ALASKA STATE LEGISLATURE  LEGISLATIVE COUNCIL  FEBRUARY 25, 2020  9:00 AM      MEMBERS PRESENT  Senator Gary Stevens, Chair  Representative Louise Stutes, Vice Chair  Senator Tom Begich  Senator John Coghill  Senator Cathy Giessel  Senator Lyman Hoffman  Senator Bert Stedman  Senator Natasha von Imhof  Representative Bryce Edgmon  Representative Neal Foster  Representative DeLena Johnson  Representative Jennifer Johnston  Representative Steve Thompson      MEMBERS ABSENT  Representative Chuck Kopp      OTHER MEMBERS PRESENT  Senators Bishop, Kiehl, Olson, Wielechowski, Representative  Hopkins      AGENDA  Call to Order  Oil & Gas Initiative Hearing per AS 24.05.186  Adjourn      SPEAKER REGISTER  Cori Mills, Attorney, Department of Law  Megan Wallace, Director, Legal Services, Legislative Affairs Agency  Emily Nauman, Deputy Director, Legal Services, Legislative Affairs  Agency  Mike Barnhill, Deputy Commissioner, Department of Revenue  Colleen Glover, Tax Division Director, Department of Revenue  9:00:18 AM    I. CALL TO ORDER    CHAIR STEVENS: called the Legislative Council meeting  to order at 9:00am in the State Capitol's Senate Finance  Committee Room. We have Statute 24.05.186 that requires the  Legislature to hold a hearing on any proposed initiative,  and that's the purpose of this meeting today, to satisfy  that requirement.  Several individuals have been asked to present at this  meeting: Department of Law, Department of Revenue,  Legislative Counsel. From Department of Law, it will be  Cori Mills; from Legislative Counsel, it will be Megan  Wallace, Emily Nauman; and also Department of Revenue may  be joining us with Colleen Glover and Mike Barnhill.  CHAIR STEVENS requested a roll call vote. Present at  the call were: Senators Begich, Coghill, Giessel, Hoffman,  Stedman, Stevens, von Imhof; Representatives Edgmon,  Foster, Johnson, Johnston, Thompson, Stutes. Representative  Kopp was absent. 13 members present.  CHAIR STEVENS: We have a quorum to conduct business.  Thank you all for being here. Let's go ahead with our  hearing today. We'll begin with Cori Mills, Department of  Law. Cori, if you'd come forward. Thank you for being  with us. She'll start the discussion, and we appreciate  your presentation. If you'd give your name for the record,  please.  II. OIL & GAS INITIATIVE HEARING    MS. MILLS: Yes. Good morning, everyone. Cori Mills,  Assistant Attorney General from the Department of Law.  And just to start off, a few ground rules, I guess,  from our perspective. I have been asked to go over  process, what the initiative process entails, especially  from this point forward for this particular initiative,  19OGTX, as identified by the Division of Elections.  I won't be doing the substantive discussion of the  initiative, and that's, in part, because we're in  litigation and, in part, because the executive branch does  have some restrictions on discussing initiatives.  Legislative Legal will be giving that presentation. So if  you have any of those questions, I would refer you to them.  We do have an --  CHAIR STEVENS: Sorry, but before we start, if there  are any questions that come up along the way, please raise  your hand, and I'll try and make sure you're allowed to ask  those questions. Cori, please go ahead.  MS. MILLS: Yes. But we do put out an attorney  general opinion on every initiative that is on our website.  I also have a copy if anybody wants it.  The one thing I would note, just because I get this  question quite often, is when we do a review of an  initiative, it's pre-enactment. And similar to  legislation, the courts don't look at legislation  pre-enactment and really determine its constitutionality or  legal issues. It waits until enactment. It does the same  thing with initiatives with some exceptions. There are  some restricted subjects that initiatives can't cover.  Those are -- in the Constitution appropriations, for  example, is one of those.  And then the other thing that the court has said is if  an initiative is clearly unconstitutional under existing  authority. So we look is there a prior case that has  already had this exact subject on this and the exact means  used has already been deemed unconstitutional? That's the  other circumstance in which we will recommend not  certifying an initiative.  In the case of 19OGTX, the oil and gas initiative, we  did not find that any of those exceptions were met, so we  recommended certification. And it was certified by the  lieutenant governor, and the petition has been circulated.  Now I'm going to kind of go from where we're at in the  initiative process now. And I did provide an outline that  I hope all of you have.  So petition certification. The petition was certified  back in October, and they gathered signatures and turned  those signatures in on January 17th. So at this point, the  Division of Elections and the lieutenant governor have 60  days to review those signatures and determine whether they  meet the qualifications in the Constitution.  And the -- I provided the constitutional language, but  the language and short of it is you have to have qualified  voters equal to 10 percent in terms of the signatures, and  then you have to have residents in at least 30 of the 40  districts, House districts represented, and on top of that,  you have to have 7 percent from each of those 30 districts.  So you have an overall 10 percent -- that's the  28,000-around-500 requirement we have right now -- and then  you have to have 7 percent from each of the 30 districts.  So there are -- you have to look at both of those  requirements when you're looking at whether they've met the  qualifications. So, like I said, the total this year is  28,501 to meet that minimum 10 percent requirement. So if  the petition is certified, it has enough signatures, then  the lieutenant governor notifies the sponsors and prepares  a ballot proposition. And at that point the whole Division  of Elections machine starts working on translating that  ballot into the different languages it has and making sure  we have a ballot summary and all of that. So, like I said,  it will be March 17th. We'll know by March 17th whether  the petition is certified or whether it's not certified.  And then some people ask about the ballot measure  number as well. You know, will we know the ballot measure  number? That doesn't happen until the Legislature  adjourns, and that's partly because of the next issue,  which is that the Legislature can void a petition through  enactment of substantially the same measure, and that's  Article XI, Section 4.  And this determination is made by the lieutenant  governor. There's a statute that kind of delegates this  decision to the lieutenant governor with the concurrence of  the attorney general. It's one of the few statutes where  the attorney general is directly mentioned.  And so what the Department of Law does, if the  Legislature enacts something that may look substantially  similar, is we engage in an attorney general opinion,  similar to when the initiative first came forward, but we  look at the enacted law that the Legislature passed, and we  look at the initiative and we compare them to determine  whether we believe they're substantially similar. And we  advise the lieutenant governor on that, and that becomes a  formal attorney general opinion.  Like I said, the timing occurs after enactment, so we  don't predetermine. We don't look at different versions of  a bill. We wait until the governor has either signed the  bill or it has become law without signature.  CHAIR STEVENS: Ms. Mills, before you go on, would you  explain the issue of -- on March 17th is the date at which  it's certified. And we've been getting reports of the  numbers of signatures, and it's a little confusing because  it says we're not -- they're not there, but the truth is,  we're only looking at a point in time. Could you just  bring us up to date on how that operates?  MS. MILLS: Yes. And so the Division of Elections is  very kind of open and public with their process. And so  every day they post the updated numbers for how many  signatures they've reviewed and how many have qualified and  in how many districts, and it's a one-page report.  I believe in this case -- I can't remember the exact  number -- but over 40,000 signatures were turned in. And I  looked at the report this morning, and I believe the review  has occurred on 27,000 of those. So you're still looking  at about 13,000-plus that haven't even been reviewed yet.  So when you look at that report online, it is not the final  until we get to March 17th and you see the total numbers  and you have certification.  CHAIR STEVENS: So 13,000 have not been verified --  MS. MILLS: Yes, 13,000.  CHAIR STEVENS: And just a moment, please. Mr.  Speaker.  SPEAKER EDGMON: Yes. Good morning, Cori. So on the  question of substantially similar, the Department of Law  couldn't opine on that -- I think you've been very clear --  until after March 17th. How long would it take the  department to conduct their review? And I guess the  context is, if the Legislature were to engage in attempting  to pass a bill that was substantially similar, can you give  me some sort of context, some sense of timing here?  MS. MILLS: Yes. I'm happy to do that, through the  Chair. It's -- we don't do it until enactment, but that  doesn't mean we're not looking at it. I mean, I'll be  honest there, right? We watch the process.  Once enactment happens, we try to get that opinion out  quickly. You know, with initiatives on the front end, we  have 60 days. But in this case, we realize an election is  coming up. I believe the last one, if you look at the  timing -- and the last one I'm aware of is HB 44 that was  passed on the legislative ethics, and that initiative, that  occurred in a week. So the opinion came out a week after  enactment.  I would imagine -- I can't promise we'd act that  quickly, but we would do it in a very timely manner to make  sure everyone knows what is going on the ballot and what is  not.  CHAIR STEVENS: Thank you, Mr. Speaker.  SPEAKER EDGMON: Thank you.  CHAIR STEVENS: Senator Begich.  SENATOR BEGICH: Thank you. Cori, just following up  on that, if I might. When that review is conducted, who  would be conducting that review?  MS. MILLS: So, through the Chair, Senator Begich, as  the elections attorney, I would definitely be involved, but  I will say that attorney general opinions go through a  pretty thorough vetting with kind of a team approach, and  ultimately the attorney general does the final review of  those.  SENATOR BEGICH: Brief follow-up?  CHAIR STEVENS: Please continue, Senator Begich.  SENATOR BEGICH: Thank you, Mr. Chairman. And would  you use outside counsel as well in that review, or would  that be strictly internal?  MS. MILLS: Through the Chair, Senator Begich, it's  normally internal. You know, circumstances would depend on  whether we'd use outside counsel. I don't want to say we  absolutely never do, but most of that is done internally.  And part of that is just the swiftness with which it has to  occur and the statute requires the attorney general's  concurrence, so the attorney general has to be involved.  CHAIR STEVENS: Thank you. Mr. Speaker, comment?  SPEAKER EDGMON: Yes. Not to belabor this point, and  thank you for taking the questions. But the issue of  substantially similar, as best as I know today as a  layperson as it applies to this particular issue, seems to  be a fairly wide-open question, if I could put it that way.  I mean, the review that's going to take place, you know,  is -- I mean, I think you've got plenty of discretion, or I  guess maybe if I were to put this in the form of a  question, would any proceedings in the Legislature relative  to hearings on this issue affect your -- the possible  outcome of the department's opinion?  MS. MILLS: Through the Chair, Speaker Edgmon, what  I'd like to do is actually go over the standard really  quickly. I think that gives a good foundation, and then  I'll address your question during that discussion, if  that's okay.  SPEAKER EDGMON: Thank you.  