Legislature(2005 - 2006)

08/03/2006 11:44 AM House FIN


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11:44:06 AM Start
11:45:00 AM HB3001
04:44:28 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   HOUSE FINANCE COMMITTEE                                                                                      
                       August 3, 2006                                                                                           
                         11:44 A.M.                                                                                             
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Chenault  called the House Finance Committee  meeting                                                                  
to order at 11:44:06 AM.                                                                                                      
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mike Chenault, Co-Chair                                                                                          
Representative Kevin Meyer, Co-Chair                                                                                            
Representative Bill Stoltze, Vice-Chair                                                                                         
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Jim Holm                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Beth Kerttula                                                                                                    
Representative Bruce Weyhrauch                                                                                                  
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Carl Moses                                                                                                       
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Speaker   John   Harris;   Representative   Ethan   Berkowitz;                                                                  
Representative   John   Coghill;  Representative   Les   Gara;                                                                  
Representative Carl Gatto; Representative David Guttenberg                                                                      
Representative   Vic   Kohring;  Representative   Pete   Kott;                                                                  
Representative Gabrielle LeDoux; Representative Mark Neuman                                                                     
Representative  Kurt  Olson;  Representative   Ralph  Samuels;                                                                  
Representative  Paul Seaton; Representative  Bob Lynn;  Robynn                                                                  
Wilson,  Director, Division  of  Tax, Department  of  Revenue;                                                                  
William  Corbus,  Commissioner,  Department  of  Revenue;  Dan                                                                  
Dickinson,  Consultant, Tax Division,  Department of  Revenue;                                                                  
Tom Williams, Tax  Attorney, British Petroleum;  Brian Wenzel,                                                                  
Vice President,  Finance and Planning, Conoco-Alaska;  Patrick                                                                  
Foley, Manager of Land and External Affairs, Pioneer.                                                                           
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
None                                                                                                                            
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 3001   An  Act relating  to the production  tax on  oil and                                                                  
          gas   and  to   conservation   surcharges  on   oil;                                                                  
          relating   to  criminal   penalties  for   violating                                                                  
          conditions   governing   access   to   and  use   of                                                                  
          confidential    information    relating    to    the                                                                  
          production  tax;  amending the  definition of  'gas'                                                                  
          as that definition applies in the Alaska Stranded                                                                     
          Gas Development Act; making conforming amendments;                                                                    
          and providing for an effective date.                                                                                  
                                                                                                                                
          CS HB 3001 (FIN) was reported out of Committee                                                                        
          with a "do pass" recommendation and with a new                                                                        
          fiscal impact note from Department of Revenue.                                                                        
                                                                                                                                
HB 3006   An  Act   making  an  appropriation   to  study  the                                                                  
          feasibility of a spur line from a gas pipeline in                                                                     
          this state; and providing for an effective date.                                                                      
                                                                                                                                
          HB 3006 was SCHEDULED but not HEARD.                                                                                  
HOUSE BILL NO. 3001                                                                                                           
                                                                                                                                
     An  Act relating  to the production  tax  on oil and  gas                                                                  
     and  to  conservation  surcharges  on  oil;  relating  to                                                                  
     criminal  penalties  for violating  conditions  governing                                                                  
     access  to and use of  confidential information  relating                                                                  
     to the production  tax; amending the definition  of 'gas'                                                                  
     as  that definition  applies in the  Alaska Stranded  Gas                                                                  
     Development   Act;  making  conforming  amendments;   and                                                                  
     providing for an effective date.                                                                                           
                                                                                                                                
11:45:00 AM                                                                                                                   
                                                                                                                                
Co-Chair Chenault  noted that  conceptual Amendment #2  was on                                                                  
the table for consideration  [the motion to adopt  was made by                                                                  
Representative   Chenault    on   8/2/06   and   objected   by                                                                
Representative Stoltze on 8/2/06].                                                                                            
                                                                                                                                
11:45:53 AM                                                                                                                   
                                                                                                                                
Co-Chair  Chenault MOVED  to WITHDRAW  the original  Amendment                                                                
#2  & and  replace it  with  Amendment #2A.    There being  NO                                                                
OBJECTION, it was replaced.                                                                                                     
                                                                                                                                
11:46:25 AM                                                                                                                   
                                                                                                                                
Co-Chair    Chenault   MOVED    to   ADOPT   Amendment    #2A.                                                                  
Representative Hawker OBJECTED for discussion purposes.                                                                         
                                                                                                                                
ROBYNN  WILSON,  DIRECTOR,  DIVISION  OF  TAX,  DEPARTMENT  OF                                                                  
REVENUE,  explained the changes  made to  the amendment.   She                                                                  
pointed  out  that  in  modeling  the  formula  an  error  was                                                                  
discovered.   She went on  to say that  both industry  and the                                                                  
Department realized  that at the marginal point  there was the                                                                  
possibility  that the  tax rate  could exceed  100-200%.   The                                                                
nNew  language  was added  to clarify  completely  the  intent                                                                
that the  tax rate does  would not go  higher than 25%  or and                                                              
not lower than  20%.  She provided examples to  illustrate the                                                                
tax rate  as calculated  in that language.  She noted  that if                                                                  
calculations  differ  in paragraph  1  from paragraph  3,  the                                                                
higher of the two would be the rate, not exceeding 25%.                                                                         
                                                                                                                                
11:50:15 AM                                                                                                                   
                                                                                                                                
Representative  Kerttula  asked  if the  lower  rate would  be                                                                  
taken  rather than  the rate that  exceeded  25%.  Ms.  Wilson                                                                  
responded that the 25% rate would be taken.                                                                                     
                                                                                                                                
Ms.  Wilson  pointed  out  that in  order  to  be  technically                                                                  
perfect it  would need an algabraic  equation to solve  for R.                                                                  
The  sponsor   felt  that  having   the  correct   algebra  in                                                                  
regulations  is the  way to  handle this  because the  formula                                                                  
provides the parts.                                                                                                             
                                                                                                                                
11:51:40 AM                                                                                                                   
                                                                                                                                
Representative  Kerttula asked  if the  actual equation  would                                                                  
be available  before the floor  vote.  Ms. Wilson  stated that                                                                  
the  formula   in  the  amendment   would  be  the   equation.                                                                  
Representative  Hawker  stated it  is the  correct formula  to                                                                
put   in  statute   because   itobserved   that  the   formula                                                                
identifies the  elements that create  the limit.   The algebra                                                                
is available  and will  be available  before  the vote on  the                                                                
floor.                                                                                                                        
                                                                                                                                
11:53:24 AM                                                                                                                   
                                                                                                                                
Representative  Kerttula asked  for clarification. Ms.  Wilson                                                                  
stated it  is the correctexplained  that the equation  used to                                                              
isolates  "R".   The algebralgebraic  formulaa  isolating  "R"                                                            
for that would be placed in regulations.                                                                                    
                                                                                                                                
