with lobbying, advertising, etc.
He explained that the expenses are not deductable as they have
to be directly associated with production, but there is no
language in current statutes that specifically said that. He
said on page 42, section 59, AS 43.55.165.(e) 8, adds specific
language. He further pointed out that the language that was
deleted is superfluous. Both changes are supported by the
Administration.
2:23:41 PM
Commissioner Galvin reported that page 43, line 6, section 12,
was rewritten. The Department was comfortable with the rewrite.
The intention behind the language is to ensure that if there is
an internal transfer with costs associated, then there needs to
be a justification reported for the amount claimed to make sure
it is of fair market value. The onus is on the taxpayer to
assign fair market value to the expense.
Co-Chair Stedman asked the Commissioner to address indirect
costs, page 46, line 4. Commissioner Galvin explained that
lines 1-4 were added in the Senate Judiciary Committee. He felt
that the language in subsection (21) was an overstatement of
what needs to be excluded from costs. In subsection (22), he
felt it was redundant because it states the inverse of the
positive statement that "only direct costs" are related. He said
the reference to overhead can cause some confusion. He
reiterated that overhead is addressed in regulations: of the
direct costs, 3% is allowed for overhead for capital
expenditures, 9% for operating costs.
Co-Chair Stedman asked if the Commissioner would like to comment
on the topping plant issue.
2:29:38 PM
Commissioner Galvin said the new subsection (20) in CSSB
2001(JUD), page 45, line 21 is the language from ACES. The
topping plant issue relates to an investment decision by
ConocoPhillips to pursue a topping plant for low sulfur diesel
located on the North Slope. The company is required to use a
particular low sulpher diesel under current law. There is
ambiguity in the current law as to whether the manufacturing of
diesel and the building of a refinery is directly related to
production and exploration. In the Department's analysis,
diesel is a supply issue. The company needs to have it as an
item for fuel to run equipment. Because the companies have an
option to purchase the fuel or can manufacture the diesel
themselves, the determination was made that building of a
refinery should not be a deductable cost. He said that the
language recommended by the Department is their policy call in
that the cost for building a plant should not be deductable or
available for a credit. He said there are estimates of $300
million to build a refinery which would represent a $100-150
million impact to the treasury, if the expense is allowed as a
deduction. He emphasized that the Department felt it is not an
appropriate deduction and should not be associated with or
subsidized through a production tax.
Senator Huggins underlined that there is a mandate to use the
low sulfur diesel fuel and emphasized the validity of a
company's desire to build a plant. He said it was his
understanding that if the Department did not support something
they would provide other options for addressing particular
concerns.
Commissioner Galvin acknowledged there were some discussions
regarding the fuel being trucked versus the opportunity for
companies to build their own plants to avoid the trucking of
fuel. He said DOR has had discussions with the Department of
Transportation and Public Facilities (DOTPF). A report had been
generated from the associated concerns.
Senator Huggins said he saw the report. He went on to highlight
the safety concerns with trucking fuel. He emphasized the
importance of looking at the issue and the potential tradeoffs
regarding safety.
AT EASE: 2:37:01 PM
RECONVENED: 4:12:48 PM
Co-Chair Stedman said he would get feedback from the
Commissioner.
4:13:12 PM
Commissioner Galvin said that, in summary, regarding the lease
expenditure language, the corrosion issue can satisfy most needs
with existing language. He added that expanding the description
of what costs are going to be excluded, due to criminal conduct
or "failure to comply" with a lease requirement, in combination
with original language, was a good solution to the corrosion
issue. With regards to the definition of what lease expenditures
are going to be excluded, the language regarding costs "incurred
within the state" is too broad. With regards to what lease
expenditures are provided, that can be tightened up from CSSB
2001(JUD). Other than the mentioned suggestion, the Commissioner
felt that the bill was a good mix of clarifications from what
was in ACES.
Senator Elton assumed the Administration would have some
proposed language on those issues.
Commissioner Galvin affirmed that and said he would submit
language to the chairman.
4:14:54 PM
Co-Chair Stedman noted that he would work with the
Administration regarding new or additional language that would
be acceptable to all parties.
Co-Chair Stedman asked if the Administration had a targeted
range of government take other than what is provided in ACES.
Commissioner Galvin said the issue of government take is one
step removed from the primary balance of ensuring that
investment opportunities in Alaska are protected. He said the
target share should be comparable to Alaska's peers, such as the
United Kingdom and Norway.
Commissioner Galvin noted that he had the original ACES metric,
which had been requested, available for the Committee. Co-Chair
Stedman assured the Commissioner that he would get the
information to the committee members.
4:17:47 PM
SB 2001 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 4:21:15 PM.
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