CHAIR STEVENS: That's fine. Okay. Thank you so  much. Please continue then.  MS. MILLS: So going to the standard -- and I put on  your handout kind of the two main cases we have here:  Warren vs. Boucher and State vs. Trust the People. And if  I were to summarize the test that the court applies, you  look at scope, you look at purpose, and you look at means.  Those are the three inquiries.  And the first inquiry on scope, the court must  determine the scope of the subject matter and afford the  Legislature greater or lesser latitude, depending on  whether the subject matter is broad or narrow.  So you really have to start there, because the court  says, "If it is a really complex, broad law, we're going to  give the Legislature more leeway. If it has a very narrow  purpose, it's very restricted, you know, it's got one  provision that it's trying enact, the Legislature is going  to have less discretion."  And then you move to the purpose. The court must  consider whether the general purpose of the legislation is  the same as the general purpose of the initiative.  And one of the phrases in the -- and I think it's the  Warren court talks about is it a hollow gesture? Is the  Legislature engaging in a hollow gesture to bypass the  people's initiative power?  So moving to Speaker Edgmon's question, I think the  legislative record could be used in a case to either  support or negate that, depending on whose side you're on.  So statements made by the Legislature in the process I  think could become part of that record in that court case.  CHAIR STEVENS: Could you give us an example of a  hollow gesture?  MS. MILLS: Well, what I can really do is point you to  the case that found that the Legislature did not  appropriately enact a substantially the same measure, and  that was State vs. Trust the People.  And in that case, the initiative -- the whole purpose  of the initiative, according to the court, was to eliminate  the governor's ability to temporarily or permanently  appoint a Senate appointment, a congressional Senate  appointment. The Legislature enacted a special election  for -- to fill a senator vacancy, but they still allowed  the governor a short appointment period to make sure that  district was represented.  And the court said, "That doesn't do it." "It  just" -- "the purpose of the initiative was to eliminate  that power." And so the Legislature did not enact  substantially the same measure. It's not the same purpose.  Even though it may have been a shorter appointment period  than previously, that was not enough. It needed to be  eliminated in order to fulfill that.  But, again, I'd point to in the Warren vs. Boucher  case, they were talking about creating campaign finance  reform. I mean, we're basically talking about the origins  of APOC, not, you know, it changed over time.  But there the court didn't have a problem with, you  know, many differences in the two, creating higher limits  in the initiative, whereas the -- or higher limits in the  legislation, whereas there were lower campaign finance  limits in the initiative, very strictly regulating media  buys by candidates, and the legislative enactment ended up  not touching that at all.  So, but the court said, "This is very broad, and if  you look at the general purpose, there's nothing showing us  that we're trying to bypass the people's power. The  Legislature is just using its discretion just like it would  to amend an initiative after the fact." And the court  really drew on that to say, "We think this is substantially  similar even if some of these intricacies and exact numbers  are different."  So those are the two cases we have. And so any time  we have an enactment that comes before us, as the  Department of Law, we have to look at those two cases,  which kind of give the extremes, right? Look at this  three-part test. And the last one is the means --  CHAIR STEVENS: Before you go on to that --  MS. MILLS: Yes.  CHAIR STEVENS: -- I'm still not sure I understand.  Looking at this specific case, I'm not sure if you can even  refer to this specific case in front of us now. What would  be considered a hollow gesture?  MS. MILLS: So, Senator Stevens, I really can't  speculate on what that would be. I would just advise that  if you're looking to enact a measure that is substantially  similar, I would really pay attention to the purpose of the  initiative, and the thrust of what you're doing should be  focused on that. That's really the best I can do without  getting into specifics.  CHAIR STEVENS: Thank you, Ms. Mills. I realize that  puts you in a tough spot, and I appreciate that answer.  Any further questions or comments from the members of  Legislative Council?  If not, then please continue.  MS. MILLS: Thank you. So just the means. I just  want to cover that last part of that three-part test. The  court must consider whether the means by which that purpose  effectuated are the same in both the legislation and the  initiative.  And, again, though, if you look at the campaign  finance package that was passed, there were differences.  So getting hung up on the details can be difficult.  The court also said the means need only be fairly  comparable for substantial similarity to exist. So, again,  it's not an exact measure, and depending on the broadness  or the narrowness, that means component would change.  Yes. And so, ultimately, the conclusion I have --  which is never very helpful and is also the lawyer's  answer -- is it depends on the facts. I mean, we really  have to do a close examination of the initiative, go by  provision by provision and do the same with any legislation  that's passed. And there's just -- you know, are you  getting closer to the Warren initiative, or are you getting  closer to the Trust the People initiative? It's -- it just  really depends on the specific initiative and how it's  framed. Are there any other questions on substantial  similarity or how that works?  CHAIR STEVENS: Yes. Representative -- please go  ahead, Mr. Speaker.  SPEAKER EDGMON: So I'm trying to learn a little bit  about legislative record, because I think I can sit here  and say -- and, you know, I ask you to please correct me to  the best of your ability you can on the spot here.  But in terms of campaign finance, the record in the  Legislature versus this issue, I'm just sitting here  thinking that there seems to be a lot of latitude between  what legislative record could exist today and may exist  two, three weeks down the road and the department's  interpretation of the purpose in terms of this three-part  test that would ultimately be administered. Any thoughts  on that?  MS. MILLS: Speaker Edgmon, through the Chair, it's  just really hard to sit here without -- one, without, you  know, opining on a predetermination; and, two, without a  specific scenario in front of me. So I'm not sure I can  clarify any more than I already have, all that to say that  any public statements made on the record.  So when we determine substantial similarity or not,  that also triggers a right to litigate. And we see that,  you know, litigation in initiative context occurs a lot,  and this is another area. The -- any aggrieved person -- I  think is how the statute -- can sue within 30 days of a  determination. So if it's determined it's not  substantially similar, you know, that triggers one side.  If it's determined it is substantially similar, that could  trigger another side.  And so any public statements made during the  legislative process can be brought into that court  proceeding by any of the sides to support their view of the  law, and I think that's valid information.  But ultimately, you know, what the court has truly  looked at in these cases is the specifics of the law. What  do the provisions say? But using this language, you know,  "it's not a hollow gesture" I think opens it up to people  using the legislative record in order to support their  side.  CHAIR STEVENS: Thank you, Speaker Edgmon. A very  important question. I'm not sure we got a clear answer,  but I understand that you cannot maybe give us one, but --  about the legislative record.  Any further questions or comments for Ms. Mills at  this point? And did you have further presentation to make  to us, Ms. Mills?  MS. MILLS: So the only thing I wanted to go over, if  the Chair wants me to, is just the last steps, which is  placing the measure on the ballot, you know, what election  it would go on and then the enactment and effective date,  because those are questions we get.  CHAIR STEVENS: Very important. And if you could  cover that, we'd appreciate it.  MS. MILLS: Okay. I'm happy to. So placing the  measure on the ballot, the determination of what election  an initiative goes on once it's been certified by the  lieutenant governor is dependent on when the Legislature  adjourns. So it's not dependent on when certification  happens but when Legislature adjourns.  And it has to appear, the initiative, on the first  statewide election held more than 120 days after  adjournment of the legislative session following the filing  of the petition.  And the statute kind of clarifies what "first  statewide election" means and says, "First statewide  general, special, special runoff, or primary election." So  basically it's the gamut as long as it's a statewide  election involving the entire population and not like a  Senate district, you know, vacancy or something like that,  it will qualify.  SENATOR BEGICH: Mr. Chairman.  CHAIR STEVENS: I'm sorry. Yes, Senator Begich.  SENATOR BEGICH: Thank you, Mr. Chairman. So does  that mean that the way it's worded, special -- what were  the -- what was the one after special?  MS. MILLS: Special runoff, which is a --  SENATOR BEGICH: Okay. Special runoff, right. But in  special election, does that mean -- does that create  ambiguity that a date could be set for a special election  simply dealing with the initiative?  MS. MILLS: Through the Chair, Senator Begich, the way  the statutes work, there is no statute allowing an  initiative to have its own election. It's only if a  special election, special runoff is called for another  reason. You know, and usually you're dealing with vacancy  issues with legislative appointments. But as I think we're  all aware of this year, we also are in a fight over the  recall. So --  CHAIR STEVENS: Yes, Senator Begich.  SENATOR BEGICH: Just follow-up. But we have had  special elections for like the veterans general obligation  bond, you know, two decades ago, and that was the special  election setup. It was on an off election year established  for an issue that the Legislature came up with. So why  wouldn't you be able to set -- I mean, I'm not suggesting  that one would, but why would you -- why wouldn't you be  able to?  MS. MILLS: So, Senator Begich, through the Chair, so  to clarify, my last answer was based on existing law. If  the Legislature were to pass another law or statute -- for  example, advisory votes have happened the same way. You  know, the Legislature has said in their advisory vote bill  it will be held on this date, you know, in a special  election. So if the Legislature were to pass another way  to have a special election, if you want one for just  initiatives, that would be a way to set a special election.  But in current law there is no special election just for  initiatives.  CHAIR STEVENS: So I think that's clear. And we do  always adjourn. We never know when, but we do adjourn, but  that adjournment sets the end process of the election.  MS. MILLS: Correct. And this year that would mean to  get to have initiatives show up on the primary the  Legislature would have to adjourn by April 19th. Anything  after that would most likely go on the general election  unless there's some sort of intervening election in between  the primary and the general.  And the only other requirement, you know, that's --  that I think everyone is aware of is that the lieutenant  governor is required to hold public hearings at least 30  days before the election in each judicial district, and  that was passed -- I think it was 2014 or so.  