11:53:58 AM                                                                                                                   
                                                                                                                                
Representative  Kerttula noted that she did have  questions on                                                                
the amendment.                                                                                                                
                                                                                                                                
11:54:33 AM                                                                                                                   
                                                                                                                                
Representative  Kerttula  referenced  production  decline  and                                                                  
voiced concern  regarding a scenario  in which a company  does                                                                
not  spend more  money but  they have  declininghas  declining                                                                
production  without increasing expenditures.   She  noted that                                                                
in this scenario  the company would get the 5%  decline credit                                                                  
without  but it would  not result  in greater  an increase  in                                                                
production.  Ms.  Wilson  requested that  Mr.  Dickinson  come                                                                  
forward.                                                                                                                        
                                                                                                                                
11:55:34 AM                                                                                                                   
                                                                                                                                
DAN  DICKINSON,   CONSULTANT,  TAX  DIVISION,   DEPARTMENT  OF                                                                  
REVENUE, replied  that heragreed with Ms. Wilson's  assessment                                                                
was correct  and emphasized  that there  could be a  numerator                                                              
effect.    He  said that though  the scenario  presented  is a                                                                  
mathematical  possibility, it  is an  unlikely combination  to                                                                  
drive the tax rate down.                                                                                                        
                                                                                                                                
Representative  Kerttula  emphasized  that  the  scenario  was                                                                  
possible  and  asked  if  there  was a  way  to  correct  that                                                                  
situation.   Mr.  Dickinson replied  that the  rate could  not                                                                  
drop lower than the 20% tax rate.                                                                                           
                                                                                                                                
11:58:36 AM                                                                                                                   
                                                                                                                                
Representative  Hawker added,added  that though the  posing of                                                                
this hypothetical  situation was  important, it overlooks  the                                                                
reality  of the  circumstances  now existing  in  Alaska.   He                                                                  
went on to  say,  with vast  known reserves, the mechanism  is                                                                
targeted  toward  for developingment   of those  resources  to                                                              
maintain the pipeline.                                                                                                          
                                                                                                                                
12:01:13 PM                                                                                                                   
                                                                                                                                
Mr.  Dickinson  acknowledged  that  Representative  Kerttula's                                                                  
concerns were accurate.   He went on to say that  in doing the                                                                  
modeling,  problems arose  from the inability  to predict  how                                                                  
much production would be incentivized.                                                                                          
                                                                                                                                
12:02:46 PM                                                                                                                   
                                                                                                                                
Representative  Kelly stated  that there  are two things  that                                                                  
can protect against  inflation.  The first is  a "2011 study,"                                                              
which will  allow for  review and the  provide an  opportunity                                                                
to  make changes  if necessary.    The second  is the  general                                                              
agreement  among  members  that  oil  should not  be  tied  in                                                                  
between now and  project sanctions.  He felt these  two things                                                                  
provided the needed security for members.                                                                                       
                                                                                                                                
12:05:12 PM                                                                                                                   
                                                                                                                                
Representative   Kerttula   voiced  concern   with  the   2006                                                                  
investment  rate of 4.6.   Referring to  the chart sShe  noted                                                              
that,  based on  the  chart, the  tax rate  in  2006 would  be                                                              
21.5%.   Mr.  Dickinson said  that, though  mechanically  that                                                                
assumption  is  correct,  the  5-year  average  is  what  will                                                                  
determine the  rate.  Representative  Kerttula asked  if there                                                                  
were calculations  based on what was previously  passed by the                                                                  
House.    Mr.  Dickinson  stated  that  he  didn't  have  them                                                                  
presently, but  could provide them  to the committee  in a day                                                                
or two.                                                                                                                         
                                                                                                                                
12:07:04 PM                                                                                                                   
                                                                                                                                
Representative  Hawker pointed out  that the numbers  indicate                                                                  
capital expenditure  from 2006.  He went  on to say that  only                                                                  
upstream expenditures  apply for  the tax credit.   In closing                                                                  
he noted  that Representative  Kerttula's  concern was  valid,                                                                
but  emphasized  that he  gained  comfort from  the  five-year                                                                
trend line for establishing the base.                                                                                           
                                                                                                                                
12:08:41 PM                                                                                                                   
                                                                                                                                
Representative  Kerttula asked  if all  expenditures, such  as                                                                
feeder  lines   and  transportation,   are  included   in  the                                                                
investment credit.   Mr. Dickinson stated that  the numbers do                                                                  
not   include   down   stream   transportation.       Upstream                                                                
investments  will be included up  to the point of  production.                                                                  
The  definitions  of  what  would  qualify  as  an  investment                                                                  
expense have not changed.                                                                                                       
                                                                                                                                
Representative  Kerttula  asked about  the  cap at  25%.   Mr.                                                                  
Dickinson observed  that it moves from 20% to  25%.  Elsewhere                                                                  
in  the   bill,  there  is   a  separate  calculation   fromor                                                                
progressivity,  which is also  capped at  25%.  He noted  that                                                                  
the investment  incentive  percentage  is completely  separate                                                                  
from progressivity.   Mr.  Dickenson clarified  that with  the                                                                  
amendment  the  tax  rate  would  be capped  at  25%  and  the                                                                  
progressivity would be capped at 25%.                                                                                           
                                                                                                                                
12:12:29 PM                                                                                                                   
                                                                                                                                
In response  to a question  by Representative Kerttula,  asked                                                            
what the  percentage ends  up being  after the incentive,  the                                                                
credit  and  the  decline  rate   with  the  new  gas  fields.                                                                
[L1]MMr. Dickinson responded  explained that  at the  extreme,                                                              
75% of the investment  could be underwritten by  the state and                                                                
federal   governments  combined   would  cover   75%  of   the                                                                
investment  and companies  would  put in  25%  out of  pocket.                                                                
The  eExpenditures  underwritten  by  the  state  and  federal                                                                
government can never reach higher than 75%.                                                                                     
                                                                                                                                
12:15:00 PM                                                                                                                   
                                                                                                                                
Representative  Kerttula requested  a monetary example  of the                                                                  
20% rate.   Mr. Dickinson stated  that the limit @ at  75%, it                                                              
would be ½ half  a billion dollars, assuming that  prices stay                                                                
in  the range  that  they are  today.   If  there  is a  price                                                                  
correction, the number will drop.                                                                                               
                                                                                                                                
12:16:36 PM                                                                                                                   
                                                                                                                                
Representative   Hawker  explained  how  much   industry  pays                                                                  
versus  government.    He  clarified  that  the  state  "pays"                                                                  
nothing and  that the industry pays  to the state.   The state                                                                  
is just providing the incentive in terms of a tax credit.                                                                       
                                                                                                                                
