Legislature(2009 - 2010)

04/16/2010 10:47 AM House FIN

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CS FOR SENATE BILL NO. 309(FIN)                                                                                               
     "An  Act amending  and  extending  the exploration  and                                                                    
     development incentive  tax credit under the  Alaska Net                                                                    
     Income  Tax  Act  for operators  and  working  interest                                                                    
     owners  directly engaged  in  the  exploration for  and                                                                    
     development  of gas  from a  lease or  property in  the                                                                    
     state;  relating to  interest on  certain underpayments                                                                    
     or  overpayments of  the oil  and  gas production  tax;                                                                    
     providing a  credit against the  tax on  the production                                                                    
     of oil  and gas for drilling  certain exploration wells                                                                    
     in the  Cook Inlet  sedimentary basin; relating  to the                                                                    
     use  of the  oil and  gas tax  credit fund  to purchase                                                                    
     certain  tax  credit  certificates;  providing  for  an                                                                    
     effective date by amending the  effective date for sec.                                                                    
     2, ch.  61, SLA  2003; and  providing for  an effective                                                                    
9:55:24 PM                                                                                                                    
Senator Lesil McGuire  stated that the bill  had been vetted                                                                    
in  multiple  committees  in both  bodies.  The  Cook  Inlet                                                                    
region  had   been  facing  shortages   of  gas,   the  main                                                                    
electrification method  in the area  for the last  40 years.                                                                    
The gas  was affordable because  it was a bi-product  of oil                                                                    
drilling  in  the  region.  She   cited  a  Petro  technical                                                                    
Resources  of  Alaska report  which  revealed  that 187  oil                                                                    
wells  would need  to be  drilled between  now and  2020; in                                                                    
order to maintain supply and  demand, and to avoid importing                                                                    
the  product  from  Indonesia.  She stated  that  due  to  a                                                                    
provision put into place in 2003,  under title 43 of the tax                                                                    
code, the  Gas Exploration and Development  tax credit could                                                                    
be used to incentivize companies.  The tax credit applied to                                                                    
all  areas outside  of  the North  Slope  Borough. The  bill                                                                    
would allow for a  qualified credit against corporate income                                                                    
taxes   for   up  to   25   percent   of  the   corporations                                                                    
expenditures,  specifically in  Cook Inlet  exploration. She                                                                    
stated  that  the Senate  Finance  Committee  had agreed  to                                                                    
allow for the  credit to be taken against 75  percent of the                                                                    
tax  liability for  qualified expenditures.  The bill  would                                                                    
also  allow  credits  to   be  applied  against  exploration                                                                    
efforts in  existing known reservoirs.  The bill  included a                                                                    
sunset extension,  which had  been moved  back from  2017 to                                                                    
2016  by   the  Senate   Finance  Committee.   The  original                                                                    
statutory   frame  work   for   the   gas  exploration   and                                                                    
development  tax  credit would  have  expired  in 2013.  The                                                                    
second  part  of  the  bill   allowed  for  three  different                                                                    
corporations to  drill in the  Cook Inlet area  at different                                                                    
percentages.   Changes   had   been  incorporated   in   the                                                                    
production tax  system with respect  to ACES.  Producers had                                                                    
recommended the  reduction of progressivity  from .4  to .2.                                                                    
The department  would be  allowed to  waive interest  on the                                                                    
underpayment  of  taxes  due  to  a  retroactive  regulation                                                                    
change. The  agreed upon  rate was  roughly 11  percent. The                                                                    
bill  would permit  small explorers  to  sell their  credits                                                                    
back to  the state  without making an  investment equivalent                                                                    
to the  credits within 24  months. The change would  have no                                                                    
effect  on the  treasury,  but would  help  ensure that  the                                                                    
benefits of the credits were going to small explorers.                                                                          
10:02:35 PM                                                                                                                   
Senator McGuire stressed that the  intent of the legislation                                                                    
was to stimulate activity in  Cook Inlet and the areas south                                                                    
of  68  degrees,  and  to make  modifications  in  the  ACES                                                                    
structure.  She thought  that  the  current system  hindered                                                                    
development. For  example, this  year marked the  first time                                                                    
in  49 years  that Conoco  Phillips had  not drilled  an oil                                                                    
well in the state.                                                                                                              
10:04:46 PM                                                                                                                   