So then we come to enactment and effective date. And  as you're aware -- but sometimes we get questions from  members of the public. Enactment and the effective date  are two different things. Enactment occurs on the date --  well, the date after certification of election results. So  when we absolutely know that a majority of votes has passed  a measure, it's the date after that's considered the  enactment date for initiatives.  And then initiatives have -- are effective 90 days  after that certification date. And there is no ability,  unlike legislation, to do a special effective date. It's  an automatic 90-day effective date.  So an example from 2014 -- because these days most of  the initiatives end up on the general election ballot. The  marijuana initiative was passed that way in 2014, and it  went into effect in late February of 2015. So that's your  most likely timeline if it ends up on the general election.  And the other question we've gotten is, well, what if  you haven't been able to enact the -- or adopt the  regulations that have to go along with it? Law -- the law  is effective regardless of whether regulations are in  place, and that's true with legislation as well if for some  reason there's -- the effective date passes and we still  don't have regulations. So basically that leaves the  Department of Revenue and the Department of Law just  working on those implementation details while it's  effective.  And then I just have a really quick -- Department of  Revenue is going to kind of go over timelines, but a quick  primer on the regulations process, because that would be  the implementation part of this.  So, you know, your first step is you have to draft  regulations, and then you have to put it out for public  notice and public comment and decide whether you want a  public hearing. And you need to have at least 30 days  between when the public notice goes out and when new  regulations are adopted, and that's a short time frame. So  I just want to be clear that this is the legal  requirements, it's not the practical or best practices.  So then the agency adopts the regulations, and they  send them to the Department of Law. The Department of Law  has a statutory role in reviewing regulations to make sure  they're consistent with the law and that they're  constitutional. And our chief regulations attorney has the  power to disapprove regulations that are not consistent  with the law.  And so the Department of Law does their final review.  They send over the approval or disapproval of specific  provisions to the lieutenant governor, and then it's the  lieutenant governor's duty to file those regulations.  And once filed, the regulations are effective 30 days  after filing unless there's some further out date that was  included in the regulations, but 30 days is the minimum  amount of time you have between. So I just wanted to lay  that out because some people think that regulations happen  in a month. It's not a month process. It can take a  while.  So that's all I have to cover for process unless there  are any additional questions.  CHAIR STEVENS: Thank you, Ms. Mills. Senator Begich.  SENATOR BEGICH: Thank you, Mr. Chairman. Ms. Mills,  the process doesn't have -- it has a minimum amount of  time, but what is the maximum amount of time? Because I  can see the process being drawn out or -- at what point  is -- does the timeline for regulations become so long that  it becomes what has been called, when at least I was a  bureaucrat, the slow roll?  MS. MILLS: So, Senator Begich, through the Chair, in  the regulations drafting manual that the Department of Law  has to put out, if a regulation -- if public notice  occurred and it's been a year and the regulations still  haven't been adopted, we consider that stale and recommend  that the process needs to start over. You need to get  public involvement again. So that's the recommendation.  There's no -- I don't know of a legal timeline, but that's  the recommendation by the drafting -- regulations drafting  manual.  CHAIR STEVENS: Stale in a year. Senator Begich.  SENATOR BEGICH: And, I'm sorry, but that doesn't  really answer the questions. That just says stale in a  year and then another year and then another year and then  another year. I mean, that process could go on  indefinitely. Is that what you're suggesting?  MS. MILLS: So through the Chair, Senator Begich,  I would have to go back and look if we have any case law on  saying you had to have regulations, and somebody brings a  challenge saying you haven't enacted regulations and it was  required, if there's a "shall adopt."  But I want to go back to my original comment, which is  the law is effective. So the law is in effect. It has to  be implemented. Regulations is a question of, you know,  those implementation details and what statutory authority  is out there for the regulations. But I don't have a  specific answer to, you know, how long is too long or is  there a legal limitation on when the court would say, "You  have to have adopted these."  CHAIR STEVENS: Thank you for the questions or  comments or thoughts. Yes, Madam President.  PRESIDENT GIESSEL: Thank you, Mr. Chairman. Cori, so  the initiative as it's written out doesn't specify what  parts of law are being addressed. Who determines where the  initiative language goes in terms of law?  MS. MILLS: So, Senator Giessel, through the Chair,  I'm actually going to defer that question to your next  presenters. Department of Law is not involved in that  process. And my understanding is that it's the reviser,  but I will defer to Megan Wallace and Emily Nauman on that.  PRESIDENT GIESSEL: Thank you.  CHAIR STEVENS: Thank you, Madam President. Further  comments, questions, thoughts? Thank you, Ms. Mills. A  very thorough explanation. You've gone over the  certification of the petition, if a petition is voided, the  substantial, the same and similar, the putting the measure  on the ballot and enactment and the effective date. Very  thorough. Thank you very much.  SENATOR BEGICH: Thank you, Cori.  CHAIR STEVENS: So we'll move on then to Megan  Wallace, Leg. Legal attorney, and I believe she has Emily  Nauman with her from Legislative Legal. If you'd come up  and join us and state your names for the record, please.  MS. WALLACE: Good morning. For the record, Megan  Wallace, Director of Legal Services, and I have with me  today Emily Nauman, the Deputy Director of Legal Services.  I will begin by kind of picking up where Ms. Mills  left off. So she discussed enactment effective dates. And  in response to Senator Giessel's question in terms of what  happens with the initiative if it's enacted by the voters  and where does it go in statute? How do we put it into our  Alaska Statutes?  And as Senator Giessel pointed out, the initiative  language itself does not specifically amend any existing  Alaska Statutes. It has a broad general statement in  following Section 1 before Section 2, "that notwithstanding  any other statutory provisions to the contrary, the oil and  gas production tax in AS 43.55 shall be amended as  follows."  Therefore, as Ms. Mills indicated, the determination  as to where to place the statutes is within the purview of  the reviser of statutes. Likely, this provision -- or this  initiative in its entirety is likely to be placed in AS  43.55, that chapter, likely as its own article. And it  will -- it's my best estimation that it will get placed  into statute exactly as it looks before you today.  I think the Legislature is accustomed to Leg. Legal  kind of doing a cleanup or technical changes, those kinds  of things, and that would not occur with respect to the  ballot initiative. Our reviser, as you all are aware,  generally do reviser bills and do technical cleanups of  things.  And to put it in a little bit of context, the  marijuana initiative that was passed in 2014 was just  cleaned up in a reviser bill last year in SB 71 in 2019.  So the process for Leg. Legal is to allow the  initiative to take effect, to see it -- how it's being  carried out, you know, make sure to see if there's any  litigation and allow the Legislature to take any action if  it wants to before we do any technical cleanups,  particularly if there are any questions about the substance  of the issue, because the cleanups that the reviser can do  are only technical revisions that do not change the meaning  of the law. And so we want to be extra diligent not to  make any changes that could have an impact on the  implementation or the meaning of the initiative.  CHAIR STEVENS: So the effective date is 90 days after  certification of the election, and it could take up to four  or five years to get it finalized and then in statute; is  that what you're saying?  MS. WALLACE: Mr. Chairman, it would go immediately  into the statutes. It would be placed in -- it would  become law, and it would be placed in the Alaska Statutes.  It would take probably two or three years, at a minimum, to  have any technical cleanups through a reviser bill, so to  speak.  CHAIR STEVENS: Thank you. Madam President.  PRESIDENT GIESSEL: Thank you, Mr. Chairman. So,  Megan, I'm somewhat alarmed to hear that there's no cleanup  in light of the fact that there are terms used in the  initiative that don't otherwise appear in law in some  cases, or they're extremely vague compared to our very  specific currently written law. So that seems a little  frightening that then they're going to be implemented and  financial impacts will be made as a result of this  initiative. Could you clarify that?  MS. WALLACE: Through the Chair, Senator Giessel, for  the reasons you just described, which is that we may have a  vague term, the reviser cannot make any changes that would  have the impact of changing the meaning of the law.  And so, you know, if Leg. Legal goes in and we replace  one word or phrase with another, in light of the fact that  it might be vague or open to interpretation, that change in  and of itself is a policy change that only the Legislature  can make and that the reviser doesn't have the power to  make because that change of a phrase or a word could have  an impact on the outcome of interpretation of the  initiative.  CHAIR STEVENS: Yes, please, we'll go to Senator  Hoffman, and then go to you, Representative. Senator  Hoffman.  SENATOR HOFFMAN: Thank you, Mr. Chairman. But under  the provisions of the law, you say that this legislation  will be -- initiative will be enacted. So that -- does  that mean that taxes will be collected and the Legislature  can appropriate them?  MS. WALLACE: Through the Chair, Senator Hoffman, yes,  the initiative will be enacted; it will be law. It will be  placed in the Alaska Statutes in some location, like I  said, likely in AS 43.55. If taxes are collected, they  will be subject to appropriation by the Legislature.  And the next topic that I was going to address is  while the reviser won't go in and make any of these  technical corrections, you know, likely for two, three,  maybe four years, the Legislature at any time has the power  to amend the initiative.  Article XI, Section 6 restricts the Legislature from  repealing the initiative for a period of two years, but the  Legislature is able to amend the initiative at any time.  And so if the Legislature feels as though there are vague  terms or that they need to make some technical corrections  to make the initiative better fit in alignment with the  Alaska Statutes, the Legislature could go in and make those  changes.  We have had some litigation in terms of how far the  Legislature can go in their amendments. And in the case of  Warren v. Thomas, the Alaska Supreme Court described that  what they'll do is they'll look to see whether the  Legislature exceeded their broad power by passing an  amendment and whether or not it so vitiates the initiative  as to constitute a repeal. In other words, did the  Legislature make changes so drastic to the initiative  language that it makes a mockery of the initiative?  And so, again, not very clear or specific. It's going  to be a very fact-intensive review in terms of the changes  that the Legislature made and whether or not it goes too  far or whether there are technical changes.  