REPRESENTATIVE GERAN TARR

(907) 465-3424 | State Capitol Building, Room 114 | WEBSITE
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Sponsor    Statement

House Bill 111: Oil and Gas Production Tax; Payments; Credits

HOUSE RESOURCES COMMITTEE
Representative Geran Tarr, Co-Chair
Representative Andy Josephson, Co-Chair

HB 111: “OIL AND GAS PRODUCTION TAX; PAYMENTS; CREDITS” was introduced to reform the oil and gas tax regime as a component of protecting Alaska’s fiscal future. This legislation builds on the passage of HB 247 in 2016, which primarily scaled back credits available in Cook Inlet. If the oil and gas tax structure is left untouched it is estimated by the Alaska Department of Revenue that there will be $1.6 billion in purchasable credits outstanding in 2026.

The introduction of HB 111 came with the goals of minimizing the downside risk for the state, reducing the state’s annual cash outlay, strengthening the minimum tax and limiting who can earn Carried Forward Annual Loss Credits (known as “NOL”).

With current oil prices, the primary way HB 111 will generate additional revenue is with an increase in the minimum production tax from 4%, at oil prices above $25 per barrel, to 5% at all oil prices per barrel. Currently taxpayers generally pay the minimum tax until oil reaches $74 dollars a barrel. At prices below the $74 per barrel crossover HB 111 is estimated to generate between $50 and $75 million per year of additional revenue. In addition, HB 111 will harden the floor so no credits can bring the tax rate below the minimum production tax rate.

HB 111 will also reduce the per-taxable-barrel credit from $0-$8 to $0-$5. This change will increase revenue when prices are between $80 and $110 per barrel. It is estimated that this provision will generate an additional $100-$300 million revenue when oil is in this price range. Additionally, HB 111 eliminates the current “zero interest rate” provision after three years of oil and gas production tax delinquency. This provision will encourage companies to settle tax disputes with the state.

Furthermore, HB 111 reduces repurchasable credits in a variety of ways. The bill will reduce NOL credits on the North Slope from 35% to 15%. This change reduces the state’s future liability from this credit by more than half beginning on January 1, 2018. The NOL credit is the last major credit remaining on the North Slope.

With the passage of HB 111 NOL credits will no longer be able to be purchased by the state beginning in 2018. Furthermore, the amount of cash each company can receive per year for purchasable credits is reduced to $35 million from $70 million and eligibility for cash payment for credits is limited to companies producing less than 15,000 barrels per day. The current law allows companies producing less than 50,000 barrels per day to be eligible for cash payment for credits.

In addition, HB 111 specifies that the Gross Value at the Point of Production for a given property cannot go below zero. This has an impact on high tariff fields at low prices. Furthermore, HB 111 limits the use of per-taxable-barrel credits to the month in which they are earned. This has a revenue impact during a year with volatile oil prices. It prevents per barrel credits earned, but unused in a month, from being used to offset taxes during a month with higher oil prices. This is also known as the migrating credit issue.

HB 111 strengthens the State of Alaska’s oil and gas tax regime and significantly reduces the state’s liability for the repayment of purchasable credits in future years. It is estimated that there will be $900 million in purchasable credits by the end of 2017. HB 111 ends this generous tax credit system without retroactively eliminating a company’s ability to receive cash for the credits they accrued through 2017. HB 111 is one component of a fiscal solution that will ensure Alaska has a balanced, sustainable budget for years to come.


