Oil legislation scarce as Legislature gets under way

Governor’s bill would give Department of Revenue more leeway in conducting audits, shift oil royalty audits from Revenue to Department of Natural Resources

Bill Kelder

PNA Contributing Writer

Only two bills and two resolutions affecting oil and gas had been introduced in the state Legislature by Feb. 10. Gov. Tony Knowles introduced two bills in the state Senate, Senate Bill 38, making some changes in the way the state audits oil and gas taxes; and SB 39, which would, if passed, increase the state motor fuel tax by 9 cents a gallon. (Editor’s note: see separate motor fuel tax article on page 7.) Both bills have identical counterparts in the state House: HB 58 and HB 59, respectively.

One change in SB 38/HB 58 is that the director of the state Department of Revenue’s Oil and Gas Audit Division will have more leeway on whether or not to conduct an audit. The existing state law says that audits “shall” be made of reports, payments and payments due. The governor’s bill would change “shall” to “may,” a minor distinction in words, but a major distinction in the verbiage of legislation where “shall” means do it, and “may” means you have an option to do it or not. The legislation also would transfer the auditing of royalty matters from the Department of Revenue to the Department of Natural Resources.

“The transfer of the royalty auditing to the Department of Natural Resources is being requested to increase efficiency,” said Dan Dickinson, newly appointed director of Revenue’s Oil and Gas Audit Division. “At present, both departments have auditing and information concerns regarding oil and gas royalties. This frequently required meetings of staff from both agencies. The meetings would result in more work, such as copying and trading documentation, and so on. It has gotten to the point where we believe a lot of time is being wasted in meetings, whereas making one division the responsible agency would eliminate that,” Dickinson told PNA. A similar measure transferring royalty audits from Revenue to DNR was introduced by the governor last year, but failed to pass.

Regarding the leeway on whether or not to conduct an audit, Dickinson said this, too, was introduced to make the process more efficient.

“There are a lot of (oil and gas) properties out there where some other approaches might be more efficient and better than simply going out and conducting an audit every year,” Dickinson explained. “Examples would be some of the fields that are beginning to play out, marginal fields like Cook Inlet or other satellite fields. Because we’ve been dealing with many of these companies for a while, maybe we don’t need to look at every piece of paper every year,” he said.

Resolutions introduced

Rep. Gail Phillips, R-Homer, introduced House Joint Resolution 11, calling on the state of Alaska to send a message to the U.S. Congress calling for the opening of oil and gas leasing in the Arctic National Wildlife Refuge. Alaskans have long believed the refuge holds the most promising potential for another super field, such as the one at Prudhoe Bay, to be discovered.

The establishment of a Special House Committee on Oil and Gas is the topic of House Resolution 4. HR 4 calls for establishment of a Special House Committee on Oil and Gas because of the importance of oil and gas revenues to the state. It states that this committee can conduct hearings and investigations throughout this session of the Legislature, and throughout the interim when the legislature is not meeting.