12:18:41 PM                                                                                                                   
                                                                                                                                
Mr. Dickinson  confirmed RepresentativeRep  Hawker's  comments                                                                
and  went on  to  say that  the  financing  of the  credit  is                                                                  
through the additional taxes that are earned.                                                                                   
                                                                                                                                
Co-Chair   Meyer  asked  if   there  should   be  a  cap   for                                                                  
investments.   He  went on  to inquire  if a  cap would  deter                                                                  
investments.   Mr. Dickinson  stated that  at a certain  point                                                                  
an investor  can get no  more than a  20% break and  therefore                                                                  
can make  investment  decisions accordingly.  He  acknowledged                                                                  
that companies  would look at the tax effect when  determining                                                                  
investment  strategy,  which is  the  intention  of the  bill.                                                                  
With  regards   to  whether   there  should   be  a   cap  for                                                                  
investments,  he said that  would be a  policy call.   He went                                                                  
on to  say that  the  table suggests  there would  have to  be                                                                
extreme investment before getting to the 20% floor.                                                                             
                                                                                                                                
12:22:24 PM                                                                                                                   
                                                                                                                                
Representative   Kerttula  asked  if  the  formula   could  be                                                                  
manipulated to  reflect the 23.5%  passed by the house.    Mr.                                                                  
Dickinson  stated  that the  mechanical  readjustment  of  the                                                                  
midpoint could be done with the formula.                                                                                        
                                                                                                                                
Representative  Kerttula mentioned  Pt. Thompson  & and  noted                                                                
taxation and  the amount coming  back to the State  of Alaska.                                                                  
Mr. Dickinson stated  that there is a huge amount  coming back                                                                  
to the  State if  Pt. Thompson  is developed  and prices  stay                                                                  
where   they  are.     Representative   Kerttula   asked   for                                                                  
clarification  that these are  future gains.   She went  on to                                                                  
question  whether  in  the  near future  the  State  would  be                                                                  
paying development  costs.  Mr. Dickinson confirmed  that this                                                                  
was correct,  but  noted that  there is  no development  right                                                                
now.                                                                                                                            
                                                                                                                                
12:24:54 PM                                                                                                                   
                                                                                                                                
Representative    Holm    reiterated    comments    made    by                                                                  
Representative  Meyer  regarding the  floor  and whether  that                                                                  
minimized the  incentive for industry  to put more  money into                                                                  
the  fields.   He commented  on the  philosophical  approaches                                                                  
and  balance of  maximizing the  dollar  thru through  maximum                                                                
extraction,  which would lessen  the decline  and the  risk of                                                                
incanting too  much and draining  the resource. Mr.  Dickinson                                                                
noted  that  the  conservation  Conservation  Ccommission  has                                                                
restrictions regarding  how much extraction can  happen at one                                                                
time  without  damaging the  reservoir.    He noted  that  the                                                                  
question of development is 10-20 years from now.                                                                                
                                                                                                                                
                                                                                                                                
12:28:26 PM                                                                                                                   
                                                                                                                                
Mr. Dickinson  explained the  a handout  on the severance  tax                                                                
under  the Produce  or Pay  Plan (POP)  and various  Petroleum                                                                  
Production Tax  (PPT) proposals at $20/bbl; $40/bbl  & $60/bbl                                                                  
{(Copy on File)}.                                                                                                           
                                                                                                                                
12:33:07 PM                                                                                                                   
                                                                                                                                
Representative  Hawker   pointed  out  that  all  models  were                                                                  
predicated  on one set  of investment  level assumptions.   He                                                                  
asked  if  those assumptions   could be  characterized.    Mr.                                                                  
Dickenson  noted that the  models were  calculated with  light                                                              
oil, heavy  oil and an exploration  component.  He  noted that                                                                  
it is  a set  of investments  that  are higher  than they  are                                                                  
today because  we are continuing  to show oil being  produced.                                                                  
Representative   Hawker  advised   that  the   charts   are  a                                                                  
mechanical  illustration   of  the  best  behavior  to  secure                                                                  
additional  investment.    He  went  on  to  say  that  it  is                                                                  
possible  that the  tax collection  could prove  to be  higher                                                                  
than the chart  illustrates, if the legislature  is successful                                                                  
in  providing   an  environment   that  secures  the   desired                                                                  
behavior.  The charts are a benchmark.                                                                                          
                                                                                                                                
Representative  Kelly noted  that the  charts show  investment                                                                  
has been frozen  as well as production.  It does  not show the                                                                  
whole situation.                                                                                                                
                                                                                                                                
Representative  Kerttula pointed  out that  it did not  show a                                                                  
prediction  of deductions  or  credits.   Mr. Dickinson  noted                                                                  
that it does  show a baseline  of investment and is  reflected                                                                  
in the fiscal note.                                                                                                             
                                                                                                                                
Representative  Kerttula   wanted  to  better  understand  the                                                                  
figures.   Mr.  Dickinson  stated that  the  same credits  and                                                                  
deductions  were being  shown.  Representative  Hawker  stated                                                                  
that only  in the future  would the State  be able to  analyze                                                                
the consequences  of current actions.  He went  on to say that                                                                  
the need  to reflect on  the results of  creating the  law was                                                                  
the reason  for establishing  the 2011  revaluation report  as                                                                  
part of the bill.                                                                                                               
                                                                                                                                
12:39:06 PM                                                                                                                   
                                                                                                                                
Mr.  Dickinson   continued  the   overview  of  the   handout:                                                                  
Cumulative  severance   Severance  Ttax,  2007-2030   POP  and                                                                
various PPT  proposals.   The final pages  look at the  entire                                                                  
State share.  This assumes royalties,  taxes and the  thorough                                                                  
tax piece  and total  government  share and  what is left  for                                                                  
the companies.                                                                                                                  
                                                                                                                                
AT EASE:        12:42:20 PM                                                                                                   
RECONVENE:      1:03:36 PM                                                                                                    
                                                                                                                                
Co-Chair  Meyer stated  that  HB 3006  would not  be heard  at                                                                  
this meeting.                                                                                                                   
                                                                                                                                
TOM WILLIAMS,  TAX ATTORNEY, BRITISH  PETROLEUM (BP),  did not                                                                  
support Amendment  2A.  He stated  that BP supports  the 20/20                                                                  
agreement.   He  noted  his gratitude  for  previous  concerns                                                                  
being addressed  in the  amendment.   He went  on to say  that                                                                  
the variable  rate mechanism  allows the  company to  buy down                                                                  
the rate  to the 20/20 and BP  appreciates the efforts  there.                                                                
The  problem,  he noted,  was  with  the progressivity.    Mr.                                                                  
Williams  pointed out  that  the industry  is  based on  three                                                                  
elements:; conventional  oil, heavy oil and gas.   He asserted                                                                
that  none  of  those  are  strong  enough  by  themselves  to                                                                  
sustain  business on  the North  Slope  for 40-50  years.   He                                                                  
described  the three  elements as  a structure  of with  three                                                                
legs.    He opined  that  progressivity  makes  the  structure                                                                  
weaker, including  the gas.  He  noted that under  this system                                                                  
the industry  could see  their rate  go up  to 45%, which  and                                                                
that would weaken the oil industry.                                                                                           
                                                                                                                                