Mr. Powlowski referred to the sectional analysis:                                                                               
Section 1 amends  AS 43.20.043  (a)  by  increasing the  gas                                                                
          exploration and  development tax credit to  25% on                                                                    
          qualifies  capital expenditures  and annual  costs                                                                    
          from 10%  for investments made after  December 31,                                                                    
Section 1  changed the gas  exploration and  development tax                                                                    
credit under AS  43.20. The change was  for corporate income                                                                    
taxes and not  the production tax. Page 2, Line  16 and Line                                                                    
18 illustrated the change in the taxed percentage.                                                                              
Co-Chair Hawker requested confirmation  that the language of                                                                    
the bill had previously vetted in committee in HB 229.                                                                          
Mr. Powlowski continued to Section 2:                                                                                           
Section 2 amends AS 43.20.043 (b) to  conform to the changes                                                                
          made in section 1.                                                                                                    
Section 2 was similarly from HB 229.                                                                                            
Section 3 amends AS 43.20.043 (c) to  replace the 50% cap on                                                                
          the  application   of  the  gas   exploration  and                                                                    
          development  tax  credit  against the  Alaska  Net                                                                    
          Income Tax with a cap of 75%.                                                                                         
Section 4 amends AS  43.20.043 (e) to ensure  that the value                                                                
          of a  credit under AS 43.20.043  is passed through                                                                    
          to  consumers  in  a  rate  base  submitted  to  a                                                                    
          regulatory agency.                                                                                                    
Section 5 amends  AS  43.20.043 (g)  to  clarify  that if  a                                                                
          taxpayer  elects   to  take  a  credit   under  AS                                                                    
          43.20.043 the  taxpayer may not  also claim  a tax                                                                    
          credit   or  royalty   modification  under   other                                                                    
          identified sections of Alaska law.                                                                                    
Mr.  Powlowski explained  that Section  3, Page  3, included                                                                    
similar  language  from 229,  but  with  the change  to  the                                                                    
percentage  of   taxpayer  liability.   Section  4   was  an                                                                    
amendment  to HB  229,  and  was meant  to  ensure that  the                                                                    
benefits of a  credit flow to the consumer.  Section 5, Page                                                                    
4, Lines  8- 16, clarified  that if corporations  elected to                                                                    
take  the  25  percent  corporate  income  tax  credit,  the                                                                    
taxpayer would forgo the right to take other credits.                                                                           
10:08:17 PM                                                                                                                   
Co-Chair  Hawker  clarified  that  the  provision  had  been                                                                    
rewritten for  the sake of  lucidity. Mr.  Powlowski replied                                                                    
in the affirmative.                                                                                                             
Mr. Powlowski continued with the sectional analysis:                                                                            
Section 6 amends AS 43.20.043 (i)(1) to  allow a taxpayer to                                                                
          claim a credit under  AS 43.20.043 for development                                                                    
          in an  existing field and for  an expenditure that                                                                    
          does  not  lead  to  production.  Section  6  also                                                                    
          clarifies  that   topping  plants,   treatment  or                                                                    
          liquefied  natural  gas  and  other  manufacturing                                                                    
          plants are not qualified expenditures.                                                                                
Section 7 amends  AS  43.20.043  to clarify  that  a  credit                                                                
          under AS  43.20.043 may  be taken  in the  year in                                                                    
          which the expenditure is made  or cost is accrued,                                                                    
          or in the following tax year.                                                                                         
Section 8 amends  AS 43.55.020  by adding  a new  subsection                                                                
          that allows  the department  to waive  interest on                                                                    
          the   underpayment  or   overpayment   of  a   tax                                                                    
          liability if  the underpayment or  overpayment was                                                                    
          due to a retroactive regulation change.                                                                               
Section 9 amends  AS  43.55.025  (a)  to  create  a  special                                                                
          tiered  exploration tax  credit of  80, 90  or 100                                                                    
          percent of total exploration expenditures.                                                                            
Section 10     amends AS 43.55.025 by adding a new                                                                          
          subsection (m) to clarify  that the special credit                                                                    
          established in  section 10 is for  the first three                                                                    
          unaffiliated wells  drilled into  the pre-Tertiary                                                                    
          strata in  Cook Inlet  using a jack-up  drill rig.                                                                    
