SENATE BILL NO. 309 "An Act amending and extending the exploration and development incentive tax credit under the Alaska Net Income Tax Act for operators and working interest owners directly engaged in the exploration for and development of gas from a lease or property in the state; providing for an effective date by amending the effective date for sec. 2, ch. 61, SLA 2003; and providing for an effective date." Co-Chair Stedman said it was the second hearing on the bill. 9:18:12 AM Co-Chair Hoffman MOVED to ADOPT the CS for SB 309, Version S, as the working document. Co-Chair Stedman OBJECTED. DARWIN PETERSON, STAFF, CO-CHAIR STEDMAN, explained the changes in the new CS. In this version of the bill, Sections 8 and 9 were removed from the previous version. Those were the sections that allowed the credits to be applied in one year. That results in a return to the status quo, which is that 50 percent of the credits can be applied for in the first year and the remainder in the second year. The next change is found on page 3, Section 3, lines 12 and 13. The previous version allowed the taxpayer to take a credit up to 100 percent of the taxpayer's liability, as opposed to the status quo of 50 percent. This CS splits the difference and the taxpayer can take up to 75 percent of their liability Mr. Peterson related that the third change is on page 5, Section 8, and is an amendment by Senator Huggins that the committee adopted previously. The amendment dealt with not incurring penalties on underpayments or overpayments due to the retroactivity in the legislation. Page 6, Section 9 is a renumbering of the section. Mr. Peterson explained that page 7, Section 10, is the section that deals with jackup rigs. Mr. Peterson read the new language from the bill. The first three unaffiliated persons that drill an offshore explanation well for the purpose of discovering oil or gas in Cook Inlet that penetrates at least 3,000 feet below the base of the tertiary age strata and evaluates a prospect in the pre-tertiary zone using a jackup drill rig, are eligible for the credit under this subsection. 9:20:38 AM Mr. Peterson turned to Section 10, page 7, line 25, to describe a date change to March 31, 2010 so that the credits would apply to the entire construction season. Page 8, Section 13, is a continuing conforming amendment. Sections 14 and 15 are also a part of the conforming amendment. Section 16 is a new sunset date for the credits, since that date is now 2016. Sections 17 and 18 also reflect the conforming amendment. Senator Ellis asked if it was standard practice to require a "sharing of the data" when the state provides money. He wondered if the CS addressed that issue. Mr. Peterson said he did not receive any orders to make changes to that policy. 9:22:23 AM SENATOR LESIL MCGUIRE, SPONSOR, addressed Senator Ellis' question. She reported that the CS was left alone in order for the credits to function. She emphasized that this was an exclusive credit and disallowed companies from taking other credits. Senator Ellis asked for the rationale for the state not requiring data sharing in this bill. Senator McGuire reported that she met with the companies to discuss what would make the credit work. The companies felt that if the data was made public, they would not be competitive. Senator Ellis offered to pursue his concerns later. 9:25:03 AM Senator Thomas noted in a previous CS there was language that allowed companies to take credits in the same year, rather than for two years. Co-Chair Stedman explained that current statutes require capital credits to be taken over two years, 50 percent each year. It was to the state's advantage to do so. Senator Thomas commented that it works well for large explorers. He suggested a situation where a smaller company would run into problems applying credits in the second year. He voiced concern about that. 9:27:05 AM Co-Chair Stedman WITHDREW his OBJECTION to adopting the CS. There being NO OBJECTION, it was so ordered. Senator McGuire related a conversation with a Cook Inlet company who stated that the scenario would be worse without the secrecy of data. Co-Chair Hoffman MOVED to report CSSB 309 (FIN) out of Committee with individual recommendations and the accompanying fiscal note. There being NO OBJECTION, it was so ordered. CSSB 309 (FIN) was REPORTED out of Committee with a "do pass" recommendation, with indeterminate FN 1 REV, and with a new zero fiscal note by the Department of Natural Resources. 9:28:48 AM