CS FOR HOUSE BILL NO. 63(2d RLS) "An Act amending the definition of `motor fuel' under the state's motor fuel tax to add, as a part of the tax exemption set out in that definition, exemption from the tax for fuel sold for use in jet propulsion aircraft operating in flights that continue from foreign countries, subject to termination of the exemption for that fuel if a refiner operating a refinery at which the fuel was produced fails to comply with terms of a voluntary agreement entered into by the refiner to use Alaska residents, contractors, and suppliers to provide goods and services when the refinery's capacity is expanded, t o add exemption from the tax for certain number 6 `residual fuel oil,' also known as bunker fuel, and to delete the exemption from the tax for fuel that is at least 10 percent alcohol by volume; and repealing ch. 42, SLA 1994, the Act providing for the imposition of a different tax levy on residual fuel oil used in and on certain watercraft until June 30, 1998; and providing for an effective date." Nancy Kelly, staff to Representative Gene Therriault, was invited to join the committee. She read the sponsor statement into the record and explained the federal definition of "federal flights". Jeff Cook, MAPCO, was invited to join the committee. He said this was a pro-Alaska bill and urged its passage. Bob Bartholomew, Assistant Director, Division of Income and Excise Audit, Department of Revenue, was invited to join the committee. He said it was appropriate to change the tax schedule. "Bunker Fuel" is very low grade and there is not a lot of consumption in Alaska. The department is comfortable with no tax on "bunker fuel". In 1994 EPA required Anchorage and Fairbanks to burn clean fuel. Motor fuel tax should be applicable to everyone and therefore there should be a motor fuel tax base. After a brief at ease, Senator Parnell explained amendment Mr. Bartholomew responded regarding amendment #2. It referred to section 2(a)(1). Senator Parnell said the title was too tight to delete section 2(a)(1). Mr. Bartholomew said he had no concerns regarding amendment #2. Co-chair Sharp explained his understanding of (f), page 4. Senator Donley voiced his concern that only Anchorage residents would be hit with the motor fuel tax. The Department of Revenue had not taken the time to discern the impact in Anchorage. Co-chair Sharp referred to the fiscal note. He said it was not up to the department to control retail dealers. He asked Mr. Bartholomew to provide the requested information. Kim Ross, Executive Director, Alaska Air Carriers was invited to join the committee. She said the association opposed HB 63 and she read their opposition statement into the record. The bill would have an adverse effect on domestic industry. This industry provided mail, freight, transportation, passenger, medivac to rural as well as urban Alaska. She provided direct quotes from MAPCO press release and the Anchorage Daily News. It was not accurate to compare jet and motor fuel. Many questions concerning the bill have gone unanswered. In response to Co-chair Sharp, Ms. Ross said she had been with the association for ten years. Co-chair Sharp advised he would hold HB 63 in committee until tomorrow at 8:00 a.m. ADJOURNMENT Co-chair Sharp adjourned the committee at 11:10 a.m. until 8:00 a.m. tomorrow.