Legislature(2011 - 2012)BUTROVICH 205
04/02/2012 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB215 | |
| SB145 | |
| 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 219 | TELECONFERENCED | |
| += | SB 215 | TELECONFERENCED | |
SB 145-OIL/GAS PRODUCTION TAX CREDITS: NENANA
4:00:37 PM
CO-CHAIR WAGONER announced consideration of SB 145 [Version D
was before the committee]. He said there was a request for
modeling at the last meeting, but it involved too much
speculation and too many hypotheticals to consider, so he
withdrew the request.
4:01:53 PM
SENATOR WIELECHOWSKI said his staff ran some modeling on SB 145
assuming 10,000 barrels a day at $110 to get a rough estimate of
a production tax value of $60 ($10 transportation costs, $20
OPEX and $20 CAPEX), and they came up with a production tax
value of about $190 million, which under ACES (backing out tax
credits and deductions) would generate a revenue of $38 million
to the state. The 4 percent gross tax under SB 145 appears to
generate a negative cash flow of $14 million to the company from
the state.
CO-CHAIR WAGONER said he appreciated that, but would feel more
comfortable with Legislative Research modeling or modeling from
Senator Stedman's consultants.
CO-CHAIR PASKVAN commented that he didn't want the committee to
get too bound up by the potential negative cash flow concept to
the state of Alaska, because Cook Inlet has had an annual
negative cash flow of $80 million for many years. The whole
concept of opening up the Nenana Basin is that the state puts
something into it in terms of reductions in costs and incentives
- as long as there are tight parameters on time.
4:05:57 PM
SENATOR WIELECHOWSKI moved Amendment 1.
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AMENDMENT 1
OFFERED IN THE SENATE
BY SENATORS WIELECHOWSKI AND FRENCH
TO: CSSB 145( ), Draft Version "D"
Page 1, line 3, following "basins;":
Insert "relating to certain nontransferable oil
and gas production tax credits;"
Page 2, following line 8:
Insert a new bill section to read:
"* Sec. 3. AS 43.55.024(b) is amended to read:
(b) A producer may not take a tax credit under
(a) of this section for any calendar year after the
later of
(1) 2021 [2016]; or
(2) the ninth calendar year after the
calendar year during which the producer first has
commercial oil or gas production before May 1, 2021
[2016], from at least one lease or property in the
state outside the Cook Inlet sedimentary basin, no
part of which is north of 68 degrees North latitude,
if the producer did not have commercial oil or gas
production from a lease or property in the state
outside the Cook Inlet sedimentary basin, no part of
which is north of 68 degrees North latitude, before
April 1, 2006."
Renumber the following bill sections accordingly.
SENATOR WIELECHOWSKI explained applies statewide and expands the
small producer tax in AS 43.55.024(b) credit until 2021, because
some small producers were concerned that it may expire.
SENATOR FRENCH said the Revenue Sources Book said the net fiscal
effect of this credit was $38 million last year and that it
makes sense for people to be able to plan on it.
CO-CHAIR WAGONER, finding no objections, announced that
Amendment 1 was adopted.
4:08:12 PM
SENATOR WIELECHOWSKI moved Amendment 2.
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AMENDMENT 2
OFFERED IN THE SENATE
BY SENATORS WIELECHOWSKI AND FRENCH
TO: CSSB 145( ), Draft Version "D"
Page 1, line 3:
Delete "and"
Insert "relating to information concerning oil
and gas taxes, including information that must be
provided in order to claim an oil and gas production
tax credit for those expenditures, and to the
disclosure of that information;"
Page 1, line 4, following "latitude":
Insert "; and providing for an effective date"
Page 7, following line 2:
Insert new bill sections to read:
"* Sec. 6. AS 43.55.030(a) is amended to read:
(a) A producer that produces oil or gas from a
lease or property in the state during a calendar year,
whether or not any tax payment is due under
AS 43.55.020(a) for that oil or gas, shall file with
the department on March 31 of the following year a
statement, under oath, in a form prescribed by the
department, giving, with other information required by
the department under a regulation adopted by the
department, the following:
(1) a description of each lease or property
from which oil or gas was produced, by name, legal
description, lease number, or accounting codes
assigned by the department;
(2) the names of the producer and, if
different, the person paying the tax, if any;
(3) the gross amount of oil and the gross
amount of gas produced from each lease or property,
and the percentage of the gross amount of oil and gas
owned by the producer;
(4) the gross value at the point of
production of the oil and of the gas produced from
each lease or property owned by the producer and the
costs of transportation of the oil and gas;
(5) the name of the first purchaser and the
price received for the oil and for the gas, unless
relieved from this requirement in whole or in part by
the department;
(6) the producer's qualified capital
expenditures, as defined in AS 43.55.023, other lease
expenditures under AS 43.55.165, and adjustments or
other payments or credits under AS 43.55.170;
(7) the production tax values of the oil
and gas under AS 43.55.160;
(8) any claims for tax credits to be
applied; [AND]
(9) calculations showing the amounts, if
any, that were or are due under AS 43.55.020(a) and
interest on any underpayment or overpayment; and
(10) for each expenditure that is the basis
for a credit claimed under AS 43.55.023 or 43.55.025,
a description of the expenditure, a detailed
description of the purpose of the expenditure, and a
description of the lease or property for which the
expenditure was incurred; notwithstanding
AS 40.25.100(a) and AS 43.05.230(a), information
submitted under this paragraph may be disclosed to the
public and shall be disclosed to the legislature in a
report submitted within 10 days after the convening of
the next regular legislative session following the
date a statement is filed under this subsection.
