HFIN-260506-1330

Okay, I'll call this meeting of the House Finance Committee to order. Let the record reflect that the time is currently 1:36 PM on Wednesday, May 6th, 2026. And present, we've got Representative, um, Hannan. As well as myself, Representative Co-Chair Foster. And what I thought I would do is gavel in and, uh, hoping that will bring some of our other members into the room here.

And in the meantime, what I wanted to do was just walk through what we plan to do today, and that we do have 4 items on the agenda today. First, we have a confirmation hearing for Ms. Jenna Weltson. And then the second item that we have out of four is we'll go back to Senate Bill 140. That is the fire station grant program. We have two invited testifiers.

And let me just double check to see if they're on. Looks like they are on. And then after that, the third item we have is we'll take up amendments for House Bill 271. That is the kitchen lights unit royalty modification bill. And then after that, the fourth item that we have is House Bill 195, the pharmacist prescription bill.

And we will finish taking questions on the bill before we— before the amendments are due soon, which I believe has already been sent out. I think it's probably later in my script. I'll revisit that here in a little bit. Um, and so we do have with us also Representative Allard, Co-Chair Representative Sharagi, Co-Chair Representative Josephson, Representative Bynum, Representative Tomaszewski. And, um, so all I've done so far is just kind of talk a little bit about the agenda for today.

We do have 4 items up, and So the first item of business that we have is taking up the governor's appointee, and that is for the State Assessment Review Board. And we also have with us Representative Jimmy. And so with that, we'll just take a moment to hear from Ms. Waltz. Ms. Wilson, and then we will go to questions. And we also have with us representative staff.

And so with that, Ms. Wilson, are you online?

I am, Chair. Can you hear me okay? Yes, we can hear you great. Thanks. Yes, if you would like to introduce yourself to the committee.

Thank you. Good afternoon, Chair and members of the committee. Thank you for the opportunity to be here today. My name is Jana Weltsine, and I'm a lifelong Alaskan born and raised in Fairbanks. I currently practice law in Anchorage as the principal attorney at JDW Council, which I established in 2015.

For more than 10 years, my practice has focused on administrative law, regulatory matters, and land use, with a material portion of my work involving quasi-judicial proceedings property valuation issues, and tax assessment disputes. I've handled property assessment appeals and Department of Revenue audit and determination matters, although none are directly related to oil and gas. I work routinely within administrative frameworks and require careful statutory interpretation and record-based decision-making. My work regularly involves developing and evaluating evidential records and applying governing laws and regulations to complex factual situations. I have also advised clients on business valuations, negotiations, and particularly where regulatory decisions directly impact asset value.

In addition to my legal practice, I served for over 5 years on the Anchorage Planning Board, where I participated in quasi-judicial hearings involving property rights and land use decisions. I currently serve on the Alaska Advisory Oil and Gas Royalty Board. That board works within the Department of Natural Resources to review proposed royalty transactions and royalty-in-kind contracts. We look at the financial terms, the economic impacts, and statutory factors, and then provide a written recommendation to the legislature. My experience on these boards has helped reinforce the importance of impartial, evidence-based decision-making and adherence to governing law.

I am also a commercial property owner and a landlord, which gives me practical familiarity with valuation methodologies and the financial impacts of property taxation and regulatory decisions. I understand that the State Assessment Review Board requires members to have experience with property assessments, and my background in handling assessment appeals, valuation disputes, and administrative proceedings directly aligns with that requirement. I'm seeking this appointment because I believe the board plays a critical role in ensuring that assessments are fair, consistent, and grounded in statute, and if confirmed, I will approach that responsibility with neutrality, diligence, and strong commitment to the law and applying the record. Thank you, and I'm happy to answer any questions. Great, thank you.

And can you repeat your last name?

Well, Jean, great, thank you very much, Ms. Weltsine. We've got a question from Representative Hannan. Thank you, Co-Chair Foster. Ms. Weltsine, this board does require or request that you have professional background in the area of property —assessment, and you clearly have that, but that in essence sets up a potential conflict where a member of the board might have to recuse themselves. Do you see any potential conflicts amongst clients you've served, or would you be able to recuse yourself from issues that have involved clients or yourself in property assessments?

Ms. Waltine?

Thank you for the question. And through the chair, I, I don't anticipate having any conflicts. The majority of my client base are marijuana, uh, hotels, restaurants, distributors— I'm sorry, not distributors, distillers. Um, really the hospitality business, um, is kind of where my bread and butter is. Um, I don't currently have any oil and gas clients, but if something were to come up, I would definitely be able to identify it.

Disclose it and ask the chair to make a finding that I not participate. I did that routinely in planning decisions where if there was a developer that I was working with on a project that was related to the property, I was disclosing it and then asking to be myself to be recused. Great. Thank you, Ms. Weltsing.

Other questions? Representative Ballard. Thank you, Jana. Thank you for being here. And I just want to say to the committee that Janet and I have been on opposite spectrums on some issues, um, especially pot shops coming to Eagle River.

And even though we have differences in opinions, I, I highly recommend her for this, and she's a pretty outstanding, uh, attorney and lady. So thanks for being here, Jana. Representative Josephson. Thank you, Representative Ballard. Representative Josephson.

Yes, uh, hi, Miss Wilson. We, we've spoken a couple times typically on, on the marijuana industry. My understanding of the SARB, or State Assessment Review Board, is that the most important thing you'll work on— I'm sure there are other things— is the periodic valuation of TAPs. And this went to court once, and Federal District Judge Sharon Gleason, I think if we dug through her order, it would say something like If TAPS didn't exist today, this is say 2020, we would rebuild it because it's still so profitable. That is the throughput and production.

That's not a question, I realize, but are you ready to tackle complex issues involving the value of TAPS, which I think will be heard by an administrative hearing officer in the first instance. Ms. Waltzing, thank you for the question, and it's a fair question. It's a pretty complex and broad area, and I've been doing a lot of homework to get caught up to speed. And, you know, I'm actually going through the Gleason opinion now because the hearings are next week, and that's one of the controlling cases that dictate the law that we're supposed to follow.

So Typically in my practice, you, you need to learn new things and become experts quickly in new areas. And thankfully for us, the two other sitting board members of the SAR board are tax assessors, retired tax assessors. So that's really great to have that experience. I'm going to do what I do with every case and read everything, listen to the evidence, question the experts,.

Experts, question the parties, and absorb as much of the information as I can, and then apply the law to the record. And that's the best I think I can do, and the best I think anybody can do in that position. All right, thank you, Ms. Wilson. Okay, any further questions? Okay, um, seeing none, sounds like folks don't have any opposition at this point.

Um, so with that, I would entertain a motion. Representative Sharagi. Thank you, Co-Chair Foster. The House Finance Committee has reviewed the qualifications of the governor's appointee and recommends that the following name be forwarded to the joint session for consideration: Jana Weltsin— Weltsin of the State Assessment Review Board. This does not reflect an intention by any member to vote for or against these individuals during any further session for the purpose of confirmation.

Okay. Any objection? Seeing none, Ms. Jenna Weltzin's name will be forwarded to the joint session for consideration for the position of the state assessment— state assessment review board. So with that, Ms. Weltzin, any comments before we move on to the next item?

No, thank you for your time. Great, thank you very much. And to the committee, just a reminder to sign the paperwork on, on the recommendation. And so with that, thank you very much, Ms. Weltsine. We're going to move now to the item that we left off on this morning, and that was the SB 140, and that is the firefighters bill.

So with that, Senator Steadman, as well as your staff, Ms. Margo Youngberg, if you could please come to the table, please put themselves on the record. And I think we're going to jump right into the two testifiers that we left off, um, where we left off. And that is the first one is Mr. Forrest Quipper. And Mr. Quipper, if you could put yourself on the record and begin your invited testimony.

Yeah, thank you, Co-Chair Foster. Can you hear me okay? Yes, we can hear you.

Good afternoon, co-chair, members of the House Finance Committee. For the record, my name is Forrest Kiper, and I'm speaking today on behalf of the Alaska Fire Chiefs Association in strong unified support of Senate Bill 140. I also serve as the fire chief at the University Fire Department in Fairbanks. The Alaska Fire Chiefs Association represents fire service leaders from every region in our state. From urban, rural, road system, remote, volunteer, combination, and career departments.

SB 140 reflects some powerful and important holistic statewide support for Alaska's emergency services infrastructure. This bill is not about one department. It's not about one region. It's about Alaska. Across our state, fire stations are aging beyond their useful life.

Some were built in the '60s. Many will no longer meet seismic standards, cancer prevention best practices, decontamination requirements, or ADA compliance requirements. Others were built for a different era, before modern apparatus sizes, before advanced EMS delivery, and before today's training and response demands. SB 130 addresses two critical needs. First, replacement and reconstruction where facilities are no longer viable.

Renovation is not always possible. In many communities, full replacement is the only responsible—. I'm so sorry, Mr. Quipper. You sound very hollow and it's kind of muffled. I don't know if maybe you're on the speakerphone.

Yeah, is this any better? That's perfect. Thank you.

Okay. Sorry about that. Second, infrastructure upgrades, ensuring our stations are safe, resilient, and capable of housing modern firefighting and EMS equipment. The total needs identified by the Alaska Fire Chiefs exceeds $347 million for new construction and $22 million in renovations. This number may seem large, but it reflects decades of deferred maintenance and the reality of Alaska's construction environment.

Fire stations are not optional infrastructure. They are critical response hubs. They house EMS, disaster response capability, wildfire response assets, and community resilience operations. They protect homes, schools, businesses, industry, and in many cases, the economic engines of our communities. Investing in fire stations is investing in life safety, It is investing in faster response times.

It is investing in firefighter health and cancer prevention, and it is investing in public safety readiness statewide. SB 140 represents a thoughtful partnership between the legislature and the local government with a 50% local match. It recognizes that while communities are doing everything they can locally, the scale of need requires state partnership. On behalf of the Alaska Fire Chiefs Association, I respectfully ask for your support of SB 140. This bill strengthens fire service capability across Alaska and ensures we can continue protecting our communities today and for generations to come.

Thank you for your time and consideration. I'm happy to answer any questions. Great, thank you very much. Questions from the committee? Seeing none, Mr. Quipper, thank you very much for calling in.

Next up for the second testifier we have, it's Steven Reidyn. Mr. Reidyn, if you could— Reidyn, I believe. If you could put yourself on the record. Looks like you're calling in from Ketchikan. [Speaker:STEVEN_REIDYN] Hi, this is Steve Reidyn, the current president of the Alaska State Fire Chiefs Association.

Thank you for allowing us to speak today. This bill is very important for, as Forrest has said, for the fire service in Alaska. As we live in a lot of small communities in Southeast Alaska, Western Alaska, Northern Alaska, those smaller communities are unable to support locally the funding needed to replace fire stations that are old and antiquated. Hoonah, Angoon, Craig, Klawock, Kaufman Cove, all of the smaller fire departments in the state don't have the tax base to fully fund replacing stations and increased cost of construction and this cancer safety that we talk about. The size of the fire apparatus.

Every department in the state, our call volume increases every year, which leaves us even farther in the hole because we don't have the adequate quarters to house people to respond to those incidents. So we, as a, as a association, fully support Senate Bill 140. It's been a pleasure working with Senator Steadman on this and today the House Finance Committee. Thank you. Great.

And we've got a question, Representative Bynum. Thank you, Co-Chair Foster. Through the chair, Chief Rydeen, I appreciate your hard work and your service to our community and fire stations across the state, specifically in Southeast, and just want to say appreciate your service. And that I am a co-sponsor on the bill in support of it. Just want to let you know I appreciate you.

Okay. And thank you. I don't see any further questions. Thank you very much, Mr. Reidyn, for— oh, Representative Galvin, question for Mr. Reidyn, invited testimony. I'll pass on that.

I'll wait until we get to the final round of questions. Thank you. Sure. And I think I mentioned we've got Representative Moore earlier, but just in case, Representative Moore, and then also Representative Galvin. And any further questions for Mr. Iadine?

Okay, seeing none, thank you very much, Mr. Iadine, for calling in. And so we left off with the line questions for the sponsor, and in the lineup I've got Representative Tomaszewski, Stapp, Allard, Hannam, Hannan, Bynum, and Galvin. So with that, Representative Tomaszewski.

Thank you, Co-Chair Foster. So I think my question has to do with the, the way this grant is funded. You've mentioned it's similar to the Harbors grant. Can you just give a quick explanation about how the Harbors grant works and then how this is similar in process? Senator Steadman.

Thank you, Mr. Chairman. Senator Steadman from District A.

The harbor matching grant fund, the harbor masters and the community submit to the department and they create the list over at DOT. And then we have the discussion as the appropriators how much, if anything, we want to fund it. So in that program, say we decided to put $10 million in.

A round number, they would— and it's a 50% match capped at $5 million, and that needs to probably be updated because that number's been held constant for almost a decade and a half anyway. So they just go down the list until the $10 million spent. And if they didn't— if you don't have enough money to completely fund your project, they jump over to the next one. And if they don't have enough money to fund that, they jump over to the next one until the money's gone. So the smaller appropriation requests have an opportunity to get funded also.

And that's an annual decision we make here in the legislature if we decide to fund it or not. So then it's a, it's a 50-50 match, and the municipality or whoever the fire department is owned by is then required to put in the match. And if they're ready, then the project moves forward until the grant money's gone. That's kind of the way it goes. Senator Steadman.