          Also caps  credits; lesser of  100% credit  or $25                                                                    
          million, lesser  of 90%  credit or  $22.5 million;                                                                    
          lesser of 80%  credit or $20.0 million.   Only one                                                                    
          credit  per   person  may  not  include   cost  to                                                                    
          construct or  manufacture a  jack-up rig  and must                                                                    
          be for  work performed  after June  30, 2010.   If                                                                    
          exploration  results  in sustained  production  of                                                                    
          oil or  gas, 50  percent of credit  received shall                                                                    
          be  repaid.   Taxpayer  obtaining  credit in  this                                                                    
          section may  not claim  credit under  AS 43.55.023                                                                    
          or another provision in this  section for the same                                                                    
          exploration  expenditure.    Provides  definitions                                                                    
          for  "jack-up  rig",  "reservoir"  and  "sustained                                                                    
Mr.  Powlowski  stated  that Page  4,  Section  6,  included                                                                    
language from HB  229, redefining property as  it related to                                                                    
the  qualified capital  investment. The  bill allowed  for a                                                                    
credit for fields where there  had already been discovery of                                                                    
gas, as the  most readily available areas that  gas would be                                                                    
found  was in  established gas  fields. Page  5 reflected  a                                                                    
change made  by the  committee in  HB 229,  removing topping                                                                    
plants, liquefied natural gas,  or manufacturing plants from                                                                    
the  list  of  qualifying facilities.  Section  7  contained                                                                    
timing language  regulating when  a taxpayer could  elect to                                                                    
take the  credits.   Section 8 marked  the division  of work                                                                    
that  was done  in HB  229 and  the governor's  initiatives.                                                                    
Page 5, Line 23 through Page  6, Line 20, was related to the                                                                    
under or overpayment of taxes  due to retroactive regulation                                                                    
change  and  the  interest  rate  applied  to  the  payment.                                                                    
Section  9  marked  another diversion,  and  was  originally                                                                    
written  into  SB  290, establishing  a  new  tiered  credit                                                                    
system within  the exploration incentive  credit of  80, 90,                                                                    
or 100  percent, or the  lesser amount described  in Section                                                                    
10. Section 10,  Page 7, Line 7, established  that the first                                                                    
3 unaffiliated  persons that drill an  off-shore exploration                                                                    
well  for the  purpose of  discovering oil  and gas  in Cook                                                                    
Inlet,  that  penetrates  at  least  3,000  feet  below  the                                                                    
Tertiary  strata,  would  receive special  credits.  If  the                                                                    
exploration leads  to a discovery,  the value of  50 percent                                                                    
of the credit would be repaid to the state.                                                                                     
Mr. Powlowski cited the sectional analysis:                                                                                     
Section 11     amends the uncodified law related to the                                                                     
          carry   forward  of   credits  accrued   under  AS                                                                    
          43.20.043 beyond the sunset date of the credit.                                                                       
Section 12     repeals AS 43.55.028 (e) (2) and (e) (3)                                                                     
          which requires a small  producer accessing the oil                                                                    
          and  gas  tax  credit   fund  to  make  additional                                                                    
          expenditures  within  24  months of  claiming  the                                                                    
Section 13     amends the uncodified law of the state of                                                                    
          Alaska to add transition language for the changes                                                                     
          made in section 8.                                                                                                    
Section 14     amends the uncodified law of the state of                                                                    
          Alaska to make section 8 retroactive to January                                                                       
          1, 2006.                                                                                                              
Section 15     amends the uncodified law of the state of                                                                    
          Alaska to conform the retroactive application of                                                                      
          regulations under section 8 to other retroactive                                                                      
          regulations issued by the department.                                                                                 
Section 16     extends the sunset of the tax credit under                                                                   
          AS 43.20.043 to 2016 from 2013.                                                                                       
Section 17     adds an effective date of July 1, 2010 for                                                                   
          section 12.                                                                                                           
Section 18     adds an immediate effective date for all                                                                     
sections other than section 17.                                                                                                 
Mr. Powlowski stated  that Section 12 would  ensure that the                                                                    
small producers could  access the benefit of  the credits as                                                                    
