Legislature(1993 - 1994)
03/30/1993 05:10 PM Senate O&G
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATOR LEMAN called the Special Committee on Oil and Gas meeting to order at 5:10 p.m. and announced SB 134 CREDITS AGAINST PURCHASE OF ROYALTY OIL to be up for consideration. SENATOR HALFORD moved to adopt the CS for SB 134. There were no objections and it was so ordered. Number 62 JIM BALDWIN, Assistant Attorney General, said there are still major defects in the bill. The Permanent Fund provisions of the bill give MAPCO an advantage over Tesoro, because Tesoro has no clause for a cash payment or term in its settlement agreement. There was discussion on this issue and SENATOR LEMAN called an at ease for a few minutes. MR. BALDWIN explained that amendment #4 doesn't solve the basic problem of the credit taking away the legislature's power to spend the state's money. On page 4, line 26 of the CS MR. BALDWIN explained the state would also have to forego payment under any judgement or settlement for a period up to 10 years. MR. BALDWIN said the title of the bill is also defective. The body of the bill says the credit can be applied not only against so-called liquidated purchase arrearages, but against any other debt owed the state. This bill goes further than any royalty oil settlement; it goes into any other lawful debt owed to the state. Number 250 SENATOR LEMAN asked Mr. Chenoweth to explain the intended parameters of the bill. MR. CHENOWETH said it was not intended to go beyond the royalty oil obligations. He said he wondered if, practically speaking, you would ever run into the situation where the amount of the credit would exceed the amount of the outstanding balance on liquidated purchase arrearages. He thought that could be deleted. Number 286 SENATOR LEMAN moved to adopt amendment #1. SENATOR ADAMS objected to all 7 amendments. A vote was taken: Senator Leman, Senator Sharp, and Senator Salo voted yes; Senator Adams voted no, and the motion carried. Number 306 SENATOR LEMAN moved to adopt amendment #3. There were no objections and it was so ordered. SENATOR LEMAN asked Mr. Chenoweth to explain amendment #4. MR. CHENOWETH explained that the committee wanted to see some commitment to pay, at least partially, in cash. He tried to make a provision identifying the amount to be paid coupled with language that would take 25 cents from the first dollar and put it into the Permanent Fund and take 75 cents and put that into the general fund, etc. He was asked, however, to draft the CS so that all of the first amount that comes in goes into the Permanent Fund until that obligation is satisfied. The general fund take is delayed and the Permanent Fund payment is advanced. SENATOR LEMAN moved amendment #4. SENATOR SHARP objected for discussion. GENE BURDEN, Tesoro Alaska, said they have roughly $100 million obligation to pay the state. Under the previous version $25 million would go to the Permanent Fund. Amendment #4 would require one third of the remaining $75 million be paid before a credit could be taken. SENATOR LEMAN said he understood his concern and would make his intentions clearer. SENATOR SALO agreed. SENATOR HALFORD asked if the royalty on any of the later royalty conversions show 50% to the Permanent Fund? Number 505 KEN BOYD, Deputy Director, Division of Oil and Gas, said he wasn't familiar enough with all the contracts to know which leases are involved with the contract. He thought that all of them were under the 25% provision, however. SENATOR LEMAN requested a vote on amendment #4. Senator Salo and Senator Halford voted no; Senator Leman, Senator Sharp, and Senator Adams voted yes, and amendment #4 carried. Number 525 SENATOR LEMAN moved amendment #5. SENATOR HALFORD objected. SENATOR LEMAN said on page 3, line 22 "7th" is changed to "3rd" making this an incentive for settlement, because they would have a shorter window of time to claim the credit. MR. BURDEN said in Tesoro's case its settlement was January 29, 1993 and if this bill passes it is 6 months into its 3 years. It is hard for a multi-million dollar project to be conceived, planned, and completed in 3 years and urged the committee to stay with the 7 years. SENATOR SALO asked if that was the intent. SENATOR LEMAN said no, the intention was for the credit to be claimed within 7 years of the effective date. Number 554 SENATOR LEMAN moved to amend amendment #5 to delete lines 21 -24 and on line 19 delete "the later of." There were no objections and it was so ordered. There were no objections to amendment #5 and it was adopted. Number 565 SENATOR LEMAN moved to adopt amendment #7. MR. CHENOWETH explained this is consistent with amendment #4 saying that as the dollars come in, the first 25 cents go into the Permanent Fund and the balance gets put into the general fund. There were no objections and amendment #7 was adopted. TAPE 12, SIDE B Number 580 SENATOR SHARP moved to pass CS for SB 134 as amended with fiscal note from committee with individual recommendations. SENATOR ADAMS objected. SENATOR LEMAN asked for a vote. Senator Leman, Senator Halford, Senator Sharp, and Senator Salo voted yes; Senator Adams voted no, and CSSB 134 was discharged from committee.
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