Thank you, Mr. Chairman. Yes, they would be, in their application, would be talking about their 50%. And they could, you know, issue bonds, have cash, whatever. And then in the harbor facilities, you have to have an enterprise fund, maintain them, you know, charge your, your mortgage rates so they don't come back. The whole idea there was so they don't come back to the state for a harbor replacement.

We fund it once, we're done. We go to the next one and build the next one and build the next one. We're not sucked back to do maintenance. And I would expect the This program would run very similar. The communities would have to maintain their fire hall.

Okay, thank you. Okay, uh, Representative Stout. Yeah, thank you, uh, Kuchere Foster, through the chair to Senator Steadman or staff. Thanks for being here, by the way, folks. Always a pleasure to see the illustrious Senate Finance folks here at our wonderful House Finance Committee.

Um, I just— really quick question for me. I understand the bill, pretty simple. Thanks for bringing it up. I will say nothing I read in the bill, uh, kind of directs the Department of structure it how you seem to want it structured. I don't know if that's a requirement.

I'll lean on your years of being in the building, but I just don't see anything in the bill that says that the harbor or the fire chiefs themselves are the ones who are going to be actually putting together their list. It just relies on the department. So I don't know if that needs to change or if you think that's acceptable. Through the chair, Senator Steffen. Yes, thank you, Mr. Chairman.

Well, the department will write up the regulations. I would expect the harbor ma— or the harbor master— the fire chiefs to have their own dialogue, you know, but individually submitting them. It's a pretty close-knit system similar to the harbor master's operation. And then the department would just, you know, rank them as far as priority concerns. For instance, if somebody had a fire hall that burned down and they needed an immediate need, I would think they would get consideration, or if somebody One of the communities had one ready to collapse on top of the fire trucks, things of that nature.

But there is no intention— because there's an earlier question offline where one of the members had— there's no intention where the, where the community would go out and build a fire hall and then submit for 50% reimbursement. We got the same issue with dealing with K-12. Schools. There's no intent for that. The communities that don't want to, you know, utilize this list or this program could just fund their own fire department.

Representative Scott? Oh, good. Okay, next up, Representative Allard, Hannon, and Galvin. Representative Allard. Thank you.

I don't remember what I wanted to say, and I sometimes— Coach, I think you do that on purpose so that I don't have anything to say when we come back. But I guess Really just thank you for including the Chugiak Volunteer Fire Department, Senator Steadman. It's important that folks understand that I think we only have 3— 2 or 3 paid individuals at the Chugiak Fire Department, and out of that we have hundreds of volunteers. And we're not all in the service area. I am.

I actually have a— whatever that fire thing is, it's yellow, that's in front of my yard, hydrant. Anyways, I have it right in front of my yard, but I know a lot of people right down the road in my district don't, and the Chugiak Volunteer Fire Department is super important. So thank you for bringing this forward. I appreciate it. That's it.

Thank you. Okay, Representative Hannon. Thank you, Co-Chair Foster. Uh, Senator Steadman, similar to Representative Stapp, you've articulated an interest in running this similar to the Harbor Grants program, which The three elements that I think are missing, and I guess I'm looking to potentially propose some amendments. The Harbor Grants Program has a cap.

Granted, I believe that cap needs to have been moved up, but that keeps a $100 million project from usurping the ability to keep everybody else from being funded for a long period of time. The additional requirement of an enterprise fund, so not only does the local community have to have buy-in of 50% towards the grant are requesting, but they also have to have built-in ongoing maintenance fees.

And, you know, I can't imagine how you'd have an enterprise fund for a fire hall, but some kind of local contribution in an ongoing way. So if we're building, especially for volunteer fire departments, if we build it but there is no ongoing maintenance of it, 20 years later we're going to need to rebuild it. And then representative staff already brought up the point, and I don't know that this is in statute. I believe the first two parts are in the Harbor Grant statute, but that the harbormasters do the ranking and placement annually for those grants to go out. And I don't know if we need to place in statute that this would be the Fire Chiefs Association to do the ranking of those so that it is not a political decision of members of finance committees putting the capital in and matching, you know, my project in my district is a $13 million project, and fancily, we got $13 million in the grant that year.

So we don't want that to happen. But we want to make sure this is going forward. I think no one is opposed to doing better in our fire service response, but I want to make sure that we have structured this in a way that it meets those things that you have expressed. So, Senator Steadman. Thank you, Mr. Chairman.

Yeah, I think that's, you know, an area where the committee should have some dialogue and some input. Clearly, this is a collective process. Um, you know, I would, um, you know, you could do it through the regulations or you could do it through amendment and put it in statute or intent language of the statutes, however we want to work it. I'm pretty flexible on that. I would agree that you don't want one community put in a $50 million request and nobody else gets anything for years.

That doesn't work. In the harbor programs, sometimes they break their harbors down in phases. If it's a $20 million harbor, they might build it in two phases. I think the building would be a little bit more difficult to do that, but I would— definitely think some dialogue on, on that amongst the committee members and come up with something, because what we want to end up with is a fair process for both the smaller and the bigger fire halls. So when you build a fire hall for fire— 5 or 6 fire trucks, that's quite a bit more expensive than if you build a fire hall for 2.

Representative Hannon. In your research, perhaps this is for your staff, of what small, medium, and large fire halls is there, would you have a suggested cap amount of how much the grant could be for any one grant? So with Harbors, I believe it's set at $5 million, and we really need to bump that up because $5 million doesn't buy you much. $5 Million from the, you know, so you get $10 million, but Harbors frequently are tens, increments much bigger than that. So I don't know if in fire halls is $10 million reasonable cap, or is a $20 million grant more what we need?

Senator Stidman? Yeah, well, that's a good question because they can get very expensive, and I think that's something that committee should have some dialogue on. But I think 5 would be maybe a little low. Maybe you started at 10, or we run the program for a while at some number and see how it goes and come back and adjust it. 'Cause I don't— no matter how hard we try, we probably won't get it perfect.

It'll need some adjustment. So I think we just make a good faith effort. And, you know, if we end up with a low number, say it's $7.5 million or some number, and it only covers a quarter of a fire hall, that's better than nothing. But we could adjust it in the future. And the idea of having the— I think Commerce in their regulations would probably want to have a little bit of thumbprint on the ranking so you don't have a politically positioned fire chief amongst all the fire chiefs that ends up with the lion's share.

Because we're trying to have a fair process here, not only with the politics of the.

Appropriations within the legislature, removed as much as possible, but also in the ranking.

Okay. Representative Gallivan. Thank you, Co-Chair Foster. Through the chair, Senator, thank you for putting this forward. I appreciate especially seeing all of these examples of those who have benefited.

And what came to my mind was an old friend of mine named George Quinto I've worked with years ago, who worked in villages to put together firefighting carts, if you will. So this would have been— and I don't even know if they're in existence anymore, but I had to wonder. I thought— he's in my heart right now. And I just think about the smaller villages that maybe don't have fire stations, but would certainly benefit from firefighting apparatus. And in their case, what I remember was that most of the funding for that was federal funding.

And so I just wondered if you would consider for the smaller villages that maybe don't need a whole station, or I'm sure they would love it, but if you would consider some sort of an opportunity for them to be able to apply for support for firefighting as well. Senator Stidman. Thank you. I think that It would probably be better through the CAPSIS, the regular process, when we start looking at fire trucks and ambulances and those type of things. Also training.

There has been a request to have training station, you know, fire station stuff included. But this is envisioned more to help the construction of fire halls themselves. Follow-up, if you would. Representative Galvin. I appreciate that.

And I guess when I hear the word CAPSIS, I have been here now 4 years and I have not I have not once seen anything through CAPSES for my district, and so that worries me. I think that clearly we don't have funding enough anyway, it seems, to move CAPSES projects. So I was wondering how that would work unless you're, I guess, in a certain position where CAPSES projects are possible. I'm sure if you're in charge of the budget, maybe that would become a reality.

And if I may ask one more line of questioning, and I've been informed that the program is called Code Blue. So I do appreciate that, that some of that is getting into the capital budget. So for that program related to villages, I think. Is Code Blue the ambulances and Code Red is for the fire carts? I believe.

I could be wrong, but, um, okay, something along those lines. And I do have another question related to how the funds are distributed. I think what I learned was the model of the Harbor Grants program was in consideration, and I wanted to ask you, given that the Burger Program for Education has an apparatus set up wherein the smaller districts and the larger districts are given appropriately weighted measurements or opportunities for getting grants. If you've looked at that and considered that model, and also if you've considered helping the smaller communities have find assistance in pulling together their ask for the needed firefighting stations. Senator Stittmann.

No, no, I wasn't— not familiar with the one program that you talked about off the top of my head. And the second, the very small communities I assume if they have a fire department, they would have a fire chief or they'd be involved in it. So I haven't really thought about the little tiny communities that are basically unstructured and don't have a fire department to speak of. But if they're a village that has a volunteer fire department and have a truck, fire truck, then they need a building to put the fire truck in. It's a firehouse.

So they'd be able to apply. Representative Galvin. Thank you. Well, I guess some do have volunteers to help put out the fires, and I think about protecting a school, for example. I know that we've had several burn down, and in some of the smaller communities, when one home goes, Many blow up.

And so that's why they have these carts or what's called Code Blue. I'm just bringing this up. You may know more about it, so forgive me if I'm stepping on your questions. But that's why I brought that one up. I don't know about a fire chief or their opportunity to get into that circle to make sure they're getting grants.

So I'm not sure. But that's why I bring up the Bond Reimbursement and Grant Review Committee from the Department of Education. That's something I'm more familiar with because it has been doing a lot of work to ensure that these public education buildings get to the highest needs, completely irrespective of politics. It really— they do their due diligence, and I've been fortunate to watch that process come together, and I really do appreciate how important it is that our public dollars that are protecting, especially protecting our services, are distributed. And so I would love to talk to you further about that offline when the moment presents itself.

Thank you. Okay. I don't see any further questions. Representative Bynum. Thank you, Co-Chair Foster.

Through the Chair, Senator Stemmann, thank you for being here today and bringing this program for it. I know it's important to communities. When I was going through the Harbor Grant program, in there they, you know, it's definitely a lot more detailed in how and when funds are being distributed. And I believe that a lot of that detail has to do with the factor you'd mentioned with the maintenance component not being authorized. And there's some other things that are tied to other revenue sources.

So I know that we specifically outline revenue sources to be dedicated— or not dedicated, we don't use those terms— that may be used for the purposes of those Harbor Grant funds. Was your intention for this particular fund that we just use general fund, UGF, for this? And, and if that was the only source, was there any ideas that were floated around of using other fees or funds from the state or taxes or anything like that that would be dedicated or not dedicated that may be used for the appropriation purpose. Senator Steadman? I think designated is the word you're looking for.

Yes, thank you. Just thinking back to my time, the end of the last century, not quite at the end of the last century. When I was on the assembly, the fire hall was— fire department was run out of the general fund, and it wasn't really a complete separate enterprise fund like the utility or the harbor fund. And some, maybe some communities have it compartmentalized, but the short answer is no, we didn't have— not given that much consideration other than the community would have to come up with their 50%. How they came up with it is kind of left up to them, but they'd have to show that they have half of the cost or more if it's, you know, to get the thing built.

But I don't think we've had, you know, when we talk about the maintenance, I don't think we've had the maintenance challenges with fire halls around the state that we had with the harbors. Yeah. Because the state was responsible for major maintenance of the harbors for years and they didn't do it. And created a mess where City Hall is responsible for the fire truck stations, and the local residents do not want their fire hall falling down on their fire truck. Thank you for that, Senator.

And just a quick follow-up comment, Representative Bynum. Thank you, Co-Chair Foster. I think it's probably for the best that we don't try to point to any particular designated funds or taxes or fees to be dedicated to this purpose because we do that in many other places in statute and I have yet to see really where we apply that. So whether it's harbor grants or whether it's ATIA or some of the other things that we actually put taxes out there for, we don't dedicate them to it. So it's probably best that we just use UGF as, as needed from the legislature.

So I appreciate you bringing this bill forward. Okay, any further questions? Seeing none, we'll go ahead and set the bill aside for now. I get the feeling there may not be a lot of other questions on this, and so I just want to make sure that folks aren't interested in amendments. Just throwing that out there for folks to think about, and we'll come back to Representative Ballard here in a second.

Senator Steadman? Yeah, just in closing, I, I would hope and suggest that, that the committee members think about.

Program, take a look at the Harbor Matching Grant Fund, come up with other ideas. We don't have all the good ideas on the other side of the building. You know, we need to work together collectively, and, and not only that, probably come back in 4 or 5 years and adjust it and tweak it. So I would suggest that if you're interested in the program, to give it some thought, and let's try to put something together that works for all our communities. Okay.

Thank you. And I know there's some conversation about maybe making some adjustments, so I'll make sure that we do have an amendment deadline set. And I'm not sure. I think maybe there might have been some interest in moving, but if, if there is some interest in doing amendments, then we should allow for that. So are there any further questions or comments?

Representative Ballard? Yeah. Are there any? Is anybody going to do an amendment? Otherwise, can't we just pass the bill out today?

Representative Hannon? Yes, I think I said them directly. I have 3 areas that I want to explore amendments, and that's setting a maximum cap.

Establishing the review process for the grant allocation being the harbormasters, and then looking at some commitment, probably intent language for local maintenance on an annual basis. Representative Lindholm. Yes, thank you, uh, Co-Chair Foster. And if, if the member from, um, Juneau would allow, I'd love to work with you on that, and we could just try to get it knocked out. Okay.