they were  designed. Section 13 was  transition language for                                                                    
the  changes  made  in  Section 8.  The  same  followed  for                                                                    
Sections  14 and  15.  Section  16 was  the  sunset for  the                                                                    
corporate income tax.  Section 17 was an  effective date for                                                                    
Section 12 of the bill,  which was the repealer section, and                                                                    
needed  to  be  different   than  Section  18,  because  the                                                                    
repealers needed to be related to the fiscal year.                                                                              
10:13:13 PM                                                                                                                   
Co-Chair Hawker  informed the  committee that  a significant                                                                    
amount  of  the  sectional  analysis  had  been  debated  in                                                                    
committee under  HB 229; except  Section 8, which was  a new                                                                    
section from  the governor. Sections  9 and 10 were  new and                                                                    
had not yet been vetted by the committee.                                                                                       
SENATOR  THOMAS WAGONER  stated that  the bill  outlined the                                                                    
exploration  and drilling  incentive in  the amount  of 100,                                                                    
90, and  80 percent, for  three wells that would  be drilled                                                                    
off  shore  in Cook  Inlet.  The  first  well would  be  100                                                                    
percent of exploration expenditures,  up to $25 million. The                                                                    
second well would be 90  percent of exploration expenditures                                                                    
up to  $22.5 million.  The third well  would be  80 percent,                                                                    
not  to  exceed  $20  million. He  understood  that  in  the                                                                    
industry,  producers would  share the  cost of  mobilization                                                                    
and  demobilization  of  the jack-up  rig  used  by  several                                                                    
parties. It was  required in the legislation  that the wells                                                                    
be dug  by three,  unaffiliated companies,  in an  effort to                                                                    
spread  the wells  throughout the  inlet. The  Kitchens Unit                                                                    
was 85 thousand square acres.  Another unit was the old ARCO                                                                    
Sunfish,  which sits  beneath  the  area ConocoPhillips  was                                                                    
currently producing  gas out  of. A  clause was  included in                                                                    
the  legislation  stating;  if producers  make  hydrocarbons                                                                    
commercially,  50 percent  of the  allowed exploration  cost                                                                    
would be paid back to the state.                                                                                                
10:17:36 PM                                                                                                                   
Co-Chair Hawker asked what was  unique about the jack up rig                                                                    
that made the use of  it good public policy. Senator Wagoner                                                                    
replied  that  the  jack  up   rig  was  mobile.  Stationary                                                                    
platforms had limited drilling depth  because the rigging on                                                                    
them was  not reinforced  to allow  for deeper  drilling. He                                                                    
explained that drillers  were required to drill  down to the                                                                    
Cretaceous  area  and ideally  into  the  Jurassic area.  He                                                                    
noted the  success of  the gas and  oil production  that had                                                                    
occurred in the inlet but  stressed that Cook Inlet had been                                                                    
Co-Chair  Hawker   shared  that  the  Alaska   Oil  and  Gas                                                                    
Conservation Commission  was eager to  know what was  at the                                                                    
depths of the inlet.  Senator Wagoner stated that geologists                                                                    
maintained that there  was an abundant source of  oil in the                                                                    
depths  of the  inlet. He  added that  XTO, a  subsidiary of                                                                    
ExxonMobil, had  been looking at drilling  into the Jurassic                                                                    
area  of  the  inlet,  but  had not  had  support  from  its                                                                    
corporate  office.   The  proposed  tax  credits   would  be                                                                    
incentive  for  the corporate  office  of  XTO to  lend  its                                                                    
support to the endeavor.                                                                                                        
10:21:13 PM                                                                                                                   
Representative Gara asked if the  bill limited the number of                                                                    
jack up  rigs in the  inlet. Senator Wagoner  responded that                                                                    
the state would  incentivize the first three  wells built by                                                                    
unaffiliated people. He believed that  more than one jack up                                                                    
rig would be unlikely. Two  years ago, Escopeta Oil received                                                                    
a  waiver of  the Jones  Act for  the transportation  of the                                                                    
jack up  rig in and out  of the inlet. The  waiver was still                                                                    
Representative Gara queried the  potential cost to the state                                                                    
and remained  unclear about the  total number of  wells that                                                                    
would be  incentivized. Senator  Wagoner repeated  that only                                                                    
three wells would be incentivized.                                                                                              