* Sec. 7. AS 43.55.030(e) is amended to read:
(e) An explorer or producer that incurs a lease
expenditure under AS 43.55.165 or receives a payment
or credit under AS 43.55.170 during a calendar year
but does not produce oil or gas from a lease or
property in the state during the calendar year shall
file with the department on March 31 of the following
year a statement, under oath, in a form prescribed by
the department, giving, with other information
required by the department under a regulation adopted
by the department, the following:
(1) the producer's qualified capital
expenditures, as defined in AS 43.55.023, other lease
expenditures under AS 43.55.165, and adjustments or
other payments or credits under AS 43.55.170; [AND]
(2) if the explorer or producer receives a
payment or credit under AS 43.55.170, calculations
showing whether the explorer or producer is liable for
a tax under AS 43.55.160(d) or 43.55.170(b) and, if
so, the amount; and
(3) for each expenditure that is the basis
for a credit claimed under AS 43.55.023 or 43.55.025,
a description of the expenditure, a detailed
description of the purpose of the expenditure, and a
description of the lease or property for which the
expenditure was incurred; notwithstanding
AS 40.25.100(a) and AS 43.05.230(a), information
submitted under this paragraph may be disclosed to the
public and shall be disclosed to the legislature in a
report submitted within 10 days after the convening of
the next regular legislative session following the
date a statement is filed under this subsection.
* Sec. 8. Sections 6 and 7 of this Act take effect
July 1, 2012."
SENATOR WIELECHOWSKI explained that the amendment requires the
disclosure of three items: a description of the expenditure, a
detailed description of the purpose of the expenditure and a
description of the lease or property for which the expenditure
was incurred. That information will be made public. The
philosophy behind this is that the state is paying close to $1
billion each year in tax credits and they have no idea where it
is going. This will help find out what those credits are being
used for and it helps in managing the resource.
4:10:01 PM
JOHANNA BALES, Deputy Director, Tax Division, Department of
Revenue (DOR), Anchorage, AK, said she had a couple of concerns
with Amendment 2. The first primarily dealt with the language
and the way the amendment is constructed. It says:
"Notwithstanding, AS 40.25.100 and AS 43.05.230(a)" and the
department didn't believe that language allowed them to
completely not adhere to those statutes. Exception language
needs to be put in those statutes if they are going to open up
taxpayer information to public disclosure.
The other concern she explained was right now when they look at
tax credits specifically for audit purposes, they receive
millions of lines of data information just like they do for tax
returns, and when they conduct audits they look at categories of
credits. This amendment would require the department to look at
each expenditure and she assumed categorize it for disclosure.
But there is no language giving them any idea of how the sponsor
wanted those expenditures to be categorized.
MS. BALES said the second part of the amendment talks about a
detailed description of the purpose of the expenditure and they
were not entirely sure what the intention was.
Another concern Ms. Bales said they had was although this
amendment didn't require identifying the taxpayer, they could
have instances where a lease or property has only one of two
owners and by simply providing that information, they would have
disclosed the taxpayer. She didn't know if that was the
sponsor's intent either.
4:13:18 PM
MS. BALES said another issue would be the cost of being subject
to public records requests. The minute this information is made
public and subject to disclosures they would be required to
disclose this information for any individual that requested it
and that would be disincentive to companies to get these credits
if they are concerned that their proprietary information might
be disclosed.
SENATOR FRENCH asked if language on page 2, lines 17-24 (number
10 on a list of 9 other items), on types of information is sent
to the department by the producers.
MS. BALES answered yes; that was correct.