Seeing that there's probably not a lot of other questions and maybe we are ready for amendments we might get via email, we'll probably set an amendment deadline and then reiterate that at our next meeting. So with that, I think Senator Steadman, you probably had your final comments. You're good. Thank you for your time. Okay.

Thank you very much. And before we jump right into the next bill, we do have two more bills. But before we— if we end up going long today and people's staff are still here, I just want to reiterate the amendment deadline that we set on Monday for HB 195, the pharmacist prescription authority. My intent was to state— reiterate that amendment deadline at the end of our meeting, but I thought maybe I should do that also now just in case folks are thinking about trying to get their staff to move on some of those. So the deadline Deadline for that is— let me just double-check— it's due tomorrow, Thursday, May 7th, at noon.

And so just to give folks a reminder there. And so we're going to jump right into the next bill, and that is House Bill 2— oh, Representative Bynum. Thank you, Co-Chair Foster. Just really quick, that was 195. You said tomorrow is the deadline for the amendments on that.

Farm assist prescription authority. And we set that on Monday, but I just wanted to remind folks today. So do we know if we have amendments, intended amendments coming in for that bill? It was my understanding, yes, we do. And I think that I know the sponsor is working with folks on some language.

Thank you. So with that, we'll jump right into the next bill. And I am looking for the sponsor. Is he— Oh, okay. Um, let's take a brief at ease here.

Okay, House Finance back on record at 2:22 PM on Wednesday, May 6th. And, um, so our next bill is House Bill 271, that is the Kitchen Lights Unit Royalty Modification Bill. And we do have 9 amendments to take up, and I'd like to invite up Representative Fields as well as his staff, Mr. Michael Noddy. And if you could just give us the short version summary of the bill just to remind folks what we're looking at, and then we'll jump right into the amendments. Thank you, Mr.

Chair. Zach Fields, House District 17. HB 271 as it stands before you puts into statute a royalty modification to 3% for the kitchen lights unit. Perfect. Thank you.

So with that, The first amendment is Representative Galvin. Thank you, Co-Chair Foster. I will not offer Amendment 1 at this time. Okay. Amendment 1 not offered at this time.

Representative Galvin, Amendment 2. Thank you. I move Amendment 2. Okay. Object.

Representative Galvin. Thank you. So what this amendment does is it terminates the royalty modification if the price of natural gas originating from Cook Inlet for residential users exceeds $17.44 per 1,000 cubic feet. And to explain how we arrived at $17.44 figure, it's $17.44 represents 25% increase from the $13.95 Alaska residential price that was cited in Hexa's presentation to this committee. So if gas rises higher than $17.44, then HEC should have no problem making the economics of their project pencil out.

This amendment allows for that extra headroom for the project to benefit from a reduced royalty rate for a period of time before the higher price of gas would take over. Royalty relief is, is really meant to help challenged projects. That's why it was put together. And so this allows for that grace period of time. And should the price change significantly, the royalty relief then wouldn't make sense.

So that's what this amendment does. Representative Fields. Thank you, Mr. Chair. I think this amendment says Cook Inlet and not the Kitchen Lights unit.

So as written, it would potentially terminate royalty modification based on what happens elsewhere in the inlet. $1,744, If the committee wishes to adopt that number, may also want to peg that to inflation because inflation tends to exist. Thank you. Okay. Questions?

We've got Representative Bynum and then staff. Representative Bynum. Thank you, Co-Chair Foster.

I did have a couple questions, and I think the bill sponsor kind of keyed on one of those. It was talking about— this just says Cook Inlet, from Cook Inlet for residential users. Just kind of an idea around that, that's the whole field or specifically for kitchen lights.

So that's one question that I have for the maker.

Of the amendment. And then the second part of that is there was some conversation about inflation. I do believe, and I could be corrected on this, that the majority of cost on these are tied to contracts, long-term contracts. I've asked about inflation or inflationary factors before when we talk about natural gas in general and/or other fuel sources. It's not similar to what we do with oil.

Very different because of this nature and structure of contracts. So I'd be a little leery about that. And then, um, the— this doesn't seem to tie to any percentage or blend. It just seems like it's just an overall price, and it doesn't also include bulk sales to like utilities. So I was just hoping for some feedback Representative Galvin, with regard to both Representative Fields and Representative Bynum.

Yeah, thank you. Good, good point there around the bulk fuel, but what it's doing though is just setting some parameter out there that, listen, if the price is going to go up this amount, then you likely are not in a challenge situation. We're trying to do things that frankly what the Department of Natural Resources should be doing because they can actually look inside of all of the numbers and have a better sense of it than what we have here. And I'm happy to make a conceptual amendment if I may. Representative Galvin.

Thank you. That if the contract price for kitchen lights unit exceeds that price. I think that makes a lot more sense. Okay. And I'll object.

I move amendment 1 to amendment 1— amendment 1 to amendment 2. Okay. And I will object for purpose of discussion. Representative Fields, did you have a question on that? Not on that conceptual amendment.

I did have to draw committee members' attention to the fact that the price to residential users is harder to track if you are trying to make $17.44 be a reasonable number. The last Hill Corp contract— sorry, the last HEX contract with NSAR, I believe, is right around $13. So I think if we actually adopt— if you adopted this amendment today, it would probably invalidate royalty modification. Objection. So just something to be aware of.

I think it's actually— this is a fairly— I like the concept, but I think it's actually a fairly unworkable amendment as written. And you're referring to the parent's amendment, not the conceptual amendment, is that correct? Both, yeah. Okay, okay. I'm going to remove my objection to the conceptual amendment number 1 to amendment number 2.

Hearing no further objection, uh, conceptual amendment's been adopted. That takes us to the Amendment 2. And with that, Representative Fields, your comments were with regard to the amendments in the next So do you have any further comments on Representative Bynum's 3 questions? So I think again you were talking about the price when it comes to a bulk purchase. And this isn't dealing with that.

We are just saying, okay, if this price out there exceeds this amount, then we can presume that the bulk price is also changing accordingly. And again, what we are trying to do is deal with issues that are related to knowing that they likely won't be as challenged of a field as it would be, as it currently is. And that's why DNR put this in place. Frankly, there's no debate that 3% for today is likely a really good idea. The question is, what can we do to avoid it being in perpetuity And so I want to make sure to comment on that, that we were trying to put some guardrails in.

And so this guardrail of a— when it floats up above 25% of where it is today, I don't think in the amendment itself it says anything about $13. That's just what we use as our base price. So that shouldn't be a problem. But it does specify 17 $1.44. So it puts in there something in statute.

So I know that it was at 13.95 NCF— MCF at one point, and that is how we came up with 25% above that. I'm going to come back to Representative Bynum right away, but I just want to say that we do have Representative Stat and Representative Hannan, but I do want to finish this line of questioning. So Representative Bynum. Thank you, Co-Chair Foster. I want to clarify the record.

I said bulk, and really what I meant was utility gas contracts. I guess it could be implied to be the same thing, but more technically that it would be utility supply contracts. Okay. Representative Galvin. Thank you.

And so I just want to be clear that we're looking at the economics of the kitchen lights unit. So tying it to their contract price makes sure that if they are bringing in far more revenue than what was expected when the state granted the relief, then the royalty relief should likely go away. Representative Stout. Yeah, I think, co-chair Foster, so I appreciate the maker of the amendment. I don't think I'm going to support it, and I'm going to give a few reasons why.

Number 1, so just because you're fixing the price to the consumer doesn't actually necessarily measure profitability of the company. Like, most of that cost is CapEx and OpEx. So this amendment basically does nothing in the event that capital expenditures for production in this field rise to a level where this is just the price they have to sell the gas at. So again, for example, it's outside of inflationary pressure, right? So that's another factor that the bill sponsor had talked about.

But I can see scenarios, especially in this current price climate, it was with tariffs and stuff like that, where the capital expenditures to get the gas out of the unit allows for the price to float up without, you know, marginal returns back to the company.

I think maybe a better way of doing that would be some sort of cap on profitability of the sale, but I mean, I want to say most of this stuff is already RCA regulated, so again, I don't know what the RCA allows for profitability on domestic consumption of gas, but I know they take that into account when they do the rate cases. So that's all I have to say. I don't know if the amendment maker has any comments on that. Thanks. Any, any comments?

With regard to the RCA and them already regulating that, I will say also the Department of Natural Resources is regulating. They have further detailed information than we do, especially about rising costs. I think that was mentioned by Representative Bynum. I understand, and you did too, you brought up whether or not we can accurately assess the rising costs according to the rising sales, and that is all information that the Department of Natural Resources typically are more privy to than we are. Similarly, they also are more privy to information related to confidential underlying costs that are associated with taxes, and that this is all information that we are not privy to.

So I want to, you know, be respectful of that. And in that way, I can understand how you have your concerns. Representative Hannon. It's been addressed. Okay.

Any further questions on Amendment Number 2 as amended? Seeing none. Representative Galvin, wrap up. Yeah. So I do encourage us to consider this royalty relief is based on modeling.

And we don't have that capability here. This company has said that they can produce profitability at $13.95. That is what they have said. So this just says that if they can get far more, then the relief goes away. Okay.

I will maintain my objection. And I don't have any comments. Anyone else have any comments? Seeing none, Could I ask a question? Sure.

Representative Johnson. I apologize for coming out of sequence. Just for clarification, and I bet there's someone in the room that knows the answer, but your amendment would terminate what they enjoy now as well, the reduction to 3%, or does it suspend the permanent reduction to 3%? Representative Galvin.

If the price goes up 25% more than where it is now from the $1,395 that was presented to us. If it gets to that point, then it is terminated now. Okay. Thank you. I believe that's the way alleged legal did it.

Representative Fields, were you okay? Okay. With that, we are on Amendment Number 2 as amended by Conceptual Amendment Number 1. And Madam Clerk, if you could please call the roll. Representative Bynum.

Pass. Representative Moore. No. Representative Galvin. Yes.

Representative Hannan. Yes. Representative Stapp. No. Representative Tomaszewski.

No. Representative Jimmy. No. Representative Bynum? Yes.

Representative Josephson? Pass.

Representative Schraggy? No. Representative Josephson? Yes. Representative.

Foster? No.

4 Yay, 6 nay. So on a vote of 4 to 6, Amendment Number 2 has not been adopted. That takes us to Amendment Number 3, and that's Representative Galvin. Thank you. I move Amendment Number 3.

Hey, object! Representative Galvin. Uh, so this amendment is pretty simple. I would actually consider it sort of a cleanup amendment. It is removing the words each month of the gross value of production from the lease.

And this gets a little bit in the weeds, but I think it's important, um, for us to understand. Alaska, uh, oil and gas leases apply to the royalty rate against what is referred to as the, quote, "gross value at the point of production," end quote. That's typically the way it's written. Leases have extensive language that defines how this is calculated. The original language in the bill would confuse application of the lease language.

Again, it makes it confusing for those who are implementing this. The amendment removes the language that is not consistent with the underlying leases themselves. Representative Fields, do you see this as a friendly amendment? I don't think that this amendment substantively changes the bill. The department did not tell me the existing language is confusing, but since this amendment does not substantively change the bill, At all, I do not object to it.

Okay. Representative Schroegge. Kucher Foster, do we have the department online and could they speak to this? Mr. Ryan Fitzpatrick, if you're online, can you put yourself on the record?

Yes, hello. This is Ryan Fitzpatrick for the record, commercial manager with the Alaska Department of Natural Resources, Division of Oil and Gas. I believe Representative Galvin does make a valid point terminology used in Section 2, the gross value of production from the lease, is different from the wording that we typically use, the gross value at the point of production. I believe given the discussion, we would probably interpret it, the statute, as the same. But if it's possible to clean it up, I think it may make it just a little bit cleaner in application.

And follow-up to that, sir. Shragi. Yeah, thank you, Coach Foster. So the Amendment Number 3 proposes deleting on page 2, line 7 through 11, evaluate the verbiage there. Is that acceptable, or do you need different verbiage inserted?

Mr. Fitzpatrick. Through the Chair, I think simply deleting the reference to gross value of production from the lease and leaving the reference to the royalty rate being reduced to 3%, I think that would be sufficient to clarify the issue. As I said, I don't know that it's a huge issue, but Certainly, if we can remove the language that may be inconsistent with our current terminology, that just cleans things up. I don't think anything additional would be necessary, though. Okay, very good.

Thank you. That's helpful. Okay. I don't see any further questions. Do you have any wrap-up, Representative Galvin?

No. Again, I think it's a cleanup, and it will refer to what the department has always used as that definition, as opposed to slipping in something that isn't typical in their leases. That's all I have. And Representative Stout? Yeah, I just have a quick question.

I don't know if the— I had to— this is just how Ledge Legal drafts it. I don't know why they draft it with that language, I guess would be my only question, but I'm not going to hold the amendment up. So, okay. And we don't have anyone online from Ledge Legal, unfortunately, but Good point. Representative Josephson.

Did the DNR individual—. Mr. Fitzpatrick? Yeah, Mr. Fitzpatrick, if he's still with us. Mr. Fitzpatrick, you seem to say that Amendment 3 offers some— is helpful, but then you also seem to say it could say is 3% of the gross value at the point of production, calling for an amendment to the amendment without saying so directly. Mr. Fitzpatrick.