Senator  McGuire interjected  that the  cap was  $67,500,000                                                                    
and included just the three wells.                                                                                              
Co-Chair  Hawker pointed  out  to the  committee that  gross                                                                    
exposure to  the state was  the $67,500,000,  but provisions                                                                    
written  into  the bill  would  ensure  the recovery  of  50                                                                    
percent of the expense.                                                                                                         
10:25:16 PM                                                                                                                   
Co-Chair  Hawker stated  that sharing  the exploration  risk                                                                    
should  be  the role  of  the  state. Subsequently,  if  the                                                                    
efforts  were  successful, the  state  should  share in  the                                                                    
rewards,  in  addition  to  the  ordinary  royalty  and  tax                                                                    
structure.   He   commended   the  philosophy   behind   the                                                                    
Representative Joule asked about  the depths needed to reach                                                                    
the Jurassic  area. Senator Wagoner replied  20,000 feet and                                                                    
below. He  furthered that  in areas of  the inlet  the basin                                                                    
was shaped  like a  letter "U", which  would allow  for side                                                                    
drilling and faster access to the Jurassic area.                                                                                
10:27:31 PM                                                                                                                   
Co-Chair Hawker opened public testimony.                                                                                        
PAT GALVIN,  COMMISSIONER, DEPARTMENT OF  REVENUE, testified                                                                    
that  the  provisions  in  the   bill  that  stem  from  the                                                                    
administration's  tax credit  bill  were  identified in  the                                                                    
sectional analysis.  One was the elimination  of the current                                                                    
requirement of  the demonstration  of further  investment in                                                                    
the  state by  the  taxpayer  in order  to  receive a  state                                                                    
purchase of a credit  certificate. The change was beneficial                                                                    
to  new exploration  ventures  that  were seeking  partners,                                                                    
primarily investors.  The second  provision would  waive the                                                                    
interest that  would be  calculated against  an underpayment                                                                    
of  taxes  due solely  to  a  retroactive application  of  a                                                                    
10:31:48 PM                                                                                                                   
Commissioner  Galvin stated  that the  department recognized                                                                    
the value of  providing the tax credits.  The application of                                                                    
the  production tax  system was  varied  because there  were                                                                    
different tax systems for the  separate areas of Cook Inlet,                                                                    
"Middle Earth"  (the area between  Cook Inlet and  the North                                                                    
Slope),  and  the  North  Slope.   The  provision  took  the                                                                    
existing credit program  in the income tax  section that was                                                                    
exclusive to gas exploration activity,  and expanded it from                                                                    
10 percent  to 25 percent.  The application was  expended to                                                                    
the existing  units that had  production, but were  ripe for                                                                    
exploration. Erecting a  jack up rig in Cook  Inlet had been                                                                    
a goal of  the state for over a decade.  The upfront cost of                                                                    
the project had been the barrier,  and the state had been in                                                                    
search  of  a  funding   source  for  the  mobilization  and                                                                    
demobilization  costs.  There  is no  single  intently  with                                                                    
sufficient  interest in  exploration  opportunities in  Cook                                                                    
Inlet  to  economically  justify the  investment.  The  bill                                                                    
highlights  the credits  up front  for perspective  players,                                                                    
which could  pave the way  for a jack  up rig in  the inlet.                                                                    
The  state expects  multiple years  of wells  to be  drilled                                                                    
from  the rig  once it  was  established in  the inlet.  The                                                                    
$67,500,000 was the  maximum amount to be paid  if each well                                                                    
costs $25  million. Each  well is not  expected to  cost $25                                                                    
million, which would limit the  states exposure. Most of the                                                                    
taxpayers would be  able to write between 45  and 65 percent                                                                    
off of the state tax system.                                                                                                    
Co-Chair Hawker needed clarification  on the jack-up credit.                                                                    
He asked if the  department was comfortable placing sidebars                                                                    
around the  expenditures that would qualify  for the credit.                                                                    
Commissioner Galvin  replied yes.  He added that  the credit                                                                    
was built  around the law  and used the  existing definition                                                                    
of eligible  costs. The department  was comfortable  that it                                                                    
had  defined eligible  expenditures  and the  limits of  the                                                                    
stampede credit.                                                                                                                