CHAIR STEVENS: Thank you, Megan. Senator Hoffman,  thank you. Representative Johnson. And then, Senator  Begich, did you have a comment or -- no. Okay.  Representative Johnson.  REPRESENTATIVE JOHNSON: Thank you, Mr. Chair. So if  you have in an initiative -- this initiative, say it's  self-contradictory within its own body of the initiative,  then -- and say we were to implement taxes based on that,  our best interpretation, at what point do you just get a  legal opinion saying this is self-contradictory? We just  get to pick which one we want to go with? If you would,  just help me understand how we might be potentially set up  for having to have some kind of litigation if we do do our  very best within what we're given.  MS. WALLACE: Certainly. Through the Chair,  Representative Johnson, so I imagine the process will  evolve. You know, the Department of Revenue and  administration will identify how this is going to be  carried out, and the Legislature can examine that.  And if the Legislature determines that it needs to  clarify or make any changes to the language of the  initiative, that will happen, you know, by bill. And I  suspect that there will be a lot of discussion through the  committee process as to the legislative intent of the  changes, what the purpose of those changes are.  And all of that discussion would be part of the  analysis as to -- you know, likely from Leg. Legal giving  you some kind of our best analysis as to whether or not we  think the amendments are at risk of litigation in terms of  going too far. I suspect that the Department of Law will  weigh in on those amendments potentially, if asked.  And, ultimately, to be frank, there's probably a high  chance of litigation if one -- you know, if the initiative  feels -- the backers of the initiative feel the Legislature  goes too far or some other, you know, citizen.  CHAIR STEVENS: Please, Representative Johnson.  REPRESENTATIVE JOHNSON: Thank you, Mr. Chair. So  walk me through then the process. So we have an enactment,  we have the effective date, and we have uncertainty. We  spend some time, as a Legislature, trying to figure out how  to come to a conclusion on how we would either implement  taxes or we would implement this -- the initiative. What  happens in that intervening time? Do we collect taxes and  then maybe refund them if we come up with some -- I mean,  tell me about some of the different scenarios that we might  have before us that we have to be thinking about as far as  timeline goes as far as coming to certainty on this if we  don't have certainty on the initiative.  MS. WALLACE: Through the Chair, Representative  Johnson, I'm going to punt a little bit since we have the  Department of Revenue here. They can -- they're probably  the best to answer in terms of what happens during that  uncertainty time in terms of collection of taxes,  refunding. That's a little -- that's outside of the scope  of what Leg. Legal would look at.  But those are all certainly going to be policy issues  for the Legislature to grapple with if the initiative takes  effect. And, like I said, because the Legislature has the  broad power to amend the initiative, the Legislature can  make that policy decision and evaluate what, if any,  changes they need to be -- need to be made in light of  whatever results from execution of the initiative.  CHAIR STEVENS: Very good question. Thank you,  Representative. We'll make sure that we direct that to the  department when they are before us. Any further comments?  MS. WALLACE: I'm going to turn it over to Emily to  discuss the substance of the initiative. As a reminder,  our office provides policy-neutral nonpartisan advice. Our  analysis of the initiative is just that, our analysis to  date. And with that, I will turn it over to Emily.  CHAIR STEVENS: Thank you, Ms. Wallace. Appreciate  your comments. And going on then to Emily Nauman.  MS. NAUMAN: Good morning. It's my intention just to  run through the sectional that I provided. I have a few  additional notes and comments in addition to the memo we  provided you. Please stop me if you have any questions  about the substance of the initiative, and I'll answer them  as best as I can.  Section 1 of the initiative sets out the short title  for the initiative. Once it's enacted would be known as  the Fair Share Act.  Section 2 of the initiative states that Sections 3 and  4, which set out these new additional taxes, would apply  only to fields, units, and non-unitized reservoirs on the  North Slope that have both produced more than  40,000 barrels of oil per day in the previous year and that  unit field or non-unitized reservoir has also produced more  than 400 million barrels of oil cumulatively. That section  also states that production taxes -- that all other  production taxes shall be unchanged by the initiative.  One key difference that Section 2 highlights between  the initiative and the current production tax system is  that taxes will be assessed by field. Currently, our tax  structure assesses production taxes by producer.  Our current production tax system has two primary  parts: The first is a net production tax value system.  This is our primary production tax. We also have an  alternative minimum tax based on gross value. The  initiative sets out a similar structure but, again, does it  by field instead of by producer.  So Section 3 sets out the alternative gross minimum  tax. Under Section 3, the fields, units, and non-unitized  reservoirs that meet the requirements of Section 2 would  have a 10 percent tax on the gross value at the point of  production starting at $50.  And technically, the initiative is a little bit -- the  wording is -- it took me a few minutes to do the math, but  at $50, the tax will actually go up to 11 percent. There's  a 1 percent increase for each $5 increase in a barrel of  oil over $50, capped at 15 percent of the gross value  total.  That section also states that no credits,  carry-forward lease expenditures, including operating  losses or other offsets, may be used to reduce the amount  of tax below the amount provided in that section.  And, again, Section 3 is -- or I should say not again.  A unique feature of the initiative is it collects taxes by  month. Our current production tax system while -- or  sorry. Let me rephrase that. The taxes are assessed and  due, levied each month. Our current production tax  collects taxes each month, but the tax is actually due  annually, so there's a true-up at the end of the year. And  I'm sure Department of Revenue can talk more about that  process if you're interested in it.  So already we see two large, what I would think,  differences between our current tax system and the  initiative; one being that we're taxing by field instead of  by producer, and the second that we're levying the tax by  month instead of annually.  Section 4 sets out what is, I imagine, parallel to our  current primary tax structure, which is an annual  production tax based on net production tax value. The  initiative sets out that this is an additional production  tax. It's unclear what it's an additional production tax  to, but I think we can assume that it's an additional  production tax to the rate set out in 40.55.011(e), which  is our primary tax system.  Under the initiative, the additional production tax  applies when the price of a barrel of oil is more than $50,  and it is the difference between $50 and the production tax  value of a barrel of oil multiplied by 15 percent. Again,  this net production tax is levied by month.  Section 4 also states that the per-barrel credits --  that's AS 43.55.024(i) and (j) -- cannot be used against  that production tax.  Section 5 of the initiative states that each producer  subject to the tax shall calculate the taxes -- shall  calculate their taxes separately for oil and gas. The  introduction of the term "gas" in Section 5 could lead to  some confusion in the interpretation of the initiative.  It -- read alone, Section 5 has the potential to imply that  the taxes set out in Sections 3 and 4 also apply to gas. I  don't believe that's the intention of the initiative  sponsor, but it's the first mention of gas in the  initiative and could cause potentially some implementation  issues.  Again, it requires the producers to pay taxes each --  the taxes in the initiative each month and also states that  lease expenditures for each field unit or non-unitized  reservoir must be calculated, deducted, and carried forward  separately.  Section 6 sets out -- or Section 6 is what triggers  the sort of parallel comparison where we're looking at the  tax levy by Section 3 and the tax levy by Section 4,  determining the greater amount and a producer shall pay  under that amount. I think you're going to have to  remember this is by month. So potentially the way that I  understand the initiative, each month the producer could  flip back and forth between the gross tax and the net tax.  Section 7 requires all filing and supporting  information related to the calculation and payment of  Sections 3 and 4 provided to the Department of Revenue to  be a matter of public record.  And Section 8 states that nothing in the initiative  dedicates revenue, makes or repeals an appropriation,  enacts local or special legislation, or otherwise performs  an unconstitutional act. Section 8 also states that the  revenues of the initiative could be used to fund government  services, capital projects, the Permanent Fund, and  Permanent Fund dividends.  Section 9 is a severability clause.  CHAIR STEVENS: Thank you, Emily.  MS. NAUMAN: Any questions?  CHAIR STEVENS: Questions? Senator Stedman.  SENATOR STEDMAN: Thank you, Mr. Chairman. I don't  know if this is a proper time to ask it or if it's to  Revenue, but this is the first time I've taken a look at  the language. I'm understanding that the current structure  we have is either-or, either a gross tax or at some point  in time you default into the net tax. This appears to be a  calculated gross tax and then a layered net tax north of  $75; is that correct? So it's not either-or, it's in  addition to?  MS. NAUMAN: Through the Chair to Senator Stedman, I  can't speak to the dollar amounts at which the tax would be  triggered. I just don't have enough information to answer  that question.  But I would say for the field -- and remember, the  producers are still going to be paying an annually levied  tax, potentially the current gross minimum tax on top of  that for a particular field monthly. They may be paying  this alternative gross minimum tax for the field or what  appears to me to be the net production tax additional  amount provided by the initiative layered on top of the  annual production tax currently in law under 43.55.011(e).  Does that answer your question?  SENATOR STEDMAN: It starts to. We've got a lot of  work to do to sort this out. And another concern I have or  just looking back in history, we've had a lot of discussion  on the integration between oil and gas and potential  impacts, you know, when we get a big gas sale, when that  comes and how that cost of gas is impacting our oil revenue  positive or negatively.  But it appears that this connects directly the gas  tax; is that correct? Would be with the mentioning of it,  that it would come under the same tax scenario, or if not,  do they have to be separated, and how would they -- how  would you separate them?  MS. NAUMAN: Through the Chair to Senator Stedman, the  initiative appears to require producers that will be paying  taxes under the structure set out in the initiative, in  other words, producers who produce oil from fields, units,  or non-unitized reservoirs that meet the requirements set  out in Section 2 to file taxes where they do separate oil  and gas under Section 5 of the initiative. I think that  those -- the provisions of the initiative will require  substantial regulations for the Department of Revenue to  sort out how those producers will file and how they'll  separate their lease expenditures.  CHAIR STEVENS: Senator Stedman.  