Representative Josephson, through the chair, sorry, rereading the language again real quick. I think with the, with the language that would be removed by the amendment, it would read that the leases within the kitchen lights unit, so that royalty rate for leases within the kitchen lights unit is 3%. Um, and so I think that specifies the royalty rates and the leases to which it applies to. Um, the additional language around gross value of production from the lease, as I indicated before, that, um, I think we would interpret that as the gross value at the point of production for those leases, but it's not the typical terminology that we use within the lease documents itself or just within our normal course of business. So I would say either one, either eliminating the terminology that says gross value of production or amending it to say gross value at the point of production.

Again, I see it as, you know, potentially cleanup may be useful. I don't, I I don't think it would change how we interpret this provision, but definitely making it consistent with our existing terminology, either, you know, by amending this or just removing the inconsistent language, I think just helps clean it up.

Thank you. Okay. Okay, and I remove my objection to Amendment 3, and hearing no further objection, Amendment 3 has been adopted. That takes us to Amendment 4. Representative Galvin.

I move amendment number 4. Okay, and I'll object. Representative Galvin. Okay, uh, thank you. So this amendment caps the royalty modification relief at 10 years, and so it may not expend— extend past January 1st, 2036.

This amendment sets what I believe is a timeline, um, an appropriate timeline for royalty relief as a state. We don't want to have indefinite royalty relief for any company.

10 Years is more than sufficient time to get their operation up and running and profitable. In fact, what we saw in the fiscal note was that the target for gross revenue likely would be around 2032. And so I want to ask the members to, if they wish to, refer to that fiscal note, and that may be helpful for them in deciding whether or not this is a good amendment. Okay, thank you very much. Representative Fields.

Well, um, royalty modification until 2036 is probably better than no royalty modification at all, but if you set an end date, then you will tend to curtail capital investment as you approach that end date. So I think it's a choice for the committee of, do we want to do that? I think there's a fairly strong record that costs in the basin continue to rise inexorably, as will happen with any aging field. So there's— this is not the kind of industry where you acquire your capital, you scale up, and then you're going to make money forever in an aging field. That's just not how it works.

So I think if, in the committee's judgment, we should be curtailing Cook Inlet production as we approach 2036, is a good amendment to adopt. I also want to note this says a royalty modification may not extend, and I don't know that we want to be that prescriptive. I think if the committee wants to set an end date, we— it might be better to tell the department, go analyze it. And actually, the subsequent amendment introduced by Representative Bynum essentially asked the department to give us the information so we can make those decisions in the future. So I would say this amendment would probably result in less cooking light gas production than the bill, than the underlying bill.

If it's not changed. Okay. Questions of the Committee? Can we have a brief at ease? Brief at ease.

Okay, House Finance back on record at 2:50 PM. We're going to take an extended at ease. The sponsor is down in Resources, they're working on the gas line bill. I think that's going to be moved out here pretty soon, so We're going to take it at ease until we get the sponsor back. So we'll let folks know when we come back and find it.

So we'll be at ease at 2:50 PM.

Okay, House Finance back on record at 3:20 PM, and we left off at Amendment Number 4. And just to get us moving in the same direction, Representative Galvin, can you just give the high-level recap of what Amendment Number 4 does? Uh, sure. So, um, I think we've covered that essentially what we're doing is we're putting that end date of 10 years from, from now. It sets the appropriate timeline for the royalty relief.

And as a state, we don't want to give indefinite royalty relief for any one company. And 10 years is more than sufficient time to get their operation up and running. And then I'm happy to give some wrap-up comments if it's time for that. Let me know. Okay.

Representative Fields and then staff. Representative Fields. Just since we're revisiting it, I do not view this as a friendly amendment. I would ask that members consider voting no. Thank you.

Representative Staff. Yeah, thank you, Co-Chair Foster. I'm not actually opposed to putting some sort of end date on this. I just think kind of the issue I have with 10 years is companies are going to go out and they're going to buy and they're going to get loans for their equipment, right? And based on the cost structure, length and time will determine how the banks and stuff are going to look at their financials.

And if you have a piece of equipment that you're trying to amortize over 20 or 30 years, or maybe in 15 years, and you only got a cost structure for 10 years, that creates a lot of challenge when you look at financing for stuff. So I think that this is definitely something I'd like to revisit, probably a later date in the need, but I don't think I'll be in support of it currently. Thanks. Okay, Representative Bynum. Thank you, Co-Chair Foster.

Through the Chair, I appreciate the maker of the amendment and the intent behind it. I was thinking very similar to this, had lots of conversations. I think there will be some other amendments that are coming that help address this for the legislature, but don't put this hard stop on it. So I do appreciate the intent. Okay, further questions or comments?

Okay, Representative Galvin, wrap up. Thank you. First of all, this doesn't really put a hard stop on anything. Certainly the company can go back to the Department of Natural Resources and say— open up their books confidentially and explain that they are challenged and need this longer. That is a system that has been in place for many, many years.

So I want to make sure that I put that out on record. Also, I want to put out on record, we heard something about that if we put an end date, it's going to curtail capital development until as close to that end date as possible. And I would actually make the opposite argument. By setting a sunset on the royalty relief, it would create an incentive to invest and increase production while the low royalty rate applies with certainty. And also it would accelerate production, which is what we want.

Hex has testified that they want to pursue a jackup rig, and they contend that $712 million gross revenue cap in their DNR granted royalty relief acts as a disincentive. So we are being asked to provide them with the same 3% they currently enjoy, but shield them from the relief possibly going away if they hit the $712 million gross revenue cap. They have said that if they bring in a jackup rig, they will recover their investment in the first few years of production. By placing a 10-year end to what we give them here, we provide them with certainty that they will have royalty relief for the full 10 years, even if they hit the $712 million cap before that.

And we've been told they likely will hit that before that. We've been told perhaps 6, 7 years out. On the other hand, we are not changing the underlying royalty relief given by DNR. If 10 years goes by and they have not exceeded $712 million in gross revenue, they will still have 3% under DNR's decision. I encourage your support for Amendment 4.

Okay. And I'll maintain my objection. And so with that, Madam Clerk, Amendment Number 4, if you could please call the roll. Representative Galvin. Yes.

Representative Jimmy. No. Representative Moore. No. Representative Hannan.

Yes. Representative Bynum. No. Representative Stepp. No.

Representative Tomaszewski. No. Representative Allard. No. Representative Josephson.

Yes. Representative Schraggy. No. Representative Foster. No.

3 Yay, 8 nay. So on a vote of 3 yay to 8 nay, Amendment Number 4 has not been adopted. That takes us to Amendment Number 5. Representative Galvin. Move Amendment 5.

Representative, object. Representative Galvin. This amendment terminates the royalty modification if the commissioner of the Department of Natural Resources determines that the lease has not complied with its DNR-approved development plans. This amendment ensures that HEX will remain committed and accountable.

To its goal of discovering and extracting natural gas for the benefit of and the use of the people of Alaska. As the legislature, we don't have the technical expertise that is necessary to determine whether the lessee is in fault of a unit plan of development. However, the Department of Natural Resources does, and we entrust that they will be effective in overseeing the progress of this project.

Okay. Representative Josephson, or— yeah, Representative Josephson. Question for Mr. Fitzpatrick. Okay.

Mr. Fitzpatrick, if you're there with us in presumably Anchorage, question on Amendment 5 from myself, Andy Josephson. The DNR relief required compliance with a plan of development. Is that true? Mr. Fitzpatrick.

And through the chair, Representative Josephson, through the chair, for the record, this is Ryan Fitzpatrick, Alaska Department of Natural Resources. Yes, that is correct. That was a term that was included in the royalty modification decision that was issued by DNR. And follow-up, follow-up.

Mr. Fitzpatrick, does the in perpetuity extension in House Bill 271, does that require compliance with the same plan of development or what's your understanding? Mr. Fitzpatrick?

Representative Josephson, through the chair. I think our understanding, um, and stand to be corrected on this, but our understanding is that as currently drafted, HB 271 would not include that same qualification on royalty modification, so that even if there was a default under a plan of development, the royalty modification that was granted under HB 271 would continue. All right. Thank you. Okay.

Representative Fields. Thank you. I wanted Mr. Fitzpatrick to confirm, I believe that a leaseholder of any lease in the basin will continue to have to meet its obligations to develop whether or not that leaseholder has a royalty modification in place. So I'm very comfortable pushing a— producer to develop. I guess the only thing I would want to observe is, because there's one jack-up rig in the inlet owned by Hilcorp— Hilcorp has a very demanding schedule to meet its contractual obligations to Hills— uh, to Enstar.

My only hesitation with this language is I wouldn't want to put a producer like Hex in the position of not meeting its goals under a POD because Hilcorp had to use that jack-up rig for a longer time to meet its contractual obligations. So not out of any malice, but it was meeting its contractual obligations first. I would appreciate if Mr. Fitzpatrick would confirm that regardless of passage of this bill, Hexenfury must produce as a leaseholder in the basin, and that obligation in terms of a plan of development exists regardless of whether the committee adopts this language. Representative Bynum. Thank you, Co-Chair Foster.

Through the Chair, Representative Fields, Representative, you were just mentioning the contractual leasing of the jack-up rig, and I was under the assumption that there are already contracts in place for the use of that, and those were very clearly defined in when those uses could occur. So is that not accurate? Representative Fields. Probably— this is Zach Fields for the record— probably one of the companies would better be able to comment on how they've managed the rig. I think it's fair to say both companies have worked really hard to maximize use of that rig, which is owned by Hilcorp.

Follow-up? Thank you. As a quick follow-up through the chair, Representative Fields, but I am under the understanding that when HEX has the ability to use that rig, it's not just on an ad hoc basis. They have a contract that allows them to have specific use of that rig. For the purposes of exploration and drilling?

[SPEAKING SPANISH] Through the Chair, they attempt to plan to the extent possible, but because it is owned by Hilcorp, the time at which Hex operations with the rig can start is sometimes contingent on a certain amount of work by Hilcorp being done. So there is a significant degree of uncertainty, which is very reasonable because Hilcorp has to meet its contractual obligations too. My only point is a company like Hex might lay out a plan of development, we want to meet a certain amount of production and they might not be able to meet that because of unavailability of a rig from Hilcorp. Now this is in the short term because the subsequent amendment is going to address a jackup rig available in the long term. But in the short term, the constraints around the jackup rig are very real.

Thank you. Okay.

So Representative Fields, sounds like you maybe had some concerns, but I just wanted to make sure that's what I heard with regard to the amendments. Rep. Backfields for the record. I, I would vote no on the amendment. I think if it's adopted, the bill is still worth moving forward. Thank you.

Representative Galvin, did you want to—. Okay. Representative Josephson. Yes, another question, if I might, Mr. Chair, for Mr. Fitzpatrick.

Mr. Fitzpatrick, Representative Josephson here again. My question is, have you read the language of Amendment 5?

Mr. Fitzpatrick.

Uh, Representative Josephson, through the chair, yes, I have a copy of Amendment 5 in front of me right now. Um, had a chance to review that briefly before the hearing. All right, I, I guess my question is, uh, it talks about, um, failure to comply or being in default of a unit plan of development. And curing that default. And I'm just trying to see how you interpret this vis-à-vis the $712 million of gross revenue.

Does the compliance requirement that you prepared in coordination with HEC does it— once it expires and the $712 million is met, Is there a plan of development to terminate?

Does that make sense? I mean, Representative Josephson, through the chair, maybe in an attempt to clarify. So the, the plan of development is annually adopted for each oil and gas unit within the state of Alaska by the operator. That's submitted to the Department of Natural Resources, reviewed by our division, and either approved or sent back to the operator for additional questions, additional work, perhaps to impose additional conditions on that, that plan of development. The plan of development itself doesn't necessarily tie back to the $712 million gross revenue target.

That was part of the royalty modification decision, which was a separate administrative decision. So the, the plan of development is something that's renewed annually in order to make sure that the unit is being managed properly, that it's being developed as a prudent operator would. And then the $712 million is separate from that, and just the qualification that was put on the department's determination for royalty modification that the department granted for Pursuant to AS3805-180J. All right, follow-up. Follow-up.

Would not accessing the jack-up rig that we have amendments on the jack-up rig, but would not accessing a jack-up rig count as a kind of default? And I understand that I'm not unsympathetic to HEX's position, but notwithstanding my sympathy, would it would it count as a kind of default? Mr. Fitzpatrick. Representative Josephson, through the chair, without attempting to be pre-decisional about the specific circumstances, I do think it would be a fact-based inquiry. You know, the department would have to look at— if you were to assume that there was a plan of development that was approved that called for a specific level of drilling and that drilling were not to occur, we would take a look at the reasons for that.

If the reasons for that were simply that, you know, HexFury and Hilcorp had reached an agreement, there was, you know, scheduling variation in Hilcorp's previous work, and the rig wasn't released in time to complete the full development that was called for by HexFury, I strongly suspect that that would mitigate against the department finding a producer in default under a plan of development. But if on the other hand, the reason for that schedule variance was, or the reason that the rig wasn't secured was through some mismanagement of the operator themselves, then that would likely lean towards a finding of default. So it's a fact-based inquiry. It kind of looks at, you know, did the operator act as a reasonable and prudent operator would.

One last question, if I might. Representative Josephson.

Mr. Fitzpatrick, do you read Amendment 5 as referring to termination of the awarded DNR royalty reduction or termination of the extension, the indefinite extension of that royalty? Reduction. Mr. Fitzpatrick.