1:10:13 PM                                                                                                                    
                                                                                                                                
Representative  Kelly  pointed  out that,  since  negotiations                                                                
began,  oil   has  doubled  in   price.    He  asserted   that                                                                
governments all  around the world are attempting  to determine                                                                  
how to address  the commodity.   He argued in favor  of adding                                                                  
the  progressivity  element.   He stressed  the  need for  net                                                                  
profit versus gross profit.                                                                                                     
                                                                                                                                
1:14:55 PM                                                                                                                    
                                                                                                                                
BRIAN WENZEL,  VICE PRESIDENT,  FINANCE AND PLANNING,  CONOCO-                                                                  
ALASKA, noted his earlier testimony regarding 3 concerns:                                                                       
                                                                                                                                
   · Inconsistencies with good fiscal policy;.                                                                                
   · Concerns about unnecessary complexity and the risk of                                                                      
      false economies and unintended consequences;. and                                                                       
   · The fundamental shortsightedness on taxation implied in                                                                    
     the CS.                                                                                                                    
                                                                                                                                
He  noted that  amendment  #2A  addresses policy  concerns  as                                                                  
well as  making a step forward  with progressivity  by raising                                                                  
the  trigger price.    Mr. Wenzel  agreed with  Mr.  Williams:                                                                
that progressivity  at any level does effects  investment.  He                                                            
went  on to  say that  because of  this  Concoco Phillips  has                                                                
serious  concerns  of with  overall  taxation  applied by  the                                                                
amendment.    He further  commented on  2noted concerns  with:                                                              
a reintroduction  of the base allowance  in the amount  of $12                                                                  
million  dollars.    He stated  that  it  is  inconsistent  to                                                                  
incentivize  new investors at a  different rate.  He  felt the                                                                  
State should strive  for alignment of all bases  and treat all                                                                  
investors equally.   Mr. Wenzel  voiced another concern  about                                                                  
the speed at which  the legislation is moving.   He urged that                                                                  
time  be   allowed   for  testimony   to  consider   different                                                                  
scenarios.                                                                                                                      
                                                                                                                                
1:19:23 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault  noted  that  the  amendment  has  been  in                                                                  
process for  a considerable amount  of time.  The idea  was to                                                                  
look  at  industry  and  the severance   tax increase.      He                                                                  
furthered  the  point  by  stating   that  in  order  to  move                                                                  
forward,  something  had to  be crafted.    The House  Finance                                                                  
Committee (HFC)  has looked at many scenarios  and agreed that                                                                  
unintended consequences  should be addressed.   He hoped for a                                                                  
perfect bill  but questioned if  that was possible.   He hoped                                                                  
for something  that  could bridge  the gap  between the  State                                                                  
and the industry.   He further maintained that  today there is                                                                
a huge  demand on  the resource  and it is  important to  move                                                                  
forward on the issue.                                                                                                           
                                                                                                                                
1:24:35 PM                                                                                                                    
                                                                                                                                
PATRICK  FOLEY,   MANAGER  OF   LAND  AND  EXTERNAL   AFFAIRS,                                                                  
PIONEER, applauded  the House Finance Committee  for listening                                                                  
to the concerns  of the new investors in the State  of Alaska.                                                                  
He commented that  Amendment #2A is an improvement  especially                                                                  
with the credit  of the $12 million credit.  The  new investor                                                              
does  not have  facility  access  or  existing  infrastructure                                                                  
that  larger companies  have in  place. The  current PPT  bill                                                                
has a tax  rate of 25%; in general,  the total package  of the                                                                  
bill continues to provide a modest incentive.                                                                                   
                                                                                                                                
Mr. Foley  urged consideration of  the mechanism by  which the                                                                  
production  tax rate  is bought  down from  25% to  20%.   The                                                                  
development project  for Pioneer is ugeric[L2];Oooguruk it and                                                              
can be  categorized  development per  barrel in  excess of  $7                                                                  
dollars capex.   [L3]The investment incentive is maxed  out by                                                                  
the $6  dollar investment  and is designed  to reward  a level                                                                  
investor.    He  went  on to  say  that  Pioneer  will  invest                                                                  
millions  of dollars, but  emphasized that  the production  at                                                              
the  start will  be modest.   The  first  year of  production,                                                                
Pioneer  expects to  make approximately  $3  million, but  the                                                              
investment could be $90 million dollars.                                                                                    
                                                                                                                                
Mr.  Foley continued  with  suggestions  on how  to deal  with                                                                  
these unintended  consequences.  He recommended  consideration                                                                  
of a rolling  average to amortize  or allow a company  who has                                                                  
the unused capex  to carry it forward.  Or, he  suggested, use                                                                  
it in future periods  to buy down the tax rate.   He commented                                                                  
on the gold  platting deterrent  in the bill and advised  that                                                                  
it had  the effect  of a  substantially higher  tax rate  than                                                                  
the 25%.   In the period  of performing  in the way  the state                                                                
is motivating  a company to  perform, investing large  amounts                                                                
of money,  theHe felt  that newer companies  were not  able to                                                              
maximize the incentive  due to the amount of time  it takes to                                                                
show  production.  are  not  being   rewarded  but  are  being                                                                
punished.                                                                                                                     
                                                                                                                                
1:31:38 PM                                                                                                                    
                                                                                                                                
Representative   Kerttula  referenced  a  previous   committee                                                                  
substitute,  which   alloweding  carry  forward  credit  until                                                              
after  production  and  question   if  this  was  Mr.  Foley's                                                              
recommendation.    Mr.  Foley  replied that  was  correct  and                                                              
emphasized;  however   that  he  hoped  the capital  could  be                                                                
carried forward.                                                                                                                
                                                                                                                                
1:33:11 PM                                                                                                                    
                                                                                                                                
Representative  Hawker argued that  the proposed bill  strikes                                                                  
a  rate   balance  thru   through  the   mechanism  with   the                                                                
deductions and  the credits.  He  stated that the  $12 million                                                                  
dollars   credit  was   a  significant   advantage  to   small                                                                
companies  like Pioneer;  .   Iit provides  an opportunity  to                                                                
help the  small companies compete  with the larger  companies.                                                                
He reiterated the benefits for industry.                                                                                        
                                                                                                                                
