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. 10:13:37 AM Representative Hawker declared potential conflict of interest because a member of his family is employed by the oil and gas industry in Alaska; he requested to be excused from participating & voting. Representative Foster OBJECTED. Representative Hawker asked that a roll call vote be taken regarding his vote exclusion on HB 3001. Co-Chair Chenault said it was not his intent to vote on any bills at the current meeting. Co-Chair Meyer noted his own conflict of interest but since it is not the intent to move the bill, he reserved the motion until the vote. Representative Hawker withdrew his request, noting he would not participate in the hearings until a Committee vote was taken. Representative Foster commented that it is inappropriate for a member of the Finance Committee not to participate during discussions on complex issues. Representative Holm agreed, relating the oil industry history with most legislative members. 10:19:24 AM Co-Chair Chenault declared his own conflict, yet encouraged members to participate during the committee process. He encouraged Representative Hawker's participation. Representative Hawker voiced his appreciation. 10:20:59 AM ROBYNN WILSON, DIRECTOR, DIVISION OF TAX, DEPARTMENT OF REVENUE, referred to a comparison matrix meant to highlight two approaches to the Petroleum Production Tax (PPT). (Copy on File.) Ms. Wilson explained the four columns: · CSSB 2001(FIN), version F; · HCS SB 2001 (FIN), version X.A, · Conference CS SB 2001, version C.A; · Governor's bill, version A. Ms. Wilson pointed out that the handout provides a "limited" matrix highlighting the differences between those versions and discussing the ramifications. She indicated that the bill is consistent with the Conference Committee substitute and instead of using a statewide system, there would be a few slightly different areas - the North Slope, Cook Inlet special treatment and the 'other' areas. The matrix identifies the tax rate, progressivity surcharge, credits for annual loss, credit usage floor, gas (GRE) transition credit, base allowance credit, new area development credit, sunset of new area development credit, oil spill, and transition payment for each. Ms. Wilson discussed the separate Economic Limit Factor (ELF) rate for Cook Inlet oil & gas. The Governor's bill contains no progressivity surcharge; the Administration believes that progressivity is not needed. 10:25:24 AM Ms. Wilson referenced the annual credit loss at various rates. She highlighted the credit usage floor & the differences resulting, which the Conference Committee placed at 22.8%. That version also provides for a 3% floor; the cap credits could not be used to reduce the tax below 3% of the gross & North Slope region. The floor was eliminated in the Governor's version. She pointed out that gas (GRE) had not been a feature in recent versions of the bill. Ms. Wilson explained the transitional investment credit (TIE). The Governor's bill maintains the language indicated in the Conference Committee version and provides for reviews of the 2 for 1. 10:28:28 AM Ms. Wilson related that the base allowance credit of $12 million dollars, based on production, varies depending on which bill version is considered. She pointed out that only Version F (CSSB 2001 (FIN)) is not based on production. 10:29:52 AM Ms. Wilson discussed development credits for some parts of the State, not Cook Inlet. That credit amounts to $6 million dollars, available at $500 thousand dollars per month, for areas not in the North Slope or Cook Inlet; the language is consistent with the Conference Committee substitute. The credit has a rolling ten-year sunset for new area development. Ms. Wilson addressed the oil spill component and the transition payment, which is the same as the Conference Committee version. She noted that the graph clarifies the amendment. 10:31:49 AM Co-Chair Chenault inquired about the difference about the TIE credit in the Governor's bill and the Conference Committee version. Ms. Wilson said there is no difference and highlighted why it should be "corrected". A page number change resulted with no progressivity included in the Governor's bill. Co-Chair Chenault requested Ms. Wilson explain the fiscal impact. 10:33:54 AM Ms. Wilson explained that fiscal note #2 by the Department of Revenue includes funding for regulation & contractual regulation writing for ten positions. During various revisions, the number of audit positions has fluctuated. Co-Chair Chenault asked about the increase to the new note as compared to the others. Ms. Wilson offered to research that information. 10:35:23 AM Co-Chair Chenault pointed out that the plan before the Committee brings the bill back to the original 20/20 as proposed by the Governor and excludes the progressivity surcharge. HB 3001 was HELD in Committee for further consideration.