Representative Jessison, through the chair, as I'm looking at Amendment 5, I believe that the language of this amendment would refer to the termination of the extended royalty modification granted under HB 271. However, as there is similar provisions in the DNR granted royalty modification, if that were to still be in force at the time of potential default, that provision within the royalty modification would likely trigger a termination of the royalty modification itself. So the provision in Amendment 5 wouldn't work a repeal of the— or termination of the department's royalty modification decision, but similar provisions in that royalty modification decision would also terminate that decision coincident with the triggering of the clause under Amendment 5.

All right. So, if I might, I apologize. So I think what you're saying is Amendment 5 concerns the bill and its extension indefinitely, but you're saying that the relief your agency afforded also has a termination clause that could default HECS if it didn't pursue Diligently, I guess, its plan of development. There's basically two terminations potentially. Mr. Fitzpatrick.

Representative Josephson, through the chair, yes, that's correct. They would both be terminated. And just to correct, it wouldn't necessarily be at the stage of the initial default. The department affords a cure opportunity once the default is identified, and so there is a period where the department works with the operator to try and get the default cured and the unit back on track. So it's only if the cure— if the operator doesn't make good use of the cure period to secure that default.

Alright, thank you. Further questions? Seeing none, wrap up. Representative Galvin. Thank you.

I encourage folks to consider this seriously. Again, this is ensuring that HECS remains committed and accountable to the goal of discovering and extracting gas. We have made a really great decision in giving royalty relief. I think that that was done by the department accordingly, and now they're back asking for forever relief. And I just want to be clear that we also want to put in place that a plan of development, that we're not completely going around what, um, the department has been set out to do, and that is to ensure that, uh, royalty modification under this subsection may be terminated.

And again, that's still allowing for curing. It's allowing for, um, the commissioner to have a look at all of the facts. Certainly at any point, if there's any trouble getting to a jack-up rig, or perhaps something else goes awry, they are able to go and meet with the commissioner and kind of respect the process that is in place. And the plan of development, I want to make mention that that can be changed always. Again, that's— and it happens a lot.

This is not something that our committee is really familiar with, so I want to make sure that we're aware of that. It happens. And then, um, you know, it has to be a pretty big dispute for DNR to end up in default on that. So, um, they truly do look at this carefully and want to make sure that these companies continue to develop. That's the job.

So anyhow, that's what the, the point of this is, is to keep some of the integrity as much as we can in what's happening with the Department of Revenue and Department of Natural Resources and their policy. So thanks. Representative Josephson. I may be out of sequence again, and I apologize. I'll try not to do that again, Mr. Chairman.

But along with the extension sought by the bill, the plan of development, as I understand it, under the DNR relief is more intense. It's more stringent than the bill would require. And so I, I think this amendment is pretty important. And I'm going to support it.

Do we have any further comments or questions? Okay. Seeing none, the objection is maintained. So with that, Madam Clerk, on Amendment Number 5, if you could please call the roll. Representative Bynum.

No. Representative Moore. No. Representative Allard.

No. Representative Galvin. Yes. Representative Hannan. Yes.

Representative Stapp. Representative Tomaszewski. No. Representative Jimmy. No.

Representative Josephson. Yes. Representative Schraggy. Yes. Representative Foster.

No. 4 Yea, 7 nay. So on a vote of 4 yea to 7 nay, Amendment Number 5 has not been adopted. That next takes us to Amendment Number 6. Representative Stout.

Thank you, Chair Foster. I move Amendment Number 6. Representative Stout. Yeah, thank you, Co-Chair Foster. Amendment number 6, amendment I'm going to call the Save Anchorage Amendment or Save South Central Amendment, Mr. Speaker, Mr. Co-Chair.

Basically what it does is it looks at the basin as a whole and it looks to reduce the royalty rate just to a basis of 5, not affecting the current kitchen lights units in any way, shape, or form, under the condition that the producers of the companies can demonstrate to DNR that a reduction in royalty will result in a cost savings for the end users of natural gas. In this case, the users of Southcentral. The Cook Inlet Basin is an aging basin that has lots of economic challenges. And I think that we are almost certainly, unless we get a gas line constructed and at an economical rate for Alaskan consumers, almost certainly going to run into a crisis of production in the aging basin that will unfortunately lead to really challenging cost of living So I do have a quick conceptual amendment for the underlying amendment, Mr. Co-chair, and that would just be to— I'm going to go ahead and move Conceptual Amendment 1 to Amendment Number 6, and that would be just to delete the words on page 2, line 9 and 10, each month of the gross value of production for the lease, to conform with Representative Galvin's earlier amendment. Okay, and I'll just object for a moment to see if we have any questions to the conceptual amendment number 1 to amendment number 6.

Do we have any questions on the conceptual amendment? Representative Bynum. Thank you, Co-Chair Foster. Through the chair, Representative Staff, what was the—. That was page 2, lines 9 and 10, words after the words 5% on line 9.

And what are we removing after 5%? The same language that was removed earlier in Rep. Galvin's amendment. Each month of the gross value of production from the lease. That exact phrase.

Representative Josephson. Question. Question for the maker.

The language at 11 and 12, page 2, will result in cost savings to end users, end users of natural gas. Who would be the decider of that? Who would enforce that? Um, Co-Chair Foster, I'd love to answer that, but could we get through the conceptual amendment language first? Questions on the conceptual amendment?

Okay, seeing none, I'm going to remove my objection to conceptual amendment number 1 to amendment number 6. And seeing no further objection, the amendment is adopted. And it takes us back to the amendment number 6. Representative Depp. Yeah, thank you, Co-Chair Foster.

Through the Chair to Co-Chair Johnson, the same folks who regulate leases currently, DNR basically, and that there's language in the amendment later that talks about how the subsection can be terminated by the Commissioner if he determines royalty revocation was assigned without approval of the Commissioner. So it's the Department of Natural Resources who's going to make those determinations.

Okay, Representative Fields and then Galvin. To follow up, this is Backfields, to follow up answering that question, we did ask if we were going to ask for information such as this, should we have DOR in addition to DNR collect the information. Basically, the department's told us because of the depth of information DNR gets, they are a very appropriate entity to make sure that such savings would be passed on.

Okay, Representative Galvin. Thank you. This is a question for the maker of the amendment. So I see you've structured the process as the commissioner shall modify the royalty to 5% if the lessee can demonstrate a lower price to consumers. And then I note that the rest of the statute is structured as the commissioner may modify the royalty if if the lessee can demonstrate that it is needed.

So my question is whether the shift from may to shall was intentional, and if so, what did you intend the difference to be? Because it'll still be a judgment call whether the demonstration has been made by the lessee. Yeah. Thank you, Co-Chair Foster. Through the Chair to Rep. Galvin, if I understand the question accurately, the language in the bill basically just instructs the the department to basin-wide royalty use reduction to 5% in the event that they can demonstrate the fact that there will be cost savings to the consumer, right?

So to me, the language is relatively immaterial, just that's the way that the alleged legal folks drafted it to shall. Obviously, if you were to put may, that would kind of change the nature of the process in which the— you could always have different type of process. I just prefer the language as it is because when I worked with alleged legal department, that's kind of what they suggested that we should utilize. Representative Galvin? Yeah, I just, uh, again, through the chair, um, maybe hearing from Ledge Legal if that was, um, something that should be fixed or if that would be just considered a technical.

Either way, I just want to make sure that your intention is on record. Thank you. Okay, Representative Josephson and then Hannan. Representative Josephson.

Yes, through the chair, Representative Stepp. So my understanding about this amendment is that the key words are cost savings. But if the goal is production such that we don't need to import, production such that we don't need a gas line, the— there could be cost savings and no cure of the crisis. Is that fair? If we agree for purposes of my question, there's a crisis.

Representative Staff. Through the chair to Representative Jostensen. I don't know if anything that the state can do, particularly in the Cook Inlet Basin, is gonna stave off a potential need for imports or a requirement for the gas line. So I don't know because I don't have a crystal ball. All I can say is clearly we are just effectively running out of time.

Before the state just kind of walks off this cliff. I mean, if you look at the storage capacity and utilization this year in Cigna, I mean, we're getting to really scary places in South Central's gas supply for domestic demand. And I don't even know, to be quite honest, if producers are going to be able to take advantage of this and demonstrate that there will be cost savings and they'll get a royalty reduction. My argument is gonna be that unless we do something that has a positive impact on the cost-based structure in the Cook Inlet Basin, right, we may be facing a crisis of a magnitude that the state has not seen in a very, very long time. Follow-up?

Representative Josephson. Representative Step, are there two commissioners at play in lines 13 and 15, page 2? Is one from Revenue and one from Natural Resources? Representative Staff.

Through the chair to Representative Josephson. I'm going to go— I mean, I don't— I don't— I don't know. I assume it's just the DNR commissioner because those are the ones who assigned the modifications. Right. And that's typically how that process works.

And that's why the language consistent with J5 of the section is in the amendment.

If I might, Representative Josephson, for Mr. Fitzpatrick. Mr. Fitzpatrick, when you were a participant— I know you're part of a team in royalty reduction for HEX— was that approved by either Commissioner Boyles or Commissioner Crowther? I mean, they were aware of it, right? Mr. Fitzpatrick. Uh, Representative Josephson, through the chair, the decision under our royalty modification statute is a decision by the commissioner of the Department of Natural Resources.

So yes, I believe that was signed by then-Commissioner Boyle when that royalty modification was granted. But yeah, I think this statute, as I understand it, would fit within Alaska Statute 3805.180. It would be a new subsection under that statute. And I believe the definition sections for that particular chapter or section provide the references to the commissioner— mean references to the Commissioner of Natural Resources. So I think within this new subsection, we would read both references to commissioner as being the commissioner of DNR.

Follow-up? Follow-up. Mr. Fitzpatrick, how do you make sense of, or how do you understand lines 12 to 15? If the commissioner must sign off on royalty reduction, how could the commissioner not know whether he or she did or didn't sign off on royalty reduction? Mr. Fitzpatrick.

Representative Josephson, through the chair, as I read these particular lines, um, this looks like a continuation of the application of one of the provisions that's in our current royalty modification statute that says that if a royalty modification is granted by the Commissioner, that that royalty modification is not then assignable, absence a new decision by the Commissioner allowing that assignment. So as I read that, essentially anytime there's a, a transfer of working interest ownership in a Cook Inlet unit that were subject to this, this provision, there would have to be a fresh decision by the Commissioner at that point in time that that royalty modification would still meet the requirements under HB 271 as amended by this amendment. Alright, thank you. Okay, and let's see here. I think just— I think along that line of thinking, before we go to the next two questions, Representative Fields wanted to address, I think, something.

Yes, Zach Fields for the record. Thank you, Mr. Chair. First, I want to say this is a friendly amendment. I support it.

Thank you for the representative staff for working with me on it. Number two, I wanted to to answer Representative Josephson's question about cost savings to end users. I think there are two ways the department could look at that and a producer could look at that under this amendment. Number one, a producer could say, hey, if you grant a royalty reduction down to 5%, we are going to sell gas to a utility at a correspondingly lower rate. The other way, which is probably the more important way, is that a producer could say, look, this— here's a particular area we want to explore and produce, and it is simply not economic to do that at all under current royalty rates.

If the— if there's a royalty modification down to as low as 5%, we will be able to explore and produce there at all, and the overall cost of that gas sold to a utility would be less than the comparative cost of an import, which would also be a cost savings to the consumer. So I think there's one scenario in which you're simply producing and selling at a lower cost to the consumer. The more important scenario is you're actually getting more production because you're making more of the basin viable as it ages. So we are less reliant on imported LNG. Thank you.

Let me just do a check-in. I do have Representative Hannan and Galvin. Representative Hannan, are you going to have a different question or is it along these same lines? In which case, I might go to Representative Galvin just to— okay, different. Representative Galvin, is it on the same subject?

It's along the same lines. I wonder if we could It's a question for the department if possible. [Speaker:CHAIR] Okay. Representative Galvin. [Speaker:GALVIN] Thanks.

So Mr. Fitzpatrick, we've heard that every field has different economics and I'm assuming there's an application process to implement this. Do you envision this applying to all leases then held by a single lessee if they can demonstrate the cost savings for just one lease, or do they need to make the demonstration for every lease to get the royalty relief? Or is it done on a field-by-field basis or unit-by-unit basis? What is your vision in seeing this amendment? Mr. Fitzpatrick.

Let's see, apologies, I'm parsing through the language as compared to the original text of the legislation. Um.

Uh, let's see, Representative Galvin, through the chair, I think as I read this amendment,.

And the original text of the legislation, the language on page 2, lines 2 and 3 follow a determination on a lease-by-lease basis. And so I suspect that it would be that a, a working interest owner would have to demonstrate that the royalty reduction in that particular lease would meet those requirements. So it wouldn't necessarily be every lease that a working interest owner has. It would be any lease that meets those requirements, basically being that the royalty reduction would result in cost savings. Follow-up?

Follow-up? Follow-up? Thank you. I guess the question also is for the maker of the amendment. I want to make sure that this follows the vision that you had, whether it is field by field, lease by lease.

Is it something— is that how you foresee it? Did you have a vision for that? Because I know every field has its own economics. So just want to check in. Yeah.

Thank you. Through the chair to Representative Galvin. I think lease by lease is an acceptable way to do it. I think DNR has enough expertise to be able to kind of run that however they see fit. I always try to be as kind of as least prescriptive as I can, especially, you know, when we talk about complicated subjects like field economics, right?

But no, I trust folks at DNR to be able to look at cost structures on fields and then modify leases in the event that companies can demonstrate that they're saving Alaska consumers money. Okay, and that was Representative Stepp. And any further Rep. O'Kay, we'll go next to Representative Hannon. Thank you, co-chair. Mr. Fitzpatrick, have any other lessees in Cook Inlet requested royalty relief in the last 24 months?