SENATOR FRENCH asked if the other nine items in that list were
disclosed to the public, too.
MS. BALES replied generally no, unless it has been aggregated,
and they aggregate at a high level.
SENATOR FRENCH asked if her concern was with language actually
in subsection (10) that says it may be disclosed to the public
because it's treated differently than the other nine items.
MS. BALES replied yes. Also, the language on line 17 says "for
each expenditure" and in their mind an expenditure is every
single line item of expense.
SENATOR FRENCH said that the language was modified to say "for
each expenditure that is the basis for a credit claimed under
.023 or .025."
MS. BALES replied that each expense item is the basis for a
credit. If they have to categorize and identify each and every
expense and identify the purpose of that expense, a little more
clarification would be needed on whether they wanted every
single expense item or categories of expenditures.
SENATOR FRENCH said if he were in her shoes, he would be saying
it's the producers' job to do the categorizations. But she was
saying it would be the department's job and he didn't want to
make her do that. He asked if there was language causing her
confusion about whose job it is.
MS. BALES replied that the producer would have to provide the
information, but she was confused as to what information and
what level of detail and assumed that the producers and
explorers would share that same confusion.
SENATOR FRENCH said they were big boys and could stick up for
themselves and he wanted the department's perspective on whether
this amendment would require them to detail things and to
categorize them.
MS. BALES answered that the department would have to do a
certain amount of detail and categorization, because if an
explorer or producer sent them information at the expense level
and provided the purpose of each expenditure, they would still
need to compile that data into a report.
SENATOR FRENCH said he thought they would be pulling information
out of one spreadsheet and inserting it into another until they
aggregated.
MS. BALES responded that would be true, and as simple as that
might sound, they get data in all sorts of different formats.
They don't have an automated system right now, so they would
have to look at how this information was provided and it would
be helpful to have a little bit more guidance about whether the
producers and explorers were providing them a report that the
department was providing to the legislature and the public as
requested.
SENATOR FRENCH said that was his intent, but he could see where
she would need a little more guidance.
4:19:18 PM
CO-CHAIR WAGONER said he wasn't that comfortable with this
either, for a little bit different reason. Let's say I'm a
charter business taking high end charters out and am forced by
APOC to disclose each one of those charters, because it's over
the maximum allowable. In doing that, he has just opened up his
entire list of business associates to his competitors. That is
why he couldn't support the amendment.
SENATOR WIELECHOWSKI withdrew Amendment 2 and said he would work
with Senator Wagoner, the Finance Committee and the department
to provide clear guidance and not have any unintended
consequences.
4:21:15 PM
SENATOR FRENCH moved Amendment 3.
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AMENDMENT 3
OFFERED IN THE SENATE
TO: CSSB 145( ), Draft Version "D"
Page 2, line 3:
Delete "seven"
Insert "four"
CO-CHAIR WAGONER objected for discussion purposes.
SENATOR FRENCH explained that this was part of a conversation he
had with the Nana folks to put some sidebar limit to the
extremely low tax provisions the state is offering under this
bill. They had talked about using a barrel a day limit, but the
drafter said it was too much. So he simply limited it down to
four years. He was comfortable with four years, but he would be
open to five. His idea was to limit the length of time under
which these extremely low tax provisions are offered; they might
need to look at Cook Inlet the same way.
SENATOR FRENCH moved to amend his amendment to insert "five"
instead of "four" on line 3.
CO-CHAIR PASKVAN asked if Doyon had been contacted about five
versus seven years.
CO-CHAIR WAGONER said he talked to them in the past a couple or
three times about it and didn't think they would object to going
to five.
4:23:47 PM
JAMES MERY, Vice President, Lands and Natural Resources, Doyon,
Limited, Fairbanks, AK, said it depends on the price of oil and
the size of the find, but the number "five" would work for them
in the larger context of trying to attract capital to these
projects. It's still a good period of protection during a
critical period of capital recovery.
SENATOR WIELECHOWSKI remarked that they were sort of shooting in
the dark without modeling and he would support the amendment,
but hoped it would get a thorough look in the Finance Committee.
CO-CHAIR WAGONER removed his objection and the amendment to
Amendment 3 was adopted. Finding no further objections, he
announced that Amendment 3 as amended was adopted.
CO-CHAIR WAGONER removed his objection to the CS.
CO-CHAIR PASKVAN moved to report CSSB 145( ), version\D, as
amended by Amendments 1 and 3, to the next committee of referral
with individual recommendations and attached fiscal note(s).
There were no objections and CSSB 145(RES) moved from the Senate
Resources Standing Committee.
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