 
[signed]
REPRESENTATIVE GERAN TARR

SPONSOR STATEMENTS from Alaska House Majority Coalition

House Bill 1: Election Registration and Voting

From the office of Representative Tuck


House Bill 2: Employment Preference for Veterans

From the office of Representative Tuck


House Bill 3: National Guard Leave/Reemployment Rights

From the office of Representative Tuck


House Bill 7: Ballot Selfies

From the office of Representative Kreiss-Tomkins


House Bill 8: Protection Orders from Other Jurisdictions

From the office of Representative Edgmon


House Bill 11: RIP for Public Employees/Teachers

From the office of Representative Kawasaki


House Bill 13: No State/Municipal Funds: Federal Immigration Registry

From the office of Representative Josephson


House Bill 14: Legislative Approval for Bristol Bay Sulfide Mine

From the office of Representative Josephson


House Bill 20: Solemnize Marriage: Elected Officials

From the office of Representative Claman


House Bill 23: Survivors’ Medical Benefits – Background

From the office of Representative Josephson


House Bill 26: Nursing Mothers in Workplace

From the office of Representative Tarr


House Bill 29: Ban Sale of Genetically Modified Fish

From the office of Representative Tarr


House Bill 30: Paid Sick Leave

From the office of Representative Tarr


House Bill 31: Sexual Assault Examination Kits

From the office of Representative Tarr


House Bill 32: GMO Labeling

From the office of Representative Tarr


House Bill 37: PERS Credit for Injured Peace Officers and Firefighters

From the office of Representative Josephson


House Bill 38: Benefits for Workplace Death and Permanent Impairment

From the office of Representative Josephson


House Bill 40: Trapping Near Public Trails

From the office of Representative Josephson


House Bill 43: The Right to Try: New Drugs for the Terminally Ill

From the office of Representative Grenn


House Bill 44: Legislative Ethics: Voting & Conflicts

From the office of Representative Grenn


House Bill 47: PERS Contributions By Municipalities

From the office of Representative Foster


House Bill 49: Extend Board of Direct-Entry Midwives

From the office of Representative Kito III


House Bill 52: Alaska Voluntary Pre-Elementary Education Act

From the office of Representative Kawasaki


House Bill 54: Voluntary Termination of Life

From the office of Representative Drummond


House Bill 78: Indigenous Peoples Day

From the office of Representative Westlake


House Bill 80: Property Assessed Clean Energy (PACE) Financing

From the office of Representative Wool


House Bill 81: More Energy Efficient Buildings Act

From the office of Representative Kreiss-Tomkins


House Bill 82: Off-Highway Driver's Licenses

From the office of Representative Kreiss-Tomkins


House Bill 84: Municipal Property Tax Exemption

From the office of Representative Kreiss-Tomkins


House Bill 85: Petersburg Lands Bill

From the office of Representative Kreiss-Tomkins


House Bill 87: Conflict of Interest: Board of Fisheries/Game

From the office of Representative Stutes


House Bill 88: Board of Fisheries Membership

From the office of Representative Stutes


House Bill 89: Licensing Radiologic Technicians

From the office of Representative Tuck


House Bill 99: Oil & Gas Tax Credit Disclosures

From the office of Representative Josephson


House Bill 102: Limited Teacher Certificates

From the office of Representative Kreiss-Tomkins


House Bill 103: Optometry & Optometrists

From the office of Representative Spohnholz


House Bill 105: Gordon Haber Denali Wolf Special Management Area

From the office of Representative Josephson


House Bill 108: Fiduciary Access to Digital Assets

From the office of Representative Claman


House Bill 111: Oil and Gas Production Tax; Payments; Credits

From the office of Representative Tarr


House Bill 115: State Revenue Restructure Act

From the office of Representative Seaton


House Bill 123: Disclosure of Health Care Costs

From the office of Representative Spohnholz


House Bill 126: Organized Militia: Workers Compensation

From the office of Representative Tuck


House Bill 127: Criminal Conviction Overturned: Receive Past PFD

From the office of Representative Kawasaki


House Bill 128: Shellfish Enhancement Projects; Hatcheries

From the office of Representative Ortiz


House Bill 131: Relocation Assistance for Federal Projects/Programs

From the office of Representative Wool


House Bill 132: Transportation Network Companies

From the office of Representative Wool


House Bill 133: Fair Share for Alaska Oil Act

From the office of Representative Gara


House Bill 134: Board of Game Composition

From the office of Representative Josephson


House Bill 141: AK Workforce Investment Board; Funds

From the office of Representative Fansler


House Bill 151: Children Deserve a Loving Home Act

From the office of Representative Gara


House Bill 166: Museum Construction Grant Program

From the office of Representative Parish


House Bill 167: Repeal of Performance Reviews

From the office of Representative LeDoux


House Bill 172: Cultivation of Industrial Hemp

From the office of Representative Drummond


House Bill 173: Climate Change Response Commission

From the office of Representative Josephson


House Bill 177: Aquatic Invasive Species

From the office of Representative Tarr


House Bill 181: Legislature Per Diem and Travel Allowance

From the office of Representative Kreiss-Tomkins


House Bill 184: Prohibiting discrimination based on sexual orientation

From the office of Representative Josephson


House Bill 188: Regional Fisheries Trusts

From the office of Representative Kreiss-Tomkins


House Bill 199: Fish / Wildife Habitat Protection; Permits

From the office of Representative Stutes


House Bill 200: Top Two Non-Partisan Primary Election

From the office of Representative LeDoux


House Bill 201: Municipal Regulation of Trapping

From the office of Representative Josephson


House Bill 203: Remote Recreational Cabin Site Staking Sales

From the office of Representative Kawasaki


House Bill 204: Overtaking / Passing DOT Vehicles

From the office of Representative Kawasaki


House Bill 213: Public School Trust Fund

From the office of Representative Parish


House Bill 217: Raw Milk Sales; Food Exempt From Regulations

From the office of Representative Tarr


House Bill 218: State Veterinarian; Animals; Products

From the office of Representative Tarr


House Bill 234: Extend Alaska Health Care Commission

From the office of Representative Guttenberg


House Bill 236: Extend Senior Benefits Payment Program

From the office of Representative Kawasaki


House Concurrent Resolution 1: Legislative Ethics: Voting & Conflicts

From the office of Representative Grenn


House Concurrent Resolution 2: Respond to Adverse Childhood Experiences

From the office of Representative Tarr


House Concurrent Resolution 3: APRIL 2017: Child Abuse Prevention Month

From the office of Representative Tarr


House Joint Resolution 5: Endorsing ANWR Leasing; Related Issues

From the office of Representative Westlake


House Joint Resolution 12: Opposing Genetically Engineered Salmon

From the office of Representative Tarr


House Joint Resolution 21: Feds Respect State Reg of Marijuana

From the office of Representative Guttenberg