Mr. Fitzpatrick.

Representative Hannon, through the chair, yes, and I apologize, it's a The particular unit's escaping me, but following the Kitchen Lights Unit royalty modification decision, there had been another applicant that had come to the department under our royalty modification statute, and there was an additional royalty modification granted sometime after the Kitchen Lights Unit. Um, and off the top of my head, I believe that that was the only other one. But I may check on that after this and get back to the committee if that's incorrect. Can you tell us what the rate of royalty relief has been reduced to in that other relief? Or I guess first, was it granted and what was it reduced to?

Mr. Fitzpatrick. Representative Hannan, through the chair. Yes, that royalty modification was also granted. I believe that it was also granted to 3%. I believe it was also on a gross value basis, but I wasn't working that particular royalty modification, so the details don't come back to me as quickly.

Again, I can— I'll double-check that after this hearing, and if any of that's incorrect, we'll update the committee. Okay. I've got a couple more. Thank you, Chair Foster. Mr. Fitzpatrick, are there— so this amendment is setting the relief at 5%.

Can you tell me, are there currently any leases whose standard royalty is 5% or less on any of existing leases? So I'm looking to see is if it— I'm trying to figure out how many this potentially applies to. Mr. Fitzpatrick.

Representative Hannon, through the chair, the only leases that within the Cook Inlet Basin, the only leases that would be at 5% or less are the leases associated with the Kitchen Lights Unit royalty modification. And I believe the other royalty modification decisions I alluded to, I believe those are the only two royalty modification decisions the department has granted in Cook Inlet, taking royalties down to 3%. I believe those are the only two in Cook Inlet, but again, I'll double-check that. Thank you. Beyond that, the only other leases that I would be aware of is, as the committee may be aware, recently the department has offered leases on a net profit share basis where net profit shares were the revenue components instead of royalties.

And so those leases have a 0% royalty but a net profit share component. So the royalty burden on those, what we would term the royalty burden, not the net profit share burden, but the royalty burden is zero on those particular leases. But I don't believe any of those leases are in production at this point. Okay. And there has only been a handful.

Okay, thank you. And then my last question, I believe, is for the sponsor of the amendment. And I'm just looking to understand on 11 and 12, the phrasing of will result in cost savings to the end users of the natural gas. So for the gas purchasers who have long-term contracts, would we expect that the royalty relief would therefore modify that contract automatically, or to get the royalty relief, let's say, and NSTAR is that— NSTAR needs to give— pass that relief on to the consumers. Is that how you as the maker of the amendment was envisioning that?

Representative Statler. Yeah, thank you, Co-Chair Foster, through the Chair, Representative Hannan. I think Representative Fields kind of had an overarching view about his answer to the question. I would say it doesn't really matter to me the granular details of how the consumption or the users at the end stage of the domestically produced gas get the cost reduction. And there's a lot of latitude for DNR to be able to deliver that when they do a royalty modification.

But your scenario works perfectly from my perspective. I mean, that'd be one way to do it. Increased overall production in the basin driving the overall cost down would also do that. Yeah, I mean, I try to be as least prescriptive and allow our folks at DNR to be able to kind of ensure that, that the consumer at the end of the day, the everyday Alaskan, is the one who's going to benefit from this type of policy. And then I guess they have one last representative.

And then so, Representative Staff, this bill started out with the kitchen lights at a 3% and extending that. —In its passage, in my read of that amendment, theirs would immediately go up to 5%. Does that— or would theirs remain at 3% for some duration? Through the chair, Representative Hannan, this section of the bill actually does not affect the kitchen lights unit modification in the underlying bill. Okay.

Okay. I've got 2 people here, Representative Fields and Josephson. Thank you. Zach Fields for the record. I did just want to note this amendment requires a very significant degree of transparency and accountability.

Transparency for producers, accountability of producers in lines 10 through 12. If producers choose not to be more transparent, they do not get the royalty modification. So it is not a blank check in any way, and I think that's a strong component of the amendment and why I support it. Thank you. Just want to also recognize that we have in the audience with us Representative Ruffridge.

Thanks for joining us this almost evening, feels like. Representative Josephson. Thank you, Mr. Chairman. Mr. Fitzpatrick, my work or others' work has suggested that the foregone revenue from your HECS team's reduction is in the range of, I think it's $6 to $8 million per year. So DNR's royalty relief extended to HECS is in that $6 to $8 million range.

First of all, do you agree that that's roughly the foregone state revenue? Mr. Fitzpatrick.

Representative Josephson, through the chair, that would be approximately the correct range, yes. I think it varies depending on, you know, obviously price and production. When we granted the royalty modification, I think the operator brought production on at a stronger rate than we had even envisaged, which is good for the inlet. And so that, uh, did increase kind of the, the foregone revenue component in the early years. Obviously that shortened the duration of the royalty modification under that gross revenue target.

But yes, current— as things currently stand, it's in the neighborhood of $5 to $6 to $8 million a year, in that range. Follow-up? What would the foregone revenue be if everyone enjoyed a maximum royalty of 5%? Mr. Fitzpatrick.

Representative Josephson, through the chair, I apologize. That would take some analysis of royalty filings and cooking it.

To get that number. That may take us a little bit to pull together. Follow-up? Follow-up? Let me posit some numbers.

If there's $60 million MCF at $10 price and a reduction of 7.5% from 12.5% to 5%, could that— could this single amendment forego as much as $45 million? Mr. Fitzpatrick.

Representative Josephson, through the chair, I would really have to run the numbers to be comfortable positing a particular amount. Additionally, my understanding of the amendments, and I may be corrected, is that the amendment would require an application and an individual determination before that royalty is reduced, and so As I understand it, it wouldn't automatically apply to every lease within the inlets. But again, if I'm incorrect, I stand corrected there. Follow-up? Is HECZ about 10% of the basin's production?

Or is it—. Representative Justesen. Representative Justesen, through the Chair. I believe that's approximately correct, kind of on an average annual basis since the the work that they've done recently, it varies sometimes fairly significantly on a month-to-month basis. But maybe up to 10%, sometimes a little bit less than that.

Follow-up? Follow-up? Who's the biggest producer and roughly what percent do they produce?

Representative Josephson, through the chair, Hilcorp is the largest producer of natural gas within the Cook Inlet. And without having looked at the numbers formally, it would be in the range of around 85% of the production, is my recollection. Follow-up? Follow-up? Hillcorp is an ambitious company and a successful company.

It seems like they could produce in such a way that it resulted in cost savings to end users of natural gas. Is that fair? Is that— in other words, I understand your hesitancy to predict what the total foregone revenue might be, but I guess— am I right, Mr. Fitzpatrick, that the potential foregone revenue could approach $45, $50 million, could it not? Potential. Mr. Fitzpatrick.

Representative Josephson, through the chair, if the royalty relief under this amendment were to be extended to every lease within the Cook Inlet, if every lease successfully applied for the royalty modification under this amendment, then yes, I believe that it is in that ballpark. But again, that's without having looked at the numbers to know. For sure, but yes, I believe that would be about in the ballpark. Thank you. Actually, if I— I apologize, allow me to— allow me to take that back.

It would probably be somewhat less than that, given that the royalty modification rate goes to 5% here versus 3% in the kitchen lights unit royalty modification. So the kind of shortcut that I was looking at kind of grossing up from kitchen lights to basin-wide probably doesn't hold. But yeah, within that, you know, $30 to $50 million range, somewhere in there. Thank you. Before Representative Hannon.

Thank you, Co-Chair Foster. Representative Stapp, this question is back to you. If Amendment 4 is adopted and it does not— does it put any constraint on the length of the kitchen light leases at 3% or did they live on in perpetuity? Representative Snap. Through the chair to Representative Hannan.

I structured this amendment so it wouldn't deal with the kitchen lights. This just deals with other leases in the Cook and the Basin. Reps amended. So it's your understanding— so the bill currently that has no end to their 3% royalty, that port of the bill would would continue through the chair to Representative Hannan. Yeah, I have nothing, nothing to do with that section of the bill in this particular amendment.

Further questions on Amendment Number 6? Wrap up, Representative Stapp. Yeah, thank you, Chair Foster. Appreciate everybody's input. I appreciate Coach Joe's comments too regarding cost structure.

Like, look, I know that obviously money outside of this big spike in costs for the Iran war basically is, is tight, but say, remember, 100% of the gas that's produced in Cook Inlet is used domestically, mainly by people in South Central, right? So regardless of the amount of state take, your Anchorage voters are the ones who are paying that price. And the Anchorage people are the people who predominantly need the gas. And what this amendment would do, it would give an alternative for producers to go through DNR to simply say, hey, look, if we have some sort of royalty relief in the entirety of the Cook Inlet Basin on a lease-by-lease basis, we can have the opportunity to drive down energy costs for South Central folks. We can drive up production potentially by utilizing the Cook Inlet basis to the maximum extent.

I'll tell you, as a guy from Fairbanks, I mean, it's a tough thing to do. Because I can tell folks a story from back 2012 when we had our largest refinery in the interior ask the state for royalty relief and it was rejected by DNR, rejected by governor, and we lost 50% of the tax base of the city North Pole because the counterparts in our state decided that the Interior wasn't worthy of having one of the largest jobs in Interior. So nobody cared when Fairbanks suffered, when Flint Hills closed down, even though they were gonna take responsibility for somebody else's sulfalane leak. But as somebody who lives in the Interior, I tell folks, if Southcentral fails, the rest of the state fails. And as hard as it is for me to sit here and advocate for folks who live in Southcentral for production and development of gas that they will predominantly domestically— use, I know that so goes Anchorage, so goes the rest of the state.

And I don't believe that any of us at this table want to let our folks in Southcentral, uh, deal with an exponentially increasing worse gas crisis. And I think this amendment is a really, um, uh, good way to structurally try to create the proper incentive structure to prolong the life of the basin and drive down the cost of energy where most of the folks live. And I ask that you support it. Thanks. Okay.

Representative Josephson, do you maintain your objection? I do. And I apologize. I've done this again, Mr. Chairman.

I think it's exhaustion, but I wanted to offer some overall comments. Representative Josephson. And if you want to afford Representative Stapp some further rebuttal, I would invite that. My concern with this amendment is manifold. One of them is that this refers to the term cost savings to end users.

I just don't know how generous those cost savings will be. They could be any cost savings. So that's a factor. The other thing is, and I asked about this and, and the answer was honest but not satisfactory to me, it doesn't indicate that there's going to be any more production. So I'm foregoing money with no assurance of further production, just some cost savings, but I don't know how much the cost savings are.

All of these things give me great pause. And then the other factor is that the testimony— and it was unmistakable, and it's known by everyone— from Mr. Fitzpatrick is the recipient of the benefit of $30 to $50 million would be Hill Corp. And there's a lot of interest in bringing Hill Corp to parity on S corporation corporate income taxes. So it just strikes me as counterintuitive in that respect. There's also no information that this is going to stave off the greater crisis. You know, in 2010, before I arrived, so 2 years before I arrived, Mike Hawker in particular was involved in something called the Cook Inlet Renaissance, and there were all these terms for cash subsidies to Cook Inlet, and they were effective for a time.

Well lease expenditures, there was one called a qualified, a Q-something, there were a number of these, but they cost the state, I think, approaching $1 billion. So I understand that there's a sense of desperation, but I think that's a time to remain calm as well and look at the other options, including 381 that just moved out of House Resources. So I adamantly oppose this amendment as, as just, um, I don't know what I get for it, and I— my coffers are $50 million lower. That, that's 2 years at least of funding Department of Environmental Conservation is gone. So I can't support this.

Once we start the next amendment, my intent is to try to let the sponsor of the bill have wrap up. We do have another comment, Representative Bynum, and then we'll go to wrap up. Representative Stepp, Representative Bynum.

Thank you, Coach Foster. Really quick through the chair, I agree with the sentiment that my friend from Fairbanks has here. We've not yet figured out a way to get this gas shipped down to Ketchikan and Southeast, so— but I do recognize that the— I will support the amendment because I believe that it creates a fairness element across the board for all users or all developers, and also a direct benefit to the users of the gas. Okay, Representative Stout. Yeah, thank you, Chair Foster.

You know, I had great closing comments before, I think, but I'll do my second bite. Look, I'll just say, I think it's just fundamental difference. Like, look folks, at the end of the day, at the end of the day, people are people and we all go home here in May and this coming winter, And maybe next year if there's a potential crisis on gas supply in Cook Inlet, you guys get to go home and explain to your voters what you did and what you didn't do. And if they run out of gas, God help us. Please vote yes on the amendment.

Okay. Representative Josephson, do you maintain your objection? Yes. Okay. And so we are on amendment number 6.

And Madam Clerk, if you Representative Ballard. Thank you. And I know he said his closing comments, and I'm sorry, I don't want to do it, but I just want to say to my district, I want you to have gas, I want you to be warm. So I will be an adamant yes. Okay, let's take a brief recess.

I mean, if everybody's getting Okay, House Finance back on record at 4:17 PM. Let's not get into the habit of, um, once the sponsors of the amendment has had wrap-up, let's try to stick to that because we've afforded that opportunity to many other folks on this committee. I'm going to continue to allow that And then once we start with the next amendment, we're going to stick to the general rule. So with that, Representative Galvin. Thank you.