10:38:05 PM                                                                                                                   
Representative  Fairclough  wondered  if  royalties  in-kind                                                                    
from the rigs  could be stored for security in  the event of                                                                    
a  state  emergency.  She  hoped that  the  issue  could  be                                                                    
discussed into the future.                                                                                                      
10:39:27 PM                                                                                                                   
Representative  Gara asked  if the  jack up  rig credit  was                                                                    
exclusive  of  other  credits. Commissioner  Galvin  replied                                                                    
yes. Representative Gara  asked if the language  of the bill                                                                    
specified  that the  income tax  credit was  also exclusive.                                                                    
Commissioner Galvin responded in the affirmative.                                                                               
Representative  Gara  commented  that  the  state  currently                                                                    
charged a very minimal tax, just  2 percent on the gross. He                                                                    
expressed  skepticism that  it  was the  tax  rate that  was                                                                    
hindering  production in  Cook Inlet.  He asserted  that the                                                                    
gas in  the inlet was  difficult to find and  that companied                                                                    
would not  explore until  there was a  utility ready  to buy                                                                    
new  gas.  How  wondered  how  the tax  rate  change  was  a                                                                    
motivating factor.  Commissioner Galvin agreed that  lack of                                                                    
drilling  in the  inlet was  not exclusive  to the  economic                                                                    
return for the  driller. He said that within  the inlet, the                                                                    
system was  inefficient, because  the market was  capped and                                                                    
limited and  the available reserves had  been exhausted. The                                                                    
amount of investment necessary to  justify the next well was                                                                    
significant.  The  credits  provided would  bring  down  the                                                                    
initial costs  in order  to justify  the investment  for the                                                                    
monetary return  provided by  the market.  He said  that the                                                                    
production of Cook  Inlet gas was not  exclusively a revenue                                                                    
source  for  state government,  but  an  issue of  providing                                                                    
energy to the people of the area.                                                                                               
10:47:09 PM                                                                                                                   
ANDREE  MCLEOD  stated that  on  July  10, 2009,  the  state                                                                    
awarded new oil and gas  explorers $193 million. She queried                                                                    
where  the  tax  credits  were.  She  stated  that  she  had                                                                    
requested  the names  of the  15 new  oil and  gas explorers                                                                    
that  had  received  the  $193 million,  and  was  told  the                                                                    
information was not  available to the public.  She asked the                                                                    
public would  be made privy as  to where the money  from the                                                                    
credits was going.                                                                                                              
Commissioner Galvin  replied that  the request of  the names                                                                    
of the  companies that received  credits, and the  amount of                                                                    
the  credits  awarded,  was   denied  because  the  taxpayer                                                                    
information  was confidential.  Her recent  modified request                                                                    
for only the names would  be considered after the Department                                                                    
of  Law  had  examined  the extent  of  the  confidentiality                                                                    
provisions under the tax law.                                                                                                   
Co-Chair Hawker  stressed that individual taxpayer  data was                                                                    
Co-Chair Hawker Closed public testimony.                                                                                        
Representative  Gara  referred  to   the  expansion  of  the                                                                    
corporate income  tax tax credit  to 25 percent.   A benefit                                                                    
of the credit was that  the well data was kept confidential.                                                                    
He assumed  that the Department  of Natural  Resources (DNR)                                                                    
had  resistance to  providing state  money and  receiving no                                                                    
data. The  data would be  necessary in order to  expand Cook                                                                    
Inlet production.  Commissioner Galvin replied that  DNR was                                                                    
not his department.                                                                                                             
10:53:12 PM                                                                                                                   
Co-Chair Stoltze MOVED to  ADOPT Amendment 1, 26-LS1629\S.1.                                                                    
Bullock, 4/16/10, by request:                                                                                                   
     Page 7, lines 8-9:                                                                                                         
          Delete "at least 3,000 feet below the base of the                                                                     
tertiary-aged strata"                                                                                                           
Co-Chair Hawker OBJECTED for the purpose of discussion.                                                                         
Mr.  Polowski explained  that the  "3,000 feet"  specificity                                                                    
had been deemed unnecessary.                                                                                                    