1:37:14 PM                                                                                                                    
                                                                                                                                
Representative  Hawker  WITHDREW  his OBJECTION  to  Amendment                                                                  
#2A.  There being NO further OBJECTION, it was adopted.                                                                         
                                                                                                                                
AT EASE:        1:37:45 PM                                                                                                    
RECONVENE:      3:21:59 PM                                                                                                    
                                                                                                                                
Mr. Dickinson  referred  reviewedto a  series of  spreadsheets                                                            
entitled: "Five  Step Calculation of Tax Rate  Under Amendment                                                              
2A ".(copy on file.)    He explained that the  first page sets                                                            
up the range of  the the net production tax value  per barrel.                                                              
He shared  various examples to  get per barrel wellhead  value                                                                
with extremes from $100 to $11.[L4]                                                                                           
                                                                                                                                
3:24:43 PM                                                                                                                    
                                                                                                                                
Mr. Dickinson  explained referred  to charts illustrating  how                                                                
to move tax rate down. (Copy on file)                                                                                         
                                                                                                                                
Step  One, which  examined  the ability  to  decrease the  tax                                                                
rate through investment.  At zero investment there  would be a                                                                
25% tax rate  per barrel. A  six dollar per barrel  investment                                                                
would result  in a  20 percent  tax rate.   He concluded  that                                                                
investors  are  able  to move  their  tax  rate  down  through                                                                
investment:  "Invest   Down"  of  Tax  Rate  (independent   of                                                                
price)"                                                                                                                       
                                                                                                                                
.                                                                                                                             
                                                                                                                                
Step  Two   addressed   the  gold  plating   problem   by  the                                                                
calculation  adding  a calculation  of  the of  "R" factor  or                                                              
rate.   The tax rate would  be at 25  percent cap if  there is                                                              
no investment.  The  number that  flows from  the R factor  is                                                                
only important  if it is above  20 or below 25 percent,  since                                                                
there  are caps  on  either  end. The  point  is  that if  the                                                                
percentage goes  below 20% it is  still 20%, if it  goes above                                                                
25% it is still capped at 25%.  Step 2 is the calculation.                                                                    
                                                                                                                                
Step Three,  the color  graph, demonstrates  that  investments                                                                
of between  $6 and $7 dollars would  buy the tax rate  down to                                                                
20 percent;  investments of  $1.50 or less  would result  in a                                                                
25 percent  tax rate. illustrates  what happens when  both the                                                                
investment  and  price  are  combined.   At  the  lower  lower                                                              
investment range  the R factor is not in play  and the rate is                                                              
the same as in  step one.  At the higher prices  the rate does                                                              
not  reach  to the  20%.     Mr.  Dickinson  pointed  out  the                                                                
difficulty of buying  down the tax rate at higher  oil prices;                                                                
aMr. Dickinson  gave an example  of prices at $100  per barrel                                                              
oil ;  the lowest  and an investment  rate  of $7 dollars  the                                                                
tax rate would  still be at the  percentage gets is  23%.  The                                                                
interaction  between  the two  shows that  at  low prices  and                                                                
high investments  the 20 percent tax rate would  occur, but it                                                                
would  be  more  difficult  to  reach  20  percent  at  higher                                                                
prices.  the 20%  cannot  be maintained.  He  noted that  this                                                              
limits  the  effectiveness   of  the  buyback.    He  candidly                                                                  
commented that it puts a brake on the tax break.                                                                                
                                                                                                                                
3:29:34 PM                                                                                                                    
                                                                                                                                
Step  Four: Prop  Version  (prior  to credits)  with  variable                                                                  
rate.   Mr. Dickinson noted  an error  in the chart  and noted                                                                
that  the numbers  were off  by a half  a column  [1.5%].   of                                                                
1.5%.   He  observed that  progressivity  is calculated  after                                                            
the  base  rate. He  noted  progressivity  is  increases  with                                                              
price. the  chart illustrates  that when  prices are  high the                                                                
more progressivity there is.                                                                                                  
                                                                                                                                
                                                                                                                                
Step Five: Net  Tax Rate Plus Progressivity.   This chart adds                                                                  
the base  and progressivity  to illustrate  the effective  tax                                                                  
rate applied to the production tax value under section 170.                                                                   
                                                                                                                                
3:31:31 PM                                                                                                                    
Clearer                                                                                                                       
Co-Chair Meyer  questioned the  numbers at $70 and  investment                                                                
at 3.50 the graph shows 28%.  He thought it closer to 26%.                                                                    
                                                                                                                                
In  response   to  a   question  by   Vice-Chair  Meyer,   Mr.                                                                
Dickienson  reiterated  that the  graph  was slightly  off  by                                                            
1.5%.                                                                                                                           
                                                                                                                                
In response  to  a question  by Representative  Kerttula,  Mr.                                                                
Dickinson  clarified  that progressivity  depends  on the  net                                                                
value defined  as the selling  price, less operating  costs of                                                                
getting  the  oil  out,  transportation   costs  and  upstream                                                                
investments.    He  further  commented  that the  26%  is  the                                                                
correct number.                                                                                                               
                                                                                                                                
                                                                                                                                
3:32:56 PM                                                                                                                    
                                                                                                                                
Representative   Kerttula   MOVED   to  ADOPT   Amendment   3.                                                                  
Representative Stoltze objected.                                                                                                
                                                                                                                                
Representative  Kerttula  noted that  all  the amendments  are                                                                  
conceptual  because they  were drafted  to the original  bill.                                                                  
She explained  that Amendment  3 would  remove Point  Thompson                                                                
from out  of the bill.   She said this  is an attempt  to move                                                                
gas  out  of the  bill  and  thus  out of  the  allowance  for                                                                  
deductions and  credits.  She opined these should  be bourn by                                                                  
the company. She  stressed that companies are  responsible for                                                                
developing under  the current lease.   She noted that  at high                                                                
prices  the  state  would  be  responsible   for  75%  of  Pt.                                                                  
Thompson's development.                                                                                                         
                                                                                                                                
3:35:47 PM                                                                                                                    
                                                                                                                                
***Representative  Les  Gara  related   maintained  that  some                                                              
things should  not be  incentivized. He  noted upstream  costs                                                                  
for  Point Thompson  are  going  to range  between  $2 and  $3                                                              
billion dollars.  In October  of 2005,  the State ordered  the                                                                
owners of  the Point  Thompson field  to develop that  fieldit                                                              
for its oil and  gas properties. The amendment  addresses this                                                                
by  removing  Pt. Thompson  so  that  the oil  companies  like                                                                  
Exxon and other  owners are not rewarded with  the credits and                                                                  
deduction   for  developing   what  they   already  have   and                                                                
obligation   to  develop.   The  amendment   would  return   a                                                                
potential of a  billion dollars in tax reduction  to the Point                                                                
Thompson  holders back  to the  state of  Alaska. He  asserted                                                                
that they have not earned the tax break or credits.                                                                           
                                                                                                                                