SENATOR STEDMAN: Thank you, Mr. Chairman. Just  something I think we need to delve into a little bit,  because, as I recall, we had significant difficulty  allocating operating and capital expenditures to oil and/or  gas when they both come out of the same hole in the ground  at the same time. So I have no idea, other than we've had  numerous meetings at Resources over the years and this  table on that subject. And it gets extremely confusing,  and so I look forward to that conversation and  clarification.  CHAIR STEVENS: Thank you, Senator Stedman. Senator  von Imhof.  SENATOR VON IMHOF: Thank you. So Senator Stedman did  sort of allude to the fact that there seems to be many  layers of taxes on top of each other. So I'm only going to  just kind of briefly discuss one layer that's alarming, the  alternative gross minimum tax.  So right now it's about 4 percent. And how I read  this is it's going to jump to 10 percent with a potential  max up to 15 percent with also at higher prices. So we're  looking at quadrupling, almost quadrupling the current  taxes that we have now, particularly in an area where it's  the lower price per barrel, where it's very slim margins at  that point. And, you know, the companies aren't making all  that much revenue and need that to make payroll to continue  with operations even in some of the rigs.  And I kind of look at it like with every tax that we  have, there is a corresponding behavior. And you see that  with the argument with sin taxes. When you have taxes on  alcohol or cigarettes, why do you do that? Well, to raise  prices enough to potentially curtail behavior.  What kind of behavior are we trying to curtail with  this bill? Like let's just have no production on the North  Slope, just make everything idle underneath $50. Oh, by  the way, I think prices are at about $53. So I just look  at this and see this as very alarming, and we're  essentially just wanting to drive the oil companies into  the ground and make them shut down.  CHAIR STEVENS: Thank you, Senator von Imhof.  Senator Coghill.  SENATOR COGHILL: Thank you. For when it's my turn to  explain the initiative to some of the folks back home, it  looks to me like what you brought out is, in Section 2 and  3 we are taxing fields and in 5 and 6 we're taxing  producers. And I know there's different layers. But so in  the field -- we have several producers we might have, for  example, in a field. How do I explain that dynamic to the  person who signed the initiative and said, "We're going to  tax the oil companies, but we're really talking about  fields"? How does that distinguish from 5 and 6?  MS. NAUMAN: Through the Chair to Senator Coghill, I  apologize for the confusion. The initiative -- the entire  initiative taxes producers, but the tax is actually on the  field, so that applies to Sections 3, 4, 5 for the entire  initiative.  CHAIR STEVENS: Would you say that again and only a  little bit slower?  MS. NAUMAN: The initiative in its entirety assesses  taxes by field. So Sections 3, 4, 5, and 6, they all  assess taxes by field. Our current production tax system  assesses taxes by producer. So at a very general level,  producers pool together all of their income from across the  state or for specific purposes by region -- sometimes we  separate out areas like the Cook Inlet -- and then they  take all their lease expenditures for the state, you know,  with some particular area set out, and combine those  together, and the producer then pays taxes on that revenue  from -- for -- I have to say with exceptions for the state  for the year.  Producers will still be doing that for areas that are  not -- what I presume are areas not covered by the  initiative. But these fields that are covered by the  initiatives, producers will be paying taxes by field, so  for income and costs related to that field each month.  SENATOR COGHILL: Mr. Chairman, if I could just  clarify that?  CHAIR STEVENS: Yes, please, Senator Coghill.  SENATOR COGHILL: It looks to me like in the  initiative the fields are fairly narrowly defined. They're  a certain minimum production and maximum production, right?  And so those are, I think, Prudhoe, Kuparuk, and one other  field. So I think isn't that true that this just targets a  couple of major producing fields based on the numbers of  the excess of 40,000 or in excess of 400,000 for the total  cumulative? There can only be two or three fields on the  North Slope, right?  MS. NAUMAN: Through the Chair to Senator Coghill,  from reading the information provided by the initiative  sponsor, that's my understanding of their intent.  I have a couple of comments. The initiative uses the  terms "fields, unit, and non-unitized reservoir," which are  terms that are not currently defined in the production  taxes statutes. So although they might seem to be fairly  understandable concepts, there's quite a bit of room for  interpretation, especially in the term "field." We have a  definition of "field" elsewhere in statute in the Alaska  Oil and Gas Conservation Commission laws. I would not want  to rely on that definition to assess taxes personally. The  Department of Revenue might feel differently.  "Unit" is defined elsewhere in statute, again, in the  Oil and Gas Conservation Commission statutes, but I  believe -- and this is from a practical perspective, not  from -- or sorry, from a legal perspective, not from a  practical perspective -- it's possible that there could be  multiple fields within a unit or multiple units within a  field, which means that it would be very difficult to  assess or to know certainly what exact piece of land would  be subject -- where the ring-fence would be around the  object that is subject to the taxation.  SENATOR COGHILL: Thank you, Mr. Chairman. That's as  clear as mud to me, but it just shows kind of the  complexity of the issue. First, for me from reading it, it  looked to me like we were talking about fields in one  section and producers in another. And it seems like  we're -- whoever is producing is going to get a tax; it's  just how. And so I'll start from there. Thank you.  CHAIR STEVENS: Thank you, Senator Coghill.  Any further explanation before we go on? Okay. Thank  you; Senator Begich.  SENATOR BEGICH: Thank you, Mr. Chairman.  A couple of clarifying points: When I was reading  Section 5, I had a different interpretation than you, and  I'm just wondering if my interpretation carries water at  all, not to bring water into an oil and gas field.  But when I read the section, it says, "For each  producer, the taxes set forth in Section 3 and 4, which are  explicitly oil, shall be calculated separately for the  following: for oil and for gas."  Isn't that just a way of identifying that they -- that  the intent of the writer of the initiative is to be clear  that it's for oil that you're calculating and not trying to  confuse it by -- I mean, isn't that one interpretation,  that they're trying to separate the two out and ensure that  the producers are accounting for it separately?  MS. NAUMAN: Through the Chair to Senator Begich, I  agree that your interpretation is both probably the most  reasonable and, based on my reading of the initiative  sponsors, is probably what was intended. You could read it  also, breaking it out, the taxes set forth in Sections 3  and 4 shall be applied separately to gas.  SENATOR BEGICH: Sure.  MS. NAUMAN: And that was where I read the ambiguity  into the --  CHAIR STEVENS: Senator Begich.  SENATOR BEGICH: Thank you, Mr. Chair. The follow-up  then to that is, earlier we heard from the Department of  Law that intent matters, what we say here at the table  would be indicative of our intent in terms of alternative  legislation or anything like that.  Wouldn't it also apply that the intent that you've  spoken to from the writers of the initiative would apply  here or would at least have the weight of law behind the  interpretation as opposed to an alternative interpretation?  MS. NAUMAN: Through the Chair to Senator Begich,  Megan and I had many discussions in preparation for this  meeting. We kind of divided up the tasks, and I think  Megan is ready to answer the question.  MS. WALLACE: For the record, Megan Wallace, Director  of Legal Services.  Through the Chair, Senator Begich, you're correct,  when the -- if this results in litigation and the court is  trying to assess a proper interpretation of this language,  it's likely going to trigger some constitutional issues. I  mean, initiatives are a creature of the Constitution, and  so the Supreme Court will look, you know, at their past  precedent, but they also will give weight to the intent of  the initiative, and they will try to give deference to that  intent. And I suspect that, you know, they'll be -- you  know, litigation is two sided. So -- likely the initiative  sponsors will explain what their intent was, and it might  be countered, you know, by the opposition.  SENATOR BEGICH: And one last --  CHAIR STEVENS: Oh, yes, Senator Begich.  SENATOR BEGICH: Thank you, Mr. Chairman. I don't  think anybody doubts there isn't going to be litigation, so  that's, you know, one way or the other. But the -- when I  look at the initiative and sort of the intent behind it and  the way it's crafted -- and I have read comments that were  forwarded to the committee or to the council by the sponsor  that were forwarded on to all of us -- it seemed pretty  clear that the idea was to narrowly construe it to legacy  fields and that there's -- that there isn't a doubt about  that, and yet I'm hearing doubt at the table now. So which  is it? Was it -- was -- the comments from the sponsor, are  they not clear that this is meant to be focused on the  legacy fields? It seems pretty clear to me from both the  writing of the initiative and from the letters that were  provided to this council.  MS. WALLACE: Through the Chair, Senator Begich, our  purpose here at the table is to just flag issues that we  spot. And as you noted, this might be a contested issue,  and we certainly don't -- aren't going to weigh in on what  a court is likely to conclude with respect to any  disagreements. So I think what Emily did was just flag a  potential argument as to maybe some ambiguity but not  express any opinion as to whether -- what side would  prevail if that were contested.  SENATOR BEGICH: I'm not asking that.  CHAIR STEVENS: Senator Begich, please continue.  SENATOR BEGICH: Thank you. I'm not asking to opine  on which side would prevail. What I'm asking is, is the  initiative narrowly construed or not? You know, I mean,  I'm simply asking based on what you've read, is the  initiative narrowly construed to legacy fields or not?  MS. NAUMAN: Through the Chair to Senator Begich, in  my effort to be as policy-neutral as possible, I really  tried to focus on the language of the initiative. To the  extent that I looked at the interpretation of the  initiative by the sponsor, I tried to keep my exposure to  that fairly minimal. I understand that's a factor that a  court and likely Department of Revenue will consider, that  they would speak to that when they're adopting regulations.  My task, as your legislative attorney, is to look at  the law that's in front of me and determine what it means.  I think that the interpretation that you have offered as  the explanation from the sponsor is probably the most  reasonable and likely interpretation, but reading it just  purely from a sterile context, I think that both  interpretations are possible.  SENATOR BEGICH: Fair enough. Thank you.  CHAIR STEVENS: Very interesting question. I thank  you for clarifying that, and we do appreciate the position  this puts you in. Senator Stedman.  SENATOR STEDMAN: Thank you, Mr. Chairman. Again,  this is the very first hearing of this completely very  complex subject matter. But under the current structure,  if we have a major gas sale, we have significant exposure  to field allowances, potentially eliminating our revenue  stream, and the concern is to have net zero. And that's  not a wacky thing to throw on the table, it's just a  mathematical potential exposure, very potential exposure we  have that I'm sure the Revenue and DNR are concerned about  also. So does this bill impact the field allowance  exposure that we may face in any way that appears  currently?  