I'm going to not say anything that might strike up further response or need for that. I just wanted to comment, if I may, that coming from Anchorage, I also understand that this amendment and the underlying bill will unlikely affect what's going to happen next year and the year after. There is no guarantee that any of this will impact— it will impact decisions for years on out, but my understanding is that they'll have very little impact on the amount of gas that will come in this upcoming year. So I just wanted to make sure that we're all aware of that piece. Thank you.

Okay. Further comments? Final wrap-up. Final, final, final wrap-up. Representative Staff.

Yeah, thank you, Chair Foster. Well, third time's a charm, I hope. I will go a little more epic this time because this is our third time. Winston Churchill said the destiny of man is not measured by material computations. When great forces are on the move in the world, we find that we are spirits and not animals.

He said there is something going on in time and space and beyond time and space which whether you like it or not spells duty, Mr. Co-Chair. I think the greatest duty and responsibility we could have here in this Finance Committee is ensure that we do everything possible to make sure that the bulk of the state, the bulk of the economic driver of the state, which is unfortunately located in South Central, and that's a pain for me to admit, is maintained to the best of our ability. So I agree with Representative Galvin, there is no guarantee. There is nothing in life is a guarantee, Mr. Co-Chair. But at the end of the day, we do the best we can.

And I think if the Cook Inlet gas basin is to die, then, uh, it should— we should do everything we can to make sure it has to die with a whimper and with— as opposed to a bang. So ask the members to vote yes. All right, thank you very much. And so, Madam Clerk, before us is Amendment Number 6 as amended. And so if you could please call the roll.

Representative Allard. Yes. Representative Bynum. Yes. Representative Stapp.

Yes. Representative Jimmy. Yes. Representative Hannan. No.

Representative Moore. Yes. Representative Galvin. No. Representative Tomaszewski.

Yes. Representative Schraggy. Yes. Representative Josephson. No.

Representative Foster. No. 7 Yea, 4 nay. And so on a vote of 7 yeas to 4 nays, Amendment Number 6 has been adopted. And that takes us to Amendment Number 7.

Representative Josephson? I will not be offering Amendment 7. Okay, Amendment 7 won't be offered. That takes us to Amendment Number 8. I will not be offering Amendment 8.

Okay, Amendment 8 will not be offered. That takes us to Amendment Number 9. I believe that is the final amendment. Representative Bynum? It's not.

Oh, we have a 10th one. Okay, so we have 2 more. Representative Bynum, Amendment Number 9. Thank you, Co-Chair Foster. I move Amendment Number 9.

Any objection? Representative—. That's for purpose of discussion. Representative Bynum. Thank you, uh, Co-Chair Foster.

Amendment Number 9 basically is one of the questions that had come up was Whether or not we put a sunset into the law so that this would basically go away, the legislature would have to then make a decision on extending that. After a lot of conversation with the bill sponsor, we recognize that by doing that we defeat some of the elements of the ability for the— I thought there was a comment. I said good job. Oh, okay. I apologize.

I thought I heard object and I was— I heard the same thing, so I apologize. So ultimately, let me get back on track here. The element here is that there was a— that by having the sunsets in, as we had talked about earlier, that it creates a problem for capital investment. And what— but one of the gaps that we have here is, is that by putting in royalty relief, I want assurances that we have a demonstration of benefit. And so what this amendment does is it is asking for there to be a review, a full review of the royalty that was put in place and to report back to the legislature for the purposes of demonstrating the benefit.

And there's a lot of language here in the amendment that, um, that talks about the things that we would like to see. Okay. Representative Fields. This is a friendly amendment. Zach Fields, for the record.

This is a friendly amendment and helps ensure the legislature can rigorously review whether royalty modification is working. Representative Galvin. Thanks. I have a question for the department, if I could, if they're still on board here. I just wanted to know, I know that a lot of Reports already take place, and I don't want to add on extra superfluous pieces to this if not necessary.

So if you would have a look at this amendment and share with us what is already reported and what they have no— what perhaps the department would not have access to in order to fulfill this amendment. If you could go over that. I know some of it I looked up on the website and I could find myself. It's already there, and yet some of it is not, and some of it I don't think we can get to. So I'd like to hear from the department.

Mr. Fitzpatrick.

Yes, Representative Galvin, through the chair, looking through the amendments and If it's okay, it may just take this kind of section by section. So in the new subsection NN, says that the report will be for the kitchen lights unit and the royalty modification granted under MM. I would anticipate that given the changes to the bill, that the specification in this amendment would still limit the report to kitchen lights unit unless that was further amended. Then going section by section, the amount of oil or gas produced from the unit is already public information. We would— I would anticipate that under the bill as amended that we would take any lease that was granted royalty modification under the new standard.

And provide the production from that lease. And again, that's public information. We would just have to collate it by the leases that then qualified for the royalty modification. Section number 2, estimated proven reserves in the unit, that I believe would be difficult. Proven reserves are something that the department does occasionally receive.

Not always necessarily as a matter of course. Proven reserves is a technical term, and the level of proven reserves is something that operators typically hold closely and only comes to the department in confidential form. So I don't know that that's something that is either publicly available or that we would be able to provide publicly given the confidentiality statutes that we operate under currently. Um, let's see, subsection 3, financial and operational information. Um, that is something that the department, uh, we would receive some parts of that.

We would also have access to additional information. Um, current statutes allow the department to access Department of Revenue information. And so the, the filings regarding, um, uh, finances, particularly with regards to, uh, production tax filings, the department would be able to, uh, access those. Those are all confidential, but we could provide summaries of those, I believe, in sufficient detail that they would not be confidential. Um, or at least descriptive, uh, summaries of, of the, the individual finances.

Subsection 4, the amount of royalty revenue, that's already a public number. We could collate that by lease. Number 5, discussion of the effects on the state of royalty modification, including total amount of royalty revenue modified by the royalty rate.

I believe we could, we could calculate the delta between the royalty revenue received under a royalty reduction versus what the original royalty amount would be under whatever the lease's existing terms were.

The extent to which royalty modification has affected production, investment, and continued operation, that may be difficult to discern given that you are talking about the extent to which the change in the royalty rate specifically induced, uh, investments or continued operation of the units. We can talk about trends, but it's sometimes difficult to tie reduction in a royalty rate to a specific expenditure. We might be able to provide kind of a high-level summary of that, but probably not more than that. Number 6, description of the future of the unit including anticipated production plans, development activities We typically receive kind of long-range plans for the unit as part of the plan of development. That is a public document, and so we can provide that.

That doesn't necessarily include future production, and that may require accessing confidential information. I may have to get back to the committee on that one. Off the top of my head, I'm not 100%. And then finally, an analysis of the effects on energy costs for state residents resulting in— from the royalty reduction.

I would— that one is— I apologize, that's a little bit difficult to answer given that we would have to come up with kind of new metrics under the bill as amended. To determine whether the royalty modification was granted and on what basis and whether that resulted in those reductions. I, I believe as the original bill sponsor had indicated, one of those metrics is likely sales to utilities. And so that may be like a metric that we could monitor and report back on, um, additional production, uh, that is, you know, potentially, um, encouraged by royalty modification. Again, we're talking about kind of fact patterns where the specific royalty reduction is difficult to tie to particular expenditures.

We could describe that subjectively, but maybe not more than that.

Follow-up? Representative Galvin. Thank you. I don't want to extend this any longer. I think the point is made.

3 Of these points are pretty difficult given confidential issues. Not that I'm against this concept because I think it's a really strong concept and I thank Representative Bynum for that. I also wondered if you would like to amend now that we have added in so many other fields to include more analysis of what the changes for the other fields would also— what the impacts are of them as well. Thank you. On that question, Representative Bynum.

Thank you, Co-Chair Foster. I would agree that if we're providing royalty relief, it should apply. This kind of evaluation should be done for anyone receiving that relief. But with that, I have a conceptual amendment because I think there were some cleanup items that came in after this. Appreciate the response back from the division about their ability to perform on this.

I think some of these, when they say it may be difficult, they've got 5 years to get the data together and get a report to us and take all of this information and collect it up into a nice tidy, um, tidy report for us so that we can be informed as a legislature. But I would like to make Conceptual Amendment 1 to 9 that would remove item number 2 on page 1, that's line 22. 23. And on item number 3, to provide a provision that says unless otherwise confidential, the information would be included. Can you repeat the removal and— can you repeat that?

Removal of item 2, it's page 1, line 22 and 23. And for item number 3 would be page 2 lines 1 through 6. Okay, thank you. So I will object for purpose of discussion. Representative Josephson?

Yes, I think Representative Bynum meant to say some words after that. So on subsection 3, page 2, unless otherwise confidential, is that— yes. Okay, thank you. Okay, and I'll take that as part of the motion. And which is the conceptual amendment number 1 to Amendment 9.

And do we have any discussion? Representative Galvin. Just a quick question. You had mentioned that it would be appropriate for other units as well. Do you want to include in here as part of your conceptual amendment something related to line 2 in your amendment?

To ask for a report from all affected in this bill or something to that effect. I'm just trying to know where you're going. Representative Bynum. Yes, I was going to offer that, but I wanted to get this out of the way first and then I would come back to that because I just wanted a second to kind of look and see what that would look like. I will remove my objection to amendment— conceptual amendment number 1 to amendment number 9.

And hearing no further objection, that is adopted. And Representative Bynum. Thank you, Co-Chair Foster. I move Amendment Number 2 to Amendment— Conceptual Amendment 2 to Amendment Number 9 that would change the language on page 1, lines 10 and 11, that would remove kitchen lights unit and say units receiving royalty relief. Okay, object.

Any discussion? Line 2. And if you could repeat that, Representative Bynum, which lines? That would be lines— page 1, line 10 and 11, kitchen lights unit. Say units receiving royalty relief.

And I don't see kitchen lights anywhere else, so—. Line 2. Representative Galvin. Thank you, Co-Chair Foster. I wondered if line 2 would also be included in your conceptual amendment.

Page 1, line 2, and line 10 and 11. Okay, and we have any further discussion on conceptual amendment number 2 to amendment 9? Hearing none, I'm going to remove my objection. So hearing no further objections, conceptual amendment number 2 to amendment number 9 has been adopted. That takes us back to the amended amendment number 9.

Any further discussion? Representative Hannan. Thank you, Co-Chair Foster. To the maker of the amendment, so now we would have a 5-year report, but no truncation. So it is not sunsetting any of the royalty relief.

It is not requesting that we reevaluate. It is just we are going to read the report of how the last 5 years have gone and the prediction, right, but there is no sunsetting of the royalty relief if it doesn't show progress or reduced price or increased production. The report asks for that kind of data, but it doesn't change anything about the length of the royalty relief. Right. These are in perpetuity.

Representative Bynum. Thank you, Co-Chair Foster. Through the chair to Representative Hannan. The intention was that the legislature could be informed on performance. And at that time, if they decided that royalty relief needed to end, they would draft a bill and end it.

I didn't want to put any kind of triggering mechanisms into the bill because it would be like.

We said earlier would create a problem for long-term capital investment.

Further questions on Amendment 9 as amended?

I do have a question. Representative Gelvin. Thank you. If we could hear from the department as to whether there would be any need for consideration around a fiscal note to put together this report. It seems like it has gotten to be quite expansive.

Or would this be— and perhaps Representative Bynum has an idea around that and how to pay for it. But I just wanted to ask the department first to hear their thoughts. Mr. Fitzpatrick.

Representative Galvin, through the chair, off the top of my head, I don't know that I can say one way or the other. I think we would have to have some discussions internally, kind of look at available resources and dig into some of the reporting mechanisms and how easy it would be to automate some of these functions. So without having the ability to go back and kind of have those internal discussions, I don't know that I can say one way or the other. Thank you. Okay.

Wrap up, Representative. I just want to double-check really quick. Any further discussion? Seeing none, wrap up. Representative Bynum, no wrap up.

Okay. Representative Hannon, do you maintain your objection? No. Okay, the objection has been removed. Any further objection?

Seeing none, Amendment Number 9 as amended has been adopted. So that takes us to our last amendment. Representative Josephson, Amendment Number 10. I move Amendment 10. Okay.

Any objection? And object, Representative Josephson. Yes, Mr. Chairman.

This amendment would require briefities, please. Briefities.

Okay, House Finance back on record at 4:40 PM. And Representative Josephson? Yes, I moved Amendment 10 moments ago. Amendment 10 would require the, um, HEX, uh, to purchase or acquire a jack-up rig prior to December 31st, um, 2029 in order to enjoy the, um, indefinite extension beyond the $712 million gross receipts of the DNR reduced royalty.

These amendments were refashioned, both mine and Rep. Galvin's, because they erroneously said the Commissioner of Department of Revenue would determine when they should have said Natural Resources. So that's why you principally saw the withdrawal of previous amendments. But my understanding is that HEX has been enriched $6 to $8 million per year. That would keep— that would be additive, I would hope. I concede that a jack-up rig apparently is tens of millions of dollars, but it would liberate them from their being bound by Hilcorp's benevolence, I guess.

And I just think that DNR did them a solid. We're being asked to extend that forever and we should have some quid pro quo. After all, it may inure to their own benefit if they get a jackup rig, they can be more productive. So I'm offering them intent. Okay.

Any questions, comments? Representative Fields. Zach Fields. Just wanted to thank the amendment sponsor for collaborating and kind of going back and forth. And this is essentially a much more workable version of the previous amendment.

So it's a very strong accountability measure, and I'm sure will be subject to further discussion. But it's a friendly amendment, and I support adopting it at this time. Thank you. Further discussion? Representative Stout?