Co-Chair  Chenault asked  where  the issue  currently  stands.                                                                  
Representative  Kerttula said the lease has been  extended for                                                                  
6 months.   Co-Chair Chenault  asked then,questioned   if they                                                                
are not  in default.   Representative  Reprentative  Kerttulla                                                          
explained   that   they  are   not   in  default   under   the                                                                
Commissioner's  ruling, but stressed  that it is not  possible                                                                
to  know  what  a  court  would  rule.  responded  by  saying,                                                                
technically they are not in default.                                                                                          
                                                                                                                                
3:38:39 PM                                                                                                                    
                                                                                                                                
Representative  Hawker  argued  against  the  amendment.    He                                                                  
mentioned a roadblock by raising the taxes.                                                                                     
                                                                                                                                
Representative  Kerttula  pointed  out  that  there is  a  75%                                                                  
write-off.                                                                                                                      
                                                                                                                                
3:40:27 PM                                                                                                                    
                                                                                                                                
Representative    Kelly    related   that    he    understands                                                                
theacknowledged  the  idea behind  the  amendment, but  .   He                                                              
added that the  intent expressed might be premature.   He went                                                                  
on to  say there  is  activity at  Pt. Thompson  and there  is                                                                  
also time to address it in the future.                                                                                          
                                                                                                                                
Representative  Kerttula responded  by saying  that she  hopes                                                                  
that  it will  be  addressed in  the  future but  is  doubtful                                                                  
about that reality.                                                                                                             
                                                                                                                                
Representative Stoltze maintained his objection.                                                                                
                                                                                                                                
                                                                                                                                
A roll call  vote was taken on  the motion to adopt  Amendment                                                                  
3.                                                                                                                              
                                                                                                                                
IN FAVOR: Kerttula, Joule                                                                                                       
OPPOSED:  Foster,  Hawker,  Holm, Kelly,  Stoltze,  Weyhrauch,                                                                  
          Meyer, Chenault                                                                                                       
                                                                                                                                
The MOTION FAILED (2-8).                                                                                                        
                                                                                                                                
Representative Moses was absent from the vote.                                                                                  
                                                                                                                                
3:42:49 PM                                                                                                                    
                                                                                                                                
Representative   Kerttula   MOVED   to  ADOPT   Amendment   4.                                                                  
Representative Stoltze objected.                                                                                                
                                                                                                                                
Representative  Kerttula explained  that the amendment  was an                                                                  
effort to craft  something closer to what the  house passed in                                                                  
the previous  session;  .  Iit  was also an  attempt to  be in                                                                
line  with the  world  rate.    The  amendment  would set  the                                                                
start rate at 23.5% and go up to 27%.                                                                                           
                                                                                                                                
Co-Chair  Chenault commented  that the  past legislative  time                                                                  
has been spent  trying to determine  the right rate.   He went                                                                  
on to say that  it is important to look at the  tax package as                                                                  
a whole,  not just a  severance tax take.   He also  felt that                                                                  
there is  a misconception in the  general public that  the tax                                                                  
rate is 20%.    He further noted that he didn't  thinkfelt the                                                                
rate should  not be  raisedbe higher  just  to get more  money                                                                
out of the  industry.  He  requested members not  supportspoke                                                                
against Amendment #4.                                                                                                         
                                                                                                                                
Representative  Kerttula agreed that the tax rate  it is not a                                                              
20%, but rate.   She went on to sayemphasized  that Alaska has                                                              
been way below  the world average. She added that  having been                                                                  
under the average  for so long, the State should  get a larger                                                                  
take now for the benefit of Alaskans.                                                                                           
                                                                                                                                
A roll call  vote was taken on  the motion to adopt  Amendment                                                                
4.                                                                                                                            
                                                                                                                                
IN FAVOR: Kerttula, Joule                                                                                                       
OPPOSED:  Foster,  Hawker,  Holm, Kelly,  Stoltze,  Weyhrauch,                                                                  
          Meyer, Chenault                                                                                                       
                                                                                                                                
The MOTION FAILED (2-8).                                                                                                        
                                                                                                                                
Representative Moses was absent from the vote.                                                                                  
                                                                                                                                
AT EASE:        3:48:30 PM                                                                                                    
RECONVENED:     3:50:26 PM                                                                                                    
                                                                                                                                
Representative   Kerttula   moved  to   adoptMOVED  to   ADOPT                                                                
Amendment 5.  Representative Stoltze objected.                                                                                  
                                                                                                                                
Representative  Kerttula explained  that the amendment  was an                                                                  
increase in  the progressivity rate;  .   Iit retains  the 25%                                                                
slope, but raises  the cap from 25% to 50%. Progressivity  and                                                              
would  start at  $35 rather  than  $40 in  the bildollars  per                                                            
barrel  of oill.   This is  an effort to  gain increase  state                                                              
revenues when prices are high.                                                                                                
                                                                                                                                
Representative  Hawker noted that  the progressivity  language                                                                
has been  in existence from the  beginning of the  discussion.                                                                  
It is  the culmination  of a  deliberate process.   He  opined                                                                  
that the numbers should be allowed to stand.                                                                                    
                                                                                                                                
***Representative   Kerttula   agreed   that   it   has   been                                                                
discussed,  but not  in  its current  form.   She  went on  to                                                                
saystressed  the importance  of  that  dealing with the  issue                                                              
of progressivity  for  the benefit  of Alaska's  future.   and                                                                
rate  is one  of the  most important  things  for the  future.                                                                
[L5]SShe went on to say observed that the State's  consultants                                                              
have underlined this point.                                                                                                     
                                                                                                                                
3:54:28 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer pointed out  that the  number varied  based on                                                                  
which consultant  you listen  too.  What  has been  consistent                                                                  
is the voice of  industry saying progressivity  is totoo high.                                                                
He  further  commented  onobserved  that  the  amendment  that                                                              
there is  a manipulatesion of the  dollar amount, but  not the                                                            
curve.                                                                                                                          
                                                                                                                                
3:55:24 PM                                                                                                                    
                                                                                                                                
Representative  Joule noted that though Dr. Van  Meurs did not                                                                  
include  progressivity,  he did  say  it that  it  was a  very                                                                
creative initiative.                                                                                                            
                                                                                                                                
Co-Chair Chenault  commented that  the previous comments  were                                                                
not necessarily  to disagree with  progressivity but  to point                                                                
out that  a balance  has been struck  between those  differing                                                                
in opinion.                                                                                                                   
                                                                                                                                
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Kerttula, Joule                                                                                                       
OPPOSED:  Foster,  Hawker,  Holm, Kelly,  Stoltze,  Weyhrauch,                                                                  
          Meyer, Chenault                                                                                                       
                                                                                                                                