MS. NAUMAN: Through the Chair to Senator Stedman, I  don't know the answer to that question. I would happy to  be -- happy to look into it a little bit more. Perhaps the  Department of Revenue could provide some analysis on that.  I can't provide any comment.  CHAIR STEVENS: Thank you, Senator Stedman.  SENATOR STEDMAN: As a follow-up, Mr. Chairman, I  think that could come in the future with different folks.  And maybe they take -- it will take some time to sort  through this and figure it out, but it's an issue that's  very seldom talked about that has a huge financial impact  on the state potentially, and we need to understand it at  the table also.  CHAIR STEVENS: Thank you. Yes, Representative  Johnson.  REPRESENTATIVE JOHNSON: Just one last thing: Are  there any rules on what we can and cannot share with  constituents as we go forward about the initiative? I  mean, could we have a town hall and explain to them what we  don't know, do know? I just would like you to clarify  that.  MS. WALLACE: Through the Chair, Representative  Johnson, I don't want to give bad advice on the record in  committee, but I would be happy to provide some analysis to  the committee if you wish.  CHAIR STEVENS: Thank you, Megan. Further comments?  Senator Begich.  SENATOR BEGICH: Just as a member of the Ethics  Committee, it might be a question for the Ethics Committee,  I think. John might agree with that.  CHAIR STEVENS: Everything has to be answered by  Ethics. Yes, Senator Coghill.  SENATOR COGHILL: Just a structural question: You  know, our tax system is complex already as it is. Does  this narrow it enough to create a situation where if we did  this, would we be in a danger of a specialized tax on a  particular field that would create the similarly situated  tension amongst other fields, where you might treat one  field so disparately different than the other and create a  backlash for us?  MS. NAUMAN: Through the Chair to Senator Coghill, I  have two comments: The first is, my understanding of your  question is that you are hypothetically thinking about  creating legislation to meet that substantially similar  task; is that correct?  SENATOR COGHILL: Maybe I should --  CHAIR STEVENS: Senator Coghill.  SENATOR COGHILL: If we are contemplating this law as  it is, would we be in danger of taxing one group so much  more than another group that we would be in danger of  having a situation where we're taxing one group so  differently than another group that we would be in danger  of failing what normally the courts would call similarly  situated situations?  I remember once when we did a tax to fishing people  that were from out of state, we got our hand slapped really  hard on that, and we ended up having to pay back some  significant money. And I just wondered if this wanders  into that question.  MS. NAUMAN: Through the Chair to Senator Coghill, you  are alluding to an equal protection analysis under the  Alaska and United States Constitutions. Any time that we  treat similarly situated individuals or persons differently  as the government, we do trigger potential equal protection  challenge.  Equal protection analysis is a sliding scale based on  the factor by which the differential treatment is based.  This would be an economic factor; in other words, the  behavior that is differentiating the individual is being  assessed different tax rates is an economic one. That's a  very low bar. That said, the court will still look at the  reasons, the purpose, and the means used to accomplish that  differential treatment in the equal protection analysis.  I think another potential smaller issue to add onto  that is the producers that will be subject to this tax  might also have much more complex production tax filings  that could be an administrative burden as well.  SENATOR COGHILL: Thank you, Mr. Chairman.  CHAIR STEVENS: Thank you, Senator Coghill. Further  questions or comments? Senator Stedman.  SENATOR STEDMAN: I hate to keep bringing these little  things up, but every year we get the Revenue Sourcebook,  Mr. Chairman, and it's a consolidation of multiple  companies' monthly reporting to the agencies. And they  boil it down to one view, the entire year for us there in  the Legislature.  So would this initiative then potentially change that,  where we would be having monthly data produced from all the  fields and then consolidated to us in a monthly format  or -- and still an annual number?  It just -- it seems like -- I guess for those watching  at home, it's difficult to sit here at the table when you  have -- say you have four major companies or three major  companies. They all have different cost structures. They  all report monthly, and we get a consolidated number at the  end of the year and have to set policy. And we might  favor -- one might win, one might lose, and one of the  companies might be in the middle and noncommittal. It  makes it difficult. So are we compounding that challenge,  or are we -- probably a better question for Revenue,  Mr. Chairman.  MS. NAUMAN: Through the Chair to Senator Stedman,  that is -- you're right, it's a better question for  Revenue.  Something else that you might be interested in  knowing, if you're able to ask the Department of Revenue,  is how they would intend to audit the now monthly tax due  rather than having one year of data and one year to audit.  It seems possible they might have to perform audits each  month.  CHAIR STEVENS: Thank you, Emily, for those comments.  Further questions or comments from members of the Leg.  Council? Well, that was a fascinating discussion. I  appreciate the time you've spent with us and very thorough.  So let's go on then to our next. We have then Deputy  Commissioner Mike Barnhill and Tax Division Director  Colleen Glover, and I understand that Cori Mills will be  joining them.  Just a comment, Deputy Commissioner. You have two  former Revenue commissioners hovering over your back.  We're pleased to see Mr. Corbus and Mr. Alper here in the  audience.  MR. BARNHILL: Thank you, Mr. Chair. I am aware of  many people hovering over my shoulder today, but thank you  for inviting us.  We're going to focus our comments today primarily on  the process of implementing the initiative. Because of the  sensitivities regarding the pending litigation over the  meaning of the initiative, we're going to try as hard as we  can to avoid answering many of the questions that were  posed in the last presentation, but we do think there's  ways of getting information to the Legislature in the form  of scenarios that are presented outside the context of the  initiative.  So, for instance, if the finance committees wanted  information on what would happen if the minimum gross tax  was changed in some way, those are scenarios that we can  present information on through our economics research  group.  So with that, I'm going to turn it over to Ms. Glover,  and she's going to talk about implementation process.  CHAIR STEVENS: Thank you, Mr. Barnhill. That was  indeed brief.  MS. GLOVER: Good morning, committee. Colleen Glover,  for the record, Tax Director, Department of Revenue. So  I'll just walk through the process of what the department  will do in order to implement this initiative if it's  enacted.  As you've heard earlier that the initiative becomes  effective 90 days after certification, then -- and we would  then be -- have to have our system available for a taxpayer  for the next monthly return that would be filed after that  90-day process.  So currently our system -- our tax revenue management  system kind of has two aspects: There's kind of the  internal system that does all the programming and the  calculations of the taxes, and then there's a customer user  interface, which we call Revenue Online, and this is for  all our tax types.  And so the system would need to be updated for our  customers/taxpayers to be able to file their monthly  returns, as well as the back-end programming to do the  calculations. That all would need to be done within 90  days of enactment of this initiative. Our estimate for  cost is $7.5 million to do this. Most of the work is  programming. We expect a significant workload to be able  to program these changes within 90 days. That is a big  lift to do in 90 days.  Then as far as the regulation process, we will begin  working on those. The timeline you heard. It can be  anywhere from six months to a year, depending on the  complexity of the regulations. You heard Ms. Mills talk  about kind of the minimum timeline. It is our experience  for any kind of major oil and gas tax changes in the past,  that that would be several months up to a year to do a  thorough public notice process, public workshops, and  scoping.  There's -- we expect that within the 90 days we will  have programming complete, but we expect there will be  changes after that. We don't expect it's going to be  exactly perfect after 90 days and whether the regulations  are finalized or not at that time. So we expect to be in  kind of this transitional period where we will be testing,  reprogramming, testing, reprogramming until we get  everything completely done and tested in time for the final  changes.  And that -- unless there's questions on that, we --  CHAIR STEVENS: Ms. Glover, thank you. Senator  Begich.  SENATOR BEGICH: Just to clarify and question. You  said it would be difficult to do monthly tax collection,  but didn't we collect taxes monthly under the old ACES  regime from the oil industry?  MS. GLOVER: Senator Begich, through the Chair, I  didn't mean, if I said that, it would be difficult to do  monthly tax collections. We do monthly tax returns now.  There's a monthly return that's filed monthly now by  taxpayers. It's an estimated tax we do collect monthly,  but the return is an annual return currently. But there is  a monthly filing, or it's called a return in our system.  SENATOR BEGICH: Thank you. Thank you, Mr. Chairman.  CHAIR STEVENS: Thank you, Senator. Further questions  or comments, concerns or thoughts? We're going to let you  off awful easy it looks like. And you have your attorney  with you, so what can we ask?  Senator Coghill.  SENATOR COGHILL: Maybe I'll drill a little deeper  into that. Collecting monthly is one thing, but would it  be contemplated, as was proposed earlier, that there would  be audit provisions done following that collection process?  MS. GLOVER: Senator Coghill, through the Chair, the  audit -- in statute right now we have a six-year statute of  limitations for auditing returns.  SENATOR COGHILL: So at this point, it looks like that  wouldn't change that unless there was a regulatory need to.  So, you know, we're struggling with how do we deal with  fields and producers, which is a new concept in law. And  so you would have to then begin to look at producers within  whatever field you could define, right? So you would have  to probably start thinking about fields as a taxpayer now  differently than you do. And so is that something you  would leave up to regulation, or would you start  immediately looking at auditing those with that  contemplation in mind?  MS. GLOVER: Senator Coghill, through the Chair, the  audits typically happen much later in the process. Right  now we are auditing the 2014 tax year, so those are much  later in the process. And as far as interpretation and  policy calls, those have not yet been decided. And so if  this initiative is enacted, we would work with Department  of Law on those.  SENATOR COGHILL: Thank you.  CHAIR STEVENS: Thank you, Senator. And to Senator  von Imhof and then Senator Stedman.  SENATOR VON IMHOF: Thank you. So I'm looking at  Section 7, public records. So all filings and supporting  information provided by each producer to the department  relating to the calculation of payment of the taxes shall  be a matter of public record.  