Legislature(2011 - 2012)BUTROVICH 205
03/30/2012 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB145 | |
| SB215 | |
| SB219 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 145 | TELECONFERENCED | |
| += | SB 215 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| = | SB 219 | ||
SB 145-OIL/GAS PRODUCTION TAX CREDITS: NENANA
3:34:45 PM
CO-CHAIR WAGONER announced consideration of SB 145 and said that
he had objected to adoption of Version D for discussion
purposes. Today the committee would ask questions of the
Department of Law, the Department of Revenue and the Division of
Oil and Gas.
He asked if anyone wanted to testify on SB 145 and finding none,
closed the public hearing.
SENATOR WIELECHOWSKI asked if a combination of tax deductions
and credits add up to be more than 100 percent if the state-wide
progressivity rate were to be reduced.
3:37:12 PM
JOHN LARSEN, Audit Master, Department of Revenue (DOR),
Anchorage, AK, said to properly answer that question, two
different scenarios would have to be considered. In the case of
costs incurred from a segment that was currently in production,
a lease expenditure deduction under a net tax system would be a
tax benefit and a combination of lease expenditure deductions,
progressivity rate and tax credits could possibly exceed the
amount of the investment. However, it wouldn't be possible for
costs incurred from a segment that was not currently producing,
because there would be no revenues in the segment with which to
offset the lease expenditures. Under the proposed language in
the bill, there are no credits available for carry forward loss
credits or any other credit under [AS 43.55.025].
CO-CHAIR WAGONER asked if there was any production in the
geographic area that SB 145 relates to.
MR. LARSEN replied no and they commonly refer to that area -
south of 68 degrees north latitude - as "Middle Earth."
SENATOR WIELECHOWSKI asked if he meant that the state couldn't
exceed 100 percent for companies that aren't producing right now
as well as existing companies that are producing.
MR. LARSEN answered that a company in current production could
not exceed the 100 percent, because the lease expenditures for a
certain segment are ring-fenced while a tax credit can be
exported and applied against any tax liability in the state.
SENATOR WIELECHOWSKI said the lease expenditures are ring
fenced, but what about the reduction of the tax rate due to the
reduced per barrel profits.
MR. LARSEN replied the answer was still no. The lease
expenditures under the bill basically end right there and won't
affect anyone's progressivity. Typically, when lease
expenditures exceed the gross value at the point of production,
the excess is allowed to be a carry forward annual loss credit
under AS 43.55.023(b), but the language of the bill specifically
precludes any credits under AS 43.55.023 or any other section of
AS 43.55.025.
3:41:42 PM
SENATOR WIELECHOWSKI asked if this bill would apply to any oil
and gas producing fields north of 68 degrees latitude.
MR. LARSEN answered that was his understanding.
CO-CHAIR WAGONER recognized that Senator Cathy Giessel was in
attendance.
SENATOR WIELECHOWSKI asked him to talk about the public
information the state would get under this bill in exchange for
providing credits.
MR. LARSEN answered that the information that would be made
public through this bill would be the seismic and well data; the
provisions in the bill expedite its release above what is
ordinarily prescribed in other statutes.
3:43:10 PM
SENATOR WIELECHOWSKI asked where it says "ring-fenced."
MR. LARSEN responded that was just how the tax basically worked.
SENATOR WIELECHOWSKI asked if a company could write off lease
expenditures and capital credits from production elsewhere,
resulting in a negative tax.
MR. LARSEN replied no; lease expenditures from one segment
cannot be exported to another segment - the idea of the ring-
fencing. A credit can be used anywhere in the state a tax
liability is due to the state. So a producer could apply tax
credits from other areas of the state to the tax liability of
production in the Middle Earth area if it would have any. The
reciprocal is also true that tax credits from the Middle Earth
area could be exported and applied against a tax liability from
other segments in the state.
CO-CHAIR PASKVAN asked him why a company would pick the system
under this section as compared to the current structure of
credits.
3:46:16 PM
MR. LARSEN answered that the benefit in SB 145 would allow a
credit under AS 43.55.025 and that would allow a credit of $22.5
million or 80 percent of the total exploration expenditures for
a well, no more than two of which could be within any one basin
area. Under AS 43.55.025, the producers or explorers are
eligible for credits up to 40 percent depending on the location
of the exploration, which would apply, given that there is no
production within the Middle Earth area. But the remaining
sections of AS 43.55.025 have caps or limitations on the amount
of the expenditures to which credits could be earned against.
SENATOR WIELECHOWSKI asked if the DOR had modeled any scenarios
on how this would impact the treasury if there were to be fields
of 10/25/100 thousand barrels/day of production.
MR. LARSEN answered no.
SENATOR WIELECHOWSKI asked if he could do that.
MR. LARSEN said he would be happy to do that if he could be a
little more definitive about what he wanted modeled.
SENATOR WIELECHOWSKI asked if the DOR had concerns about the
state losing money with a large oil find.
MR. LARSEN answered yes; it was his absolute fiduciary duty for
the state as a certified public accountant.
3:50:06 PM
SENATOR WIELECHOWSKI asked if the administration supported this
bill.
MR. LARSEN replied no; this is not the administration's bill and
they have no position on it. He asked for parameters for the
modeling he wanted him to provide saying that he would forward
that to the appropriate people and try to get it done for him.
SENATOR WIELECHOWSKI said he would get him something.
CO-CHAIR WAGONER, finding no further questions, closed the
public hearing on SB 145 and held it in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SB145CS(RES)-DNR-DOG-03-29-12.pdf |
SRES 3/30/2012 3:30:00 PM |
SB 145 |
| SB145CS(RES)-DOR-TAX-03-29-12.pdf |
SRES 3/30/2012 3:30:00 PM |
SB 145 |