The MOTION FAILED (2-8).                                                                                                        
                                                                                                                                
Representative Moses was absent from the vote.                                                                                  
                                                                                                                                
3:57:22 PM                                                                                                                    
                                                                                                                                
Representative   Kerttula   MOVED   to  ADOPT   Amendment   6.                                                                  
Representative Stoltze objected.                                                                                                
                                                                                                                                
Representative  Kerttula   explained  that  the  amendment  is                                                                
wouldto  remove  the allowance  of  a  worldwide cost  may  be                                                            
deductionsed  from the new  tax.  She  further clarified  that                                                                
it the amendment  allows for  expenses made within  the State,                                                              
but disallows tax credits for expenses outside the State.                                                                       
                                                                                                                                
Co-Chair  Chenault  asked  if  all dollars  spentexpenditures                                                                 
have to  be spent  in the state  of AlaskaState.   He  gave an                                                                
example    of    costs    associated     with    construction.                                                                  
Representative  Kerttula  explained thatit  is  the intent  of                                                                
the  amendment  is to  accommodate  those expenses  that  have                                                                
been incurred  in the  State and have  direct relationship  to                                                                
the stateState.   Co-Chair Chenault  felt that the  noted that                                                              
he thought  the intent was already  clear and maintained  that                                                              
all  costs outside  the  state could  not be  excluded.in  the                                                                
bill.                                                                                                                         
                                                                                                                                
Representative  Kerttula  explained  that  her  intent  is  to                                                                
preventsaid  she  is  trying    costs  that  do  not  directly                                                                
[pertain  to  oil   and  gas  production  in   the  State]  as                                                                
allowable  deductions.  She to  prevent costs  that would  not                                                                
apply.  She  went on to say that  the intent is there  but she                                                                
wanted  to stressed  the  desire  to take  it  a step  further                                                                
provide for absolute clarity.                                                                                                 
                                                                                                                                
4:00:07 PM                                                                                                                    
                                                                                                                                
Representative  Hawker noted that "incurred in  the state" had                                                                  
its own  set of problems  and provided  examples. As  the bill                                                                  
is crafted  there is a substantial  increase in the  powers of                                                                  
the  Department   of  Natural  Resources  and   Department  of                                                                  
Revenue in making  determinations and interpretations  of what                                                                  
is and is not allowable  costs.  He addressed  the possibility                                                                  
of a constitutional  issue in  establishing a disadvantage  to                                                                  
other  states.  He  opined  that  the  bill  is  written  with                                                                  
adequate protection of and for Alaskans.                                                                                        
                                                                                                                                
4:01:46 PM                                                                                                                    
                                                                                                                                
Representative   Kelly   said   thought  the   definition   of                                                                
allowances  had been  tightened up  with the  debate of  gross                                                                
and net, the definition  of allowances had been  tightened up.                                                                
He  noted Dr.  Van Meurs'  comment  regarding  the rules  that                                                                
they are the tightest set of rules he has seen.                                                                                 
                                                                                                                                
4:03:34 PM                                                                                                                    
                                                                                                                                
Representative  Weyhrauch stated he would vote  noindicated he                                                                
would  oppose the  amendment and  referred to  page 27-8  that                                                                
outlines  allowable  costs.     He  felt  this  addressed  the                                                                  
concern regarding allowable expenditures.                                                                                       
                                                                                                                                
4:05:21 PM                                                                                                                    
                                                                                                                                
Representative    Kerttula    agreed    with    Representative                                                                  
Weyhrauch,   but   wanted   the   additional    language   for                                                                
clarification.                                                                                                                  
                                                                                                                                
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Kerttula, Joule                                                                                                       
OPPOSED:  Foster,  Hawker,  Holm, Kelly,  Stoltze,  Weyhrauch,                                                                  
          Meyer, Chenault                                                                                                       
                                                                                                                                
The MOTION FAILED (2-8).                                                                                                        
                                                                                                                                
Representative Moses was absent from the vote.                                                                                  
                                                                                                                                
4:06:40 PM                                                                                                                    
                                                                                                                                
Representative  Kerttula  moved MOVED  to  ADOPT Amendment  7.                                                                
She stated  that  this amendment  was the  broader version  of                                                                  
amendment Amendment 3. Representative Stoltze objected.                                                                       
                                                                                                                                
Representative  Kerttula  explained  the  that  the  amendment                                                                
would take gas  completely out of the bill and  allow the bill                                                                
to be  simply an  oil tax  bill. This  would allow  gas to  be                                                                
considered  separately, so  that the  oil tax  is not used  to                                                                
pay for gas development.   reasoning behind the amendment.                                                                    
                                                                                                                                
Representative  Kerttula withdrew WITHDREW Amendment  7 due to                                                              
the vote on amendment 3.                                                                                                      
                                                                                                                                
Representative  Kerttula  moved MOVED  to  ADOPT Amendment  8.                                                                
Representative   Stoltze   objected.      She   Representative                                                                
askedKerttula  asked Representative  Gara to help explain  the                                                                
amendment  adding   that  it  had  to  do  with   clawback  on                                                                  
expenditures.                                                                                                                   
                                                                                                                                
4:08:42 PM                                                                                                                    
                                                                                                                                
***Representative   Gara   discussed   the  purpose   of   the                                                                
amendment.     He  stated  that   the  bill  currently   gives                                                                  
companies  that have invested  in the state  a tax credit  for                                                                
past investments  made over  the past 5  years. He noted  that                                                              
those investments  were offered within a system  that provided                                                                  
a  very  generous  tax  rate.  He  maintained  that  rewarding                                                                  
companies  with the a  20% tax credit  is inappropriate.   The                                                                
amendment  is   a  compromise  to  the  extent   that  when  a                                                                  
company's  investments   are  greater  than  the   prior  year                                                                  
investments,  it can be  written off at  the 20%. He  spoke of                                                                  
retroactive rewards vs. retroactive tax.                                                                                        
                                                                                                                                
4:10:48 PM                                                                                                                    
                                                                                                                                
Representative   Kelly   noted  that   this   came  from   the                                                                  
governor's  Governor's office  months ago  and was dealt  with                                                                
by the 2 for 1  compromise.  He suggested that  the bill as it                                                                  
currently  stands is a  good compromise  with the  possibility                                                                  
of passing both bodies.                                                                                                         
                                                                                                                                
Representative  Hawker concurred  with Representative  Kelly's                                                                  
remarks.  He related  that this new tax proposal  is a massive                                                                  
increase  in  taxes  for the  industry.    He  maintained  the                                                                  
current proposal  is a fair balance  when moving from  the old                                                                  
tax regime into the new one.                                                                                                    
                                                                                                                                