So all filings and supporting information, that might  be their daily revenue log, all the money that came in for  that particular month by whom, what their expenses were, so  essentially opening their books and their checkbook and  making it a public record. Do you know of -- any other  corporation that pays taxes to Alaska now, is their  checkbook public?  MS. GLOVER: Senator von Imhof, through the Chair,  currently under statute all taxpayers and all taxes under  43 -- Chapter 43 are confidential.  SENATOR VON IMHOF: So we are carving out an industry  and making their particular books, no one else, but their  particular books public to the state, the country, the  world?  MS. MILLS: Cori Mills again, for the record. Senator  von Imhof, through the Chair, I don't want to comment on  exactly how broad or narrow this would be for the reasons  we talked about before, but this does -- would change those  confidentiality provisions for the specific tax enacted in  this law.  CHAIR STEVENS: Senator von Imhof.  SENATOR VON IMHOF: So I just have to comment on the  fairness of that, the -- how businesses can operate  competitively with that, how we are highlighting a  particular business over others and just the punitive  nature of that on so many levels. And I just -- I find it  despicable that we would treat a particular company or any  number of companies like that.  CHAIR STEVENS: Thank you, Senator von Imhof. Senator  Stedman.  SENATOR STEDMAN: Thank you, Mr. Chairman. My  co-chair corked me on the question I was going to ask about  the filings. But let me couch it a different way. They  use the word "all," "all filings and supporting  information." And we've had, over the years, numerous  presentations on the inability that Alaska has of accessing  information in our oil basin. Virtually every consultant  that we've hired has brought that to our attention. That's  just the way we've been structured and we struggle along  with and always comment about the lack of information.  My understanding is Norway, they have a very open  process in the North Sea and compared -- so it's very easy  to see the cost and revenue of the industry.  But where is the boundary between the industry norms  worldwide for public -- or for us to have access to  information and the word "all filings and supporting  information"? I'm just not so sure that where that line  is, and it's something I think we need to clarify clearly.  There's a need, in my opinion, for us to have more  information. But what is the definition of "more," where  we don't breach -- like Senator von Imhof mentioned, have  the information to the point where it's egregious and puts  the corporations in a position where they have -- you know,  lose maybe some competitive advantage against their  competitors? So I think we need to explore that on a more  of a comparative basis. "All" is rather an inclusive term.  CHAIR STEVENS: Thank you. We'll begin with Senator  Stutes and -- I'm sorry, Stutes and Senator Begich, and  then we'll get the rest of you. Please go ahead,  Representative Stutes.  VICE-CHAIR STUTES: Thank you, Mr. Chair. I'm curious  on this "all filings and supporting information." Is that  required for other resource revenue that this state  receives from any of the other producers of other  resources?  MS. GLOVER: Vice-Chair Stutes, as I can only speak to  tax revenues, if you have questions on royalty revenues,  that would be a question for DNR. But there is no  requirement in -- for other taxes under Chapter 43. The  only -- there are some limitations on data that we can  aggregate and give, but we do not release taxpayer  confidential information for any taxes.  VICE-CHAIR STUTES: Thank you.  CHAIR STEVENS: Thank you. So if I have this right,  we have -- Senator Begich wishes to speak, Representative  Johnston, Representative Johnson. Anyone else? Okay.  Senator Begich.  SENATOR BEGICH: Thank you, Mr. Chairman. Just on  echoing comments from the co-chairs of Finance but maybe  from a different angle. It's my understanding from  presentations that I've had from the Legislature's oil and  gas experts that -- supporting what you just said, Senator  Stedman -- that other jurisdictions do require substantial  transparency, and the issue is where the line is probably  where we're going to.  But isn't it true some of our own taxpayers report on  Alaska through other transparency agreements that they have  with -- for example, British Petroleum, when it comes to  reporting to the International Association, because they  have signed on to that, they have to report their profits,  and they have to report their expenses within  jurisdictions. I mean, that's true, right, currently?  MS. GLOVER: Senator Begich, through the Chair,  it's -- I can't really speak to what taxpayers'  requirements are for reporting, like SEC filings. But if  they do report information publicly, that doesn't then give  us the authority for us to report that information. So  regardless of whether a taxpayer reports it themselves in  the public domain, we cannot provide that.  SENATOR BEGICH: Right. I think it's just getting to  my point of the balance of what transparency ought to be  allowed. For example, can -- do we know what the -- for  Exxon or for BP what the profits or expenses were here in  Alaska?  MS. GLOVER: Senator Begich, through the Chair, I  don't have that information. I think you should ask those  taxpayers that information.  SENATOR BEGICH: All right. And that's my point I  think is that there's a balance that has to be struck here,  Mr. Chairman, at some point. And I think supporting what  you're saying, Co-Chair Stedman, and the reasonableness  argument that Senator -- Co-Chair von Imhof brought up is  what is the balance between the level of information? And  part of our responsibility I think would be to define that,  were this initiative to pass would be to define that, or if  it were to be replaced, to ensure that we speak to that  transparency issue one way or the other. But clearly we  don't know the answer to those questions, and I think that  hampers our ability at the -- at our table to identify how  we address budgets.  CHAIR STEVENS: Thank you, Senator Begich.  Mr. Barnhill, did you have a response?  MR. BARNHILL: Mr. Chair, I think one of the  difficulties we, the Department of Revenue, have in  participating in the conversation at the table as presented  is there's a very specific statute that says that state  funds, in the context of an initiative, can only be used  for nonpartisan education. And so that's -- that is the  posture in which we sit before you. The various comments  at the table are phrased in terms of advocacy, and we  really do not want to participate in advocacy on either  side.  In that spirit, there are important issues of tax  policy regarding transparency of how we administer  statutes, and I think we can bring back a presentation  outside the context of the initiative on what those tax  policy considerations are and what practices are within the  state of Alaska and outside the state of Alaska.  But when we have advocacy going on at the table over  specific provisions in this initiative, that's a  conversation we'd rather refrain from actively  participating in.  CHAIR STEVENS: I understand that, and I understand  you will certainly be asked those questions later. I will  allow Senator Begich to continue questioning, and then  we'll go down to Johnston, Johnson, and Senator Stedman.  SENATOR BEGICH: I just want to take exception to the  comments that were just made by Mr. Barnhill that there's  advocacy going on at this table. What I'm hearing in  people who are questioning issues around an initiative, no  one here has spoken either in favor or against this  initiative. And I think that, at the very least, the  conversations at this table should not be categorized in  that manner by somebody who's sitting there because I think  that's unfortunate.  CHAIR STEVENS: Thank you, Senator Begich. So a  lesson for all of us to consider. Moving on to  Representative Johnston.  REPRESENTATIVE JOHNSTON: Yes, thank you, Senator  Stevens. Just a follow-up to Senator Stedman's comments  about the Norwegian transparency. I think that we might  find that Statoil, which is owned partially by the  Norwegian government but is traded, is -- has less  restriction on what they disclose and what they don't  disclose than their Norwegian oil company, which is  majority owned by the Norwegian government, than they had  more transparency. So it's not quite as clear as sometimes  it's presented as. A follow-up question?  CHAIR STEVENS: Yes, please, Representative Johnston.  REPRESENTATIVE JOHNSTON: I -- the definition of the  fields to be taxed, I'm trying to think of a scenario where  those fields become more fluid than they would be today by  definition, because you have a minimum amount that needs to  be produced and then you have the amount that has been  produced. And it's the minimum is where I could have  concerns, whereas if this tax is implemented, the efforts  to draw oil from the field would be less economically  feasible, and so those fields could be -- drop out of the  taxation and could happen rather quickly.  And on the other hand, you could have fields in other  units that maybe came on faster, and what kind of oversight  would that require? I'm back to Senator Coghill's idea as  far as auditing. Even though it's a yearly audit, we're  now talking monthly and by the field and if this was far  more fluid than we can see right now.  MS. GLOVER: Representative Johnston, through the  Chair, in the initiative it does have those thresholds of  the 40,000 barrels per day in the preceding year and then  the 400 million cumulative. So it's possible that there  are fields that could be -- qualify today and won't in the  future or that don't qualify today that could in the  future, including new fields, however that becomes defined.  As far as the defining or tracking or a reporting, those  are policy calls that have not been made yet.  REPRESENTATIVE JOHNSTON: Thank you.  CHAIR STEVENS: Thank you very much, Representative  Johnston. We'll move on to Representative Johnson,  Stedman, and then Coghill.  SENATOR STEDMAN: Thank you, Mr. Chairman. Just  briefly.  CHAIR STEVENS: Representative Johnson first.  SENATOR STEDMAN: Oh, excuse me.  REPRESENTATIVE JOHNSON: Thank you, Mr. Chair. So, I  mean, I recognize and acknowledge the sensitive position  that you are in in this situation, and I appreciate that.  And as you can imagine, all of us sitting at the table are  in a bit of a sensitive position as well because we need to  figure out exactly how much this is going to cost us as we  move forward. We're planning to be done, and really you  are the Department of Revenue's key to helping us  understand what those numbers are. And while you can't be  specific, I mean, we're all trying to get to the same  conclusion I -- or the same sense of what's happening I  think.  I, too, have some concerns about the confidentiality,  and I'd like to think that that's not a partisan issue,  that's a business issue. But if you would -- and I'm  trying to put this in a more general sense. If you could  walk me through the scenario of a ring-fenced field, where  you have tax, as if it was this initiative, how would you  see the administration -- not your administration, but the  administration of those fields by the companies, how are  they going to share the cost as a -- I mean, obviously,  there's administrative costs that they wouldn't necessarily  say that's attributed to that field, but if you start  ring-fencing it and you're going to now get down into those  kind of details, we're going to see things attributed to  fields in a way that they've never had to account for,  we've never had to account for. And how hard and expensive  is it going to be for the Department of Revenue really to  sort that out and say, okay, are you -- if you were to  audit something according to a field specifically, are you  going to be able to tell if the administrative costs are  being attributed to a field for tax purposes would be --  how are you going to know one way or the other?  