Just want to remove my objection. Okay, the objection has been removed. Representative Moore, would you like to speak to your objection? Okay. So we do have an objection.

So an opportunity for further discussion. Representative Tomaszewski. Yeah, thank you, co-chair. What is the availability of a jack-up rig? Is it even possible to get one to this— to the Cook Inlet in, in this amount of time?

So have you looked into that or have any discussion that would give us insight into that possibility? So We'll go Representative Josephson first. I was going to say, but I want to be clear for the record, I'm kidding when I say it. I was in Singapore last week and looking at this. I'm teasing.

I don't know the availability of them. No, I don't. But I think they're down that way. The Malay Peninsula, maybe. Representative Tomaszewski, any further?

No? Okay. Representative Tomaszewski.

So we're asking them to have one by December 31st, 2029, but we're not sure.

We have no idea the possibility. Maybe the sponsor of the original bill has some information on that. I'm just, just curious. Representative Fields. Thank you, Zach Fields.

Yeah, if I'd been drafting the amendment, I would have might have said, I don't know, 2033 or 2034. But like I said, it's a, you know, I think it'll be subject to further discussion. Very challenging timeline. Admittedly, it got a lot more challenging with the war for obvious reasons. But I think the general direction is a good direction.

More jackup rigs in the inlet. Representative Tomaszewski. Yes. Thank you, co-chair. Do we have any idea how much a jackup rig costs?

Representative Fields. Through the chair, Zach Fields. $50 To $100 million before the war. I think we can assume some escalation in cost.

Okay, thank you. Okay, next question is to— let's see here— Representative, I think, Representative Josephson. You didn't have a separate question, did you? I think that was the question. Okay, Representative Bynum.

Thank you, uh, Co-Chair Foster. I guess this is Similar to what I've heard already, the date on here, I mean, basically we're 3 years out. I have no idea what the procurement on this type of equipment looks like. I mean, $50 to $100 million piece of machinery that you're going to be expected to be here in 3 years. I mean, if you got it across the world, it might take you a year to transit it here.

So I'm also, the question for the maker of the amendment, it says on page 1, line, starting on line 3,.

7, It's the intent of the legislature to meet this requirement or for them to meet this requirement. And then we put in here on line 15 a conditional effect. And then on line 19, we say if the commissioner determines that the condition of A is met, that, that we can waive this off. I just was wondering if there was any kind of flexibility from the maker of the amendment to move that date out, uh, to to 31 instead of 29?

Yes, there is. I would consider that a friendly amendment to the amendment. And just for the record, that was Representative Josephson. And if you could maybe repeat that into the microphone. Rep. Josephson?

Yes. So I was asked from Rep. Bynum whether at line 16, page 1 of the amendment, if I would object to an amendment to Amendment 10, call it Amendment 1 to Amendment 10, which would give HEX until December 31, 2031 to acquire a jackup rig. And I said I did not object to that amendment. It has— the amendment hasn't been made, but I would not object to it. Representative Bynum.

Thank you, Chair Foster. I move Conceptual Amendment 1 to Amendment 10. To amend, or yes, to amend line 16, the date to December 31, 2031. Okay, any objection? Hearing— okay, Rip Sims, tap.

Actually, I'll just speak to underlying, so I'll remove my objection. The objection has been removed. Any further objections on Amendment 1 to Amendment 10? Conceptual Amendment 1. And hearing no objection, conceptual amendment number 1 to amendment number 10 has been adopted.

Representative Bynum. Thank you. And just another quick question, as it doesn't clarify really in here, I was wondering if through the chair, maybe somebody from the department or response from the maker of the amendment, if entering into a contractual agreement for a rig would meet the requirements. So meaning that they don't have to buy one, but having a set contract that defines use, if that satisfies. Representative Josephson.

No, it doesn't satisfy. And the reason is they have some sort of agreement that it— I'm not I'm not terribly familiar with Hill Corp. It's not advantageous to HECZ. They must have a contract. They don't simply call them and say, is this a good weekend?

Maybe they do. But I don't think that that's adequate for my intent. Representative Bynum. Thank you, Co-Chair Josephson. The reason why I'm asking the question— or Co-Chair Foster.

Thank you, Co-Chair Josephson, for the response. The reason why I'm asking is because many times companies will have subsidiaries and/or will enter into leasing agreements for equipment that they may not own, but they have exclusive rights to use. And if that were the case, in my mind, I would think that you would be meeting the obligation of the, the intent here, and that's that they have a dedicated jack-up rig for the purposes of exploration and development. So that's just my thoughts, and I'll just leave it at that, and we'll I'm going to go with where the objection stands. Representative Staff.

Yeah, I just would kind of want to put on the record, Co-Chair Foster, that I wish that this amendment may have said that it can't be paid for by the state because, you know, we did that jack-up-rig state-owned thing once before. So.

Any further discussion on Amendment Number 10?

Okay, hearing none. Let's see here. I will remove my objection. I'm sorry, Representative Moore had the objection. Okay, it'll, it'll stand.

Okay, so the objection to Amendment Number 10 as amended is maintained. And so with that, Madam Clerk, if you could please call the roll. Representative Moore. No. Representative Hannan.

Yes. Representative Allard. No. Representative Galvin. Yes.

Representative Bynum. Pass. Representative Jimmy. No. Representative Tomaszewski.

No. Representative Stapp. Mm, no. Representative Bynum. No.

Representative Schrag. Yes. Representative Josephson. Yes. Representative Foster.

Yes. 5 Yea, 6 nay. And so on a vote of 5 yea to 6 nay, Amendment Number 10 has not been adopted. And so just to double-check, I don't think we have any other amendments. I'm not seeing any.

And so with that, if it is the will of the committee, Representative Sharagi. Oh, oh. Representative Bynum. Thank you, Co-Chair Josephson— or Co-Chair Foster. That's 3 times today.

I apologize. I did have one other final question and it really— that I meant to ask at the last hearing and wasn't able to ask and it really is for the maker of the as the sponsor of the bill. And if I may, thank you. Through the chair to Representative Fields, this bill is basically providing permanent relief through royalties. I know that it still has a ways to go, but one of the things that we talk about when we think about the revenue or royalties coming to the state is what has already been foregone.

Has there— if you know, do you know how much FERIE or HEX has gotten in tax credits and if those tax credits are still available and being used? Through [Speaker:COMMISSIONER MAY] the Chair, HEX acquired these leases, I believe, after the termination of the cashable tax credits. So I would want to go to the department for whoever might have had cashable credits before this particular producer in this unit. And it was 3 units before. So anyway, for that depth, I'd have to go to the department.

Zach Fields for the record. Representative Bynum, would you like us to go— did you have a comment first? No. No, I'll wait. If the department is available to answer the question, that would be helpful.

Mr. Fitzpatrick.

Uh, Representative Bynum, through the chair, this is Ryan Fitzpatrick from the Department of Natural Resources. The tax credit programs were administered by the Department of Revenue. My understanding is that the cashable tax credits are no longer enforced, and so the operator is not able to apply for any additional cashable tax credits. I believe that all of the tax credits that were outstanding have now been retired. That's probably a better question for the Department of Revenue.

But that is my recollection. So follow-up? Follow-up, Representative Bynum? Thank you, good. Chair Foster, as a follow-up, if the department could, or the bill sponsor, or those that might know from revenue, if they could give us— provide to the committee for the public's purposes any tax credits that had been available and used, and if there happens to be any that are still able to be used, a clarification on that answer would be helpful.

Provide that to the committee so that we can provide it as part of our record. Mr. Fitzpatrick. Sorry, no, I'm sorry. Representative Bynum, through the chair, certainly we can pass that request on to the Department of Revenue for them to follow up with the committee.

Thank you. OK. Representative Jimmy. Thank you, Co-Chair Foster. I would like to do reconsideration of my vote for For Amendment 10, I move. Okay, you're moving for reconsideration on Amendment Number 10.

Could—. Coach Foster, I think the proper motion would be rescind action. I would like to rescind action. Rescind. Okay, and the motion to rescind action on Amendment Number 10.

And so with that, is there any objection? Hearing none, uh, we are rescinding our action on Amendment Number 10. Representative Ballard, can we take a brief at ease? Brief at ease.

Okay, and House Finance is back on record at 4:56 PM, and there's no objection to rescinding motion for Amendment Number 10. So Amendment Number 10 has been rescinded. With that, is there any further motions?

So we would have to re-vote the rescinded. But I do want to make some record that to the extent the intent of the maker of amendment is important, and it could be, and I'm the maker of the amendment. I think we need to still have the motion before us. Of course. Put your thoughts forward.

Representative Foss. We need to move the amendment and we will need to move the conceptual amendment again as well. So Representative Josephson, I just wanted to make some record in the event you could move the amendment. Sorry, I move Amendment 10. Okay.

And Representative Josephson? Yes. At line 17, it— this amendment doesn't appear to say that Hex would have to be the owner of the Jacka rig. It does require them to drill a well. And so I think I'm not asking to modify my amendment, but Representative Bynum's point is well taken that I don't see it requiring that Hex owned the rig, which is a significant factor.

Representative Bynum. Thank you, Co-Chair Foster. I move conceptual Amendment 1 to Amendment 10 to modify line 16, the date from December December 31, 2029 to December 31, 2031. Okay, hearing no objection, conceptual amendment number 1 to amendment number 10 has been adopted. And that takes us back to the amendments and amendment number 10.

And if there's no further discussion— is there— was there an objection? Object and question. Representative Stout. A question. Representative Stout.

Oh, calling question. I thought you had a question. Okay, with that, Madam Clerk, what we have before us is amendment number 10 as As amended. And if you could please call the roll. Representative Jimmy.

Yes. Representative Bynum. Yes. Representative Stapp. No.

Representative Moore. No. Representative Allard. No. Representative Hannan.

Yes. Representative Tomaszewski. No. Representative Galvin. Yes.

Representative Bynum.

Representative Josephson? Yes. Representative Schragg? Yes. Representative Foster?

Yes. 6 Yea, 5 nay. So on a vote of 6 yea to 5 nay, Amendment Number 10 as amended has been adopted. And if there's no further discussion, Representative Schragg? Butcher Foster, I move House Bill 271, Work Order 34-LS1225/H, out of committee as as amended with individual recommendations and attached fiscal note.

Objection. Okay, we have an objection. Would you like to speak to your objection? No, just want it on record. Thanks.

Okay, no further discussion. So with that, no discussion. Yes, yes, actually, Representative Josephson, I think it's important that the Hex Company— I'm thinking of Mr. Slaughter, for example— who I've had good interaction with know that my concern with the bill as amended is that we're forgoing too much revenue. And my state can't afford to do that.

So the bill morphed and it's not the same bill. And I just want to make that comment. Thank you. Okay. Thank you.

Representative Bynum. Thank you, Co-Chair Foster. I'm just put on the record here. I was happy to let this move out without objection, but we're going to be voting on it. My yes vote here is to move the bill further into the process and not obstruct it is not necessarily an endorsement of the bill one way or the other.

Okay. And so with that, Madam Clerk, the motion before us is to move out House Bill 271 from committee. And if you could please call the roll. Representative Bynum. Yes.

Representative Hannan. No. Representative Stapp. Pass. Representative Allard.

Pass. Representative Moore. Yes. Representative Tomaszewski. Yes.

Representative Jimmy. No. Representative Galvin. No. Representative Stapp.

Yes. Representative Allard. Yes. Representative Schraggy. Yes.

Representative Josephson. No. Representative Foster. No. 6 Yay, 5 nay.

And so on a vote of 6 yay to 5 nay, House Bill 271, which is version 34-LS1225- H is moved out of House Finance as amended with individual recommendations and attached fiscal notes. And if we could all be sure to stick around to sign the committee report. My intention was to go ahead and move right into House Bill 195, allowing for folks to ask questions. It sounds like folks might be pretty tired. I'm looking at the committee to see if there is an interest in wanting to ask questions.

The amendment deadline is tomorrow. We currently do not have on the calendar, from what I can see, the next meeting for that bill. We can always take it up under bills previously heard at another meeting this week and work on the amendments if it's the desire of this committee to want to do that. We could try to take up the last of our questions now. The opportunity is there, but if not, I realize folks are also tired.

Representative Sharagi. Commissioner Foster, I have no preference on what the committee does. I do have to leave. It's my wife's birthday, and if I have her do bedtime alone on her birthday, I'm in deep trouble. So if the committee wants to continue, I have no issue.

I can watch online, but I'm not able to stay beyond this point. My apologies to Representative Mena, who I think has been courageously waiting in the back. I do think between a birthday and some folks who are just really frazzled, it's probably best if we maybe sleep on it and come back to this, and we'll try to reschedule something sooner rather than later. So with that, just a reminder that House Bill— let's see here— 195, I believe, is what the pharmacy bill was— is the amendment deadline. We had that set earlier as noticed, Thursday, May 7th at noon.

We're also setting the amendment deadline for HB 388 for tomorrow, May 7th at noon. 388 Is the Bulk Fuel Loan Bill, I believe. And so our next meeting is scheduled for tomorrow morning at 9:00 AM, and at that meeting we'll hear 258, HB 258. That's a spay and neuter program bill, as well as Senate Bill 24, tobacco and e-cigarettes bill. Reminder, we do have floor tomorrow, and so it's going to be a— we'll have to stick with a 1-hour time frame that we have.

So if there's nothing else come forward, the committee will be adjourned at 5:04 PM.