4:14:26 PM                                                                                                                    
                                                                                                                                
Representative  Kelly  pointed  out  that  the bill  from  the                                                                  
governor's  Governor's   office  was  a  result   of  rigorous                                                                
negotiations with the oil companies.                                                                                            
                                                                                                                                
Representative   Gara  disagreed   with  a  comment   made  by                                                                  
Representative  Hawker that  the new tax  bill would create  a                                                                  
considerable  amount of  new revenue.   He  noted that at  $40                                                                  
per barrel  all the revenue  coming into  the state,  if North                                                                  
Slope  gas   is  developed,   would  go   out  in  gas   field                                                                  
deductions.   He  furthered his  point  illustrating what  the                                                                  
actual dollar amount  would represent over the  next 10 years.                                                                  
He reiterated  that the state of  Alaska has been  being below                                                                
[L6]the world average in oil tax rates.                                                                                       
                                                                                                                                
Representative  Hawker  acknowledged  world  oil  prices,  but                                                                
emphasized  that  Alaska  is  not  an  average  place  in  the                                                                
world.commented.                                                                                                              
                                                                                                                                
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Kerttula, Joule                                                                                                       
OPPOSED:  Foster,  Hawker,  Holm, Kelly,  Stoltze,  Weyhrauch,                                                                  
          Meyer, Chenault                                                                                                       
                                                                                                                                
The MOTION FAILED (2-8).                                                                                                        
                                                                                                                                
Representative Moses was absent from the vote.                                                                                  
                                                                                                                                
AT EASE:        4:18:47 PM                                                                                                    
RECONVENE:           4:30:03 PM                                                                                               
                                                                                                                                
                                                                                                                                
Representative Kerttula WITHDREW Amendment #9.                                                                                  
                                                                                                                                
Representative Kerttula WITHDREW Amendment #10.                                                                                 
                                                                                                                                
Representative   Kerttula  MOVED   to  ADOPT  Amendment   #11.                                                                  
Representative Stoltze OBJECTED.                                                                                                
                                                                                                                                
Representative   Kerttula  explained  that   the  amendment[L7]                                                               
disallows  any  costs  incurred  for  oil  discharge  cleanup,                                                                
other  than   routine   maintenance  to   be  used  toward   a                                                              
deduction..   She maintained  that she  didn't think  that any                                                              
un-permitted  oil  discharge  clean  up costs  should  not  be                                                                
allowed as a deduction.                                                                                                         
                                                                                                                                
4:32:39 PM                                                                                                                    
                                                                                                                                
Representative   Kelly   stated   that   the   amendment   had                                                                  
previously  been  before  the  Committee and  felt  it  needed                                                                
further clarification  and still he does not quite  understand                                                                
it.    He  noted  his  concerned   with  the  wording  of  the                                                                
amendment.                                                                                                                    
                                                                                                                                
                                                                                                                                
Representative  Hawker  concurred with  Representative  Kelly.                                                                  
He   stated  that   he  was   confused   with  Department   of                                                                  
Environmental  Conservation   regulations  and  Department  of                                                                  
Revenue tax law.  He spoke against the amendment.                                                                               
                                                                                                                                
4:34:40 PM                                                                                                                    
                                                                                                                                
Representative  Weyhrauch noted  that there  was an  amendment                                                                  
on the  House Floor dealing  with spills.   He noted  he would                                                                  
be a no vote, but reserve the right to change his opinion.                                                                    
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Kerttula, Joule                                                                                                       
OPPOSED:  Foster,  Hawker,  Holm, Kelly,  Stoltze,  Weyhrauch,                                                                  
          Meyer, Chenault                                                                                                       
                                                                                                                                
The MOTION FAILED (2-8).                                                                                                        
                                                                                                                                
Representative Moses was absent from the vote.                                                                                  
                                                                                                                                
4:35:58 PM                                                                                                                    
                                                                                                                                
Representative  Stoltze MOVED to  REPORT CS HB 3001  (FIN) out                                                                  
of  Committee  with individual  recommendation  and  with  the                                                                  
attached fiscal note.                                                                                                           
                                                                                                                                
Co-Chair  Chenault interjected  that there  was a pending  new                                                                  
fiscal note forthcoming to the House floor.                                                                                     
                                                                                                                                
Representative Kerttula OBJECTED.                                                                                               
                                                                                                                                
4:37:24 PM                                                                                                                    
                                                                                                                                
Representative   Kerttula  spoke   to  the  objection.     She                                                                
maintained that  tThe current bill  does not address  the real                                                                
concerns of the State of Alaska.                                                                                                
                                                                                                                                
Representative  Joule  added his  concerns  with the  proposed                                                                  
legislation.    He encouraged further review byvoice  from the                                                                
lLegislative  consultants.;  hHe  asked that the  bill receive                                                              
final hearing in the House Rules Committee.                                                                                     
                                                                                                                                
4:40:26 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault responded  that  they  hadaobserved that  a                                                                
requested was  made of EconOne  to provide information  to the                                                            
committee   before  the  floor   vote.    Trespond.     [L8]The                                                               
Department has  run the needed numbers.      It is  the intent                                                                
to have the drafts before the body before the final vote.                                                                     
                                                                                                                                
4:42:11 PM                                                                                                                    
                                                                                                                                
Representative  Hawker added  noted that  there has been  more                                                                
than 6  months to review  and compare  results of EconOne  and                                                              
the  department's  findings.     Due  to  the  fact  that  the                                                              
information closely  correlates he felt comfortable  using the                                                                
department's  numbers.      comments[L9].   He  concluded  his                                                              
comments  by saying he  feltthat the bill  should be  moved to                                                                
the floor.                                                                                                                      
                                                                                                                                
4:43:19 PM                                                                                                                    
                                                                                                                                
Co-Chair  Chenault  pointed   out  that  Governor  Hickel  sat                                                                
before the Committee.                                                                                                         
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Foster,   Hawker,  Holm,   Kelly,  Stoltze,   Joule,                                                                  
          Weyhrauch, Meyer, Chenault                                                                                            
OPPOSED: Kerttula                                                                                                               
                                                                                                                                
The MOTION PASSED (9-1).                                                                                                        
                                                                                                                                
Representative Moses was absent from the vote.                                                                                  
                                                                                                                                
4:44:28 PM                                                                                                                    
                                                                                                                                
Co-Chair Chenault  acknowledged that  much work had  been done                                                                
on the bill  in the House Finance  committee as well  as other                                                                
committees.   He thanked  members of  the committee for  their                                                                
work.made final comments[L10].                                                                                              
                                                                                                                                
CS HB 3001 (FIN) was reported out of Committee with a "do                                                                       
pass" recommendation and with a new fiscal impact note from                                                                     
Department of Revenue.                                                                                                          
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 4:45 P.M.                                                                                          

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