Co-Chair  Hawker  WITHDREW  his OBJECTION.  There  being  no                                                                    
further OBJECTION, it was so ordered.                                                                                           
Co-Chair Hawker MOVED Amendment 2 by request:                                                                                   
     To Pages 8, line 24:                                                                                                       
          Delete "2024 and insert "2020                                                                                         
Co-Chair Stoltze OBJECTED for the purpose of discussion.                                                                        
Mr. Polowski  explained the sunset for  the corporate income                                                                    
tax  credit in  the original  bill was  2020. The  amendment                                                                    
would make  the commensurate  4 year  difference on  Page 8,                                                                    
Line 24 to the sunset change on Page 9, Line 15.                                                                                
10:55:46 PM                                                                                                                   
Representative  Gara wondered  if the  corporate income  tax                                                                    
credit  had a  sunset date.  Representative McGuire  replied                                                                    
the  sunset date  was 2017,  with a  carry forward  meant to                                                                    
sunset in 2024. Representative Gara  asked if the 25 percent                                                                    
credit would revert  back to 10 percent in  2017, except for                                                                    
the  carry forward.  Mr. Polowski  believed that  the credit                                                                    
disappeared entirely upon the sunset date.                                                                                      
Vice-Chair  Thomas withdrew  his OBJECTION.  There being  no                                                                    
further OBJECTION, Amendment 2 was ADOPTED.                                                                                     
10:57:16 PM                                                                                                                   
Representative Gara WITHDREW Amendment 4:                                                                                       
     Page 4, line 6 following "chapter":                                                                                    
               (4) shall agree, in writing, to the                                                                          
applicable  provisions  of   AS  43.55.025(f)(2)  and  shall                                                                
submit to the Department of  Natural Resources all data that                                                                
would be  required to be submitted  under AS 43.55.025(f)(2)                                                                
for a credit under AS 43.55.025"                                                                                            
Co-Chair Hawker  addressed the fiscal notes.  Both reflected                                                                    
zero fiscal impact.  Revenue projections were indeterminate.                                                                    
He  wondered   if  an  indeterminate  expense   fiscal  note                                                                    
existed.  Commissioner  Galvin  said   that  there  were  no                                                                    
expenditures to be  noted on a fiscal  note. Co-Chair Hawker                                                                    
thought that  an indeterminate fiscal  note would  be needed                                                                    
because  the bill  offered a  credit that  would need  to be                                                                    
accepted by  another party. Commissioner Galvin  stated that                                                                    
the determination of potential  credits was a revenue issue.                                                                    
The  department had  not projected  the expenditures  of the                                                                    
program  into  the  future,  and had  decided  to  deem  the                                                                    
expenditures indeterminate for the time being.                                                                                  
Co-Chair  Hawker  said that  the  legislature  was under  no                                                                    
obligation  to add  money  to  2011 budget  as  a result  of                                                                    
passing the legislation.                                                                                                        
Co-Chair Stoltze MOVED to REPORT  SB 309 (FIN), 26-LS1629\S,                                                                    
as  amended, from  committee with  attached fiscal  note and                                                                    
individual recommendations.                                                                                                     
Representative Gara OBJECTED for  the purpose of discussion.                                                                    
He pointed  out to  the committee the  provision on  Page 4,                                                                    
which  originally was  a new  well credit  designed for  new                                                                    
production  in new  wells.  Not only  was  the credit  being                                                                    
expanded  to 25  percent, but  it was  being expanded  to be                                                                    
used  in fields  and  existing wells.  He expressed  concern                                                                    
with the change in policy.                                                                                                      
Representative Gara WITHDREW his OBJECTION.                                                                                     
There  being no  further  OBJECTION, HCS  CSSB 309(FIN),  as                                                                    
amended,  was   MOVED  out  of  Committee   with  individual                                                                    
recommendations and the accompanying fiscal notes.                                                                              
HCS CSSB  309(FIN) was  REPORTED out  of Committee  with "no                                                                    
recommendation" and  attached new indeterminate note  by the                                                                    
Department of Revenue and  previously published fiscal note:                                                                    
FN2 (DNR).                                                                                                                      
11:02:30 PM         RECESSED                                                                                                  
12:44:12 AM         RECONVENED                                                                                                
Co-Chair Stoltze noted that the amendment                                                                                       

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