I guess what I'm trying to figure out is from a  revenue perspective, not necessarily specific to this,  trying to be specific as much -- you know, not as specific  to the initiative so much, but what kind of difficulty?  How hard is it? How much expense will it be to your  department to really try to implement something where you  identify fields and sort out of those pieces that we -- in  some ways we don't even know exactly what's coming?  MR. BARNHILL: Through the Chair, Representative  Johnson, so there's a certain level of complexity to  Alaska's oil and gas production tax that's sort of imbedded  in the way we've decided to tax this particular industry.  There's a complexity that will be imbedded in any change to  that law.  Our best estimate at this time is what we've said in  our financial cost statement, that it's going to take  $5 million to program our tax revenue management system,  it's going to take $2.5 million in staff time. We don't  want to comment on how comparatively hard it is with  respect to current law because we're trying to manage that  line between advocacy and nonpartisan.  But it will impose a burden, which we're currently  calculating to be $7.5 million. And it will impose a time  burden in terms of implementation, you know, at least three  months to reprogram the system, several months to a year to  completely implement regulations.  CHAIR STEVENS: Representative Johnson, comments?  REPRESENTATIVE JOHNSON: May I --  CHAIR STEVENS: Please.  REPRESENTATIVE JOHNSON: -- follow up? Thank you,  Mr. Chair.  So how do you see yourself being able to really audit  and figure out how much is being attributed to each field?  I saw your numbers in here, and I appreciate that. And  then there's probably things imbedded in there that I  didn't pick up. I'm sure there probably is. But beyond  just -- well, I mean, there's the numbers, there's  reprogramming by month, and so on and so forth. But  there's a bigger piece to this of trying to figure out what  can you really attribute to a field and what you aren't  going to be able to attribute to a field. I mean, those  are going to be some -- I mean, there's policy issues you  guys are going to have to figure out within this, and I'm  just wondering if you're -- you know, if you have any  comments on that?  MR. BARNHILL: Through the Chair, Representative  Johnson, I have no further comments in that we've taken our  best guess at what the burdens are going to be in terms of  cost and staff time, but with respect to the specifics of  how we do the auditing, I believe our estimate is fair.  Ms. Glover, do you want to --  MS. GLOVER: Rep Johnson, through the Chair, so for  audits, currently we have things by unit. We do get  information for the major units, and obviously there's  different working interest owners for different units. So  there is a mechanism that information is shared and  cross-checked between different taxpayers at a unit level.  So that is something within our current audit practices.  CHAIR STEVENS: Thank you, Representative Johnson.  And thank you for your response as well. Just a reminder  that the purpose of this meeting is really an overview of  the initiative before us, not really intended to get into  the details or the merits of the initiative. Senator  Stedman and then Senator Coghill.  SENATOR STEDMAN: Thank you, Mr. Chairman. Let me, if  I could -- I'll try to make it brief, just digress to  Senator Begich's earlier question/concern. When we're  dealing with the public records, we have struggled with the  issue of Conoco's corporate reporting disclosing Alaska,  which is nice. BP's information we don't have access to.  We have to get it out of an international document. Exxon,  of course, is a different one.  And then when we go down and look down the end of the  table and we see revenue -- Department of Revenue and  Department of Natural Resources, you've got to be careful  which department you're asking the question to because some  questions cannot be answered by the Department of Revenue,  but they can be answered by the Department of Natural  Resources. And until you're around the table a while, it's  hard to pick that up. So it's very difficult for the  layman, as mentioned earlier by the speaker, that come to  these tables like we all do, and try to sort this out from  a public policy perspective. It's difficult.  So with that, Mr. Chairman, I would like to ask, as we  go forward, that we try to clarify some of these things  over the next month or so, including this "all filings." I  mean, it's kind of an inclusive term, but there is an issue  here that is of concern.  CHAIR STEVENS: Very good point. Thank you, Senator  Stedman. Senator Coghill.  SENATOR COGHILL: Maybe I should just stop where  Senator Stedman came in because the "all filing," you're  going to have a gross and a net and a producer and a field.  And so there's going to be different ways that they're  going to have to be categorized, I suppose.  This is -- as you were saying, this is just a new  category that you're going to have to try to figure out how  to implement. Is that what we understand? Plus, there's a  switching. You can switch between. And so those are  things I think -- when I want to explain it to people that  I have to talk to back home, I need to understand that it's  a new type of filing, and it could be gross tax or a net  tax. And if the producer is in one field and not another,  do they then have to report the same thing, and is their  taxes then going to be open different than, say, a  competitor? And those are things we need to be able to say  to our constituents, how this system works and how you  might contemplate calculating that.  MS. GLOVER: For the record, Senator Coghill, through  the Chair, I can talk to kind of simplistically about how  the taxes today -- I mean, currently there is -- the tax is  a net profits tax, the production tax. The gross minimum  floor is a tax floor. So information that taxpayers file  today, the system will calculate both to figure out which  tax is owed. So that is true today.  And currently for the North Slope, all oil is in one  tax segment, and so that information gets aggregated for  the taxpayer for all of the North Slope oil. That is how  it is today. As far as how this would work in the  initiative, those are still interpretive issues that are  policy calls, interpretations that we have not made at this  point in time.  SENATOR COGHILL: I just need to be able to say that  to people. There are some things that we do now that are  complex, as you have said, but there are new complexities  coming in this particular regard. I just need to be able  to say that out loud, Mr. Chairman. That's all. Thank  you.  CHAIR STEVENS: Thank you, Senator Coghill. Senator  von Imhof.  SENATOR VON IMHOF: Thank you. So in the past, your  department has testified here in the committee and talked  about the backlog of audits that we've had in the past, and  I think at one point it was about six years.  And then I think you testified recently that you're  absolutely getting caught up, and, you know, the millions  of dollars that we're sort of leaving on the table is now  being deposited into the CBR and other accounts, so this is  great news.  But I'm wondering if we're going to be doing a  backslide, because with this is new system of monthly  returns and that they're new via fields or even production  sites and not necessarily producers, how many more tax  returns and audits will the department be doing on a  monthly, quarterly, annual basis? And what kind of staff  are you going to need and annual resources do you think you  might need? You mentioned earlier 5 million to in 90 days  hopefully change the software, but I would imagine there's  going to be significant ongoing costs as well. Can you  comment on that?  MS. GLOVER: So, Senator von Imhof, through the Chair,  we don't expect there to be additional resources needed  for -- you know, for the future for this. The $7.5 million  estimate is for the next -- would be for the time period up  to about a year after, if the initiative was enacted, to  actually do a lot of the work and upfront planning.  We do, though, expect that that workload for our  current oil and gas production tax audit team would be  impacted if this initiative were enacted. We would need  them to help. It's a lot of testing for the system, help  with the regulations process. So we do expect that, based  on past practices when other oil and gas taxes were passed,  that the resources would then focus on the enactment of any  new tax law. That is partially what has kind of got us in  this backlog today was from prior tax laws.  So we do expect that the resources within their  priority would be enactment of any oil and gas tax law and  not the audit. So we do expect the duration of our audits  to slip, and whether it would go beyond the six-year  statute of limitation is unknown at this time until, you  know, the work happens, but we don't expect a need for  additional resources for the long-term for this.  CHAIR STEVENS: Thank you. Mr. Barnhill, did you have  any comment? No. Senator von Imhof.  SENATOR VON IMHOF: Well, thank you, Mr. Chairman. I  just wanted just to say so it sounds like it's potential  that the audits will begin to slip as all hands on deck  start to pick up the workload of figuring out what all  these taxes are and whether it's per field per production  site and so forth.  I just worry that with this change of monthly and this  change of ring-fencing, that the initial 7.5 million will  only get you so far and that we may be looking at some more  resources needed for your department, and we just want to  be aware of that possibility.  CHAIR STEVENS: Thank you, Senator. Senator Begich.  SENATOR BEGICH: Just as follow-up. Thank you,  Mr. Chairman. On Senator von Imhof's comment, it would be  your intent, though -- I mean, at one point you're saying  there won't be any long-term impact on your resources and  ability to do this, but, on the other hand, audits might  slip, which would imply there is a long-term impact. So  you would come back to the Legislature and request  additional support for auditing and those purposes if you  felt that that was happening, right?  MS. GLOVER: Senator Begich, through the Chair, that's  correct. At this point, we aren't at that six-year limit  as we had been in the past. So we do think we have some  room that we would still be able to -- if we had to focus  early on enactment of a new tax, to kind of move our  resources to that, but then also we just might push the  audit backlog back towards that six-year limitation, but we  don't expect additional resources. If we did, correct, we  would ask for that in the budget process.  SENATOR BEGICH: And, Mr. Chairman.  CHAIR STEVENS: Senator Begich.  SENATOR BEGICH: And you identified that the  7.5 million was not just for setting up the system but for  the planning process. You just said that a second ago.  And so you would anticipate in that planning process,  whatever those demands might be, and we would expect then  to see whatever accommodation you would need to make to  address the audits, correct?  MS. GLOVER: Senator Begich, through the Chair,  correct.  SENATOR BEGICH: Thanks.  CHAIR STEVENS: Thank you. Any further comments or  questions for the Department of Revenue?  Seeing and hearing none, thank you very much for being  with us. This is the last time we will be hearing this  issue, of course. It will be going through lots of other  meetings and committee hearings.  But I do want to say that, according to Statute 24 --  25.05.186, we're required, as a Legislature, to hold a  hearing on this initiative. I am pleased that the  Legislative Council has done this, seven members of the  House, seven members of the Senate.  I do appreciate Cori Mills, Department of Law, for  being here; Megan Wallace, Emily Nauman of Legislative  Counsel; and, of course, Deputy Commissioner Mike Barnhill  and the Tax Division Director, Colleen Glover. Thank you  all very much.      III. ADJOURN    CHAIR STEVENS said if there is nothing further to come  before the Council, we are adjourned.    10:52:51 AM