I Mina'Bente Nuebe Na Liheslaturan Guahan TWENTY-NINTH GUAM LEGISLATURE

Senator Edward J.B. Calvo CHAIRMAN

Committee on Finance, Taxation, Commerce & Economic Development Office of Finance and Budget

November 14, 2008

The Honorable Judith T. Won Pat, Ed.D Speaker Mina Bente Nuebe Na Liheslaturan Guahan 155 Hesler Street Hagatiia, GU 96910

Hafa Adai Madam Speaker:

The Committee on Finance, Taxation, Commerce, and Economic Development to which Bill No. 367 (LS): "AN ACT TO AMEND §58104 OF CHAPTER 58 OF 12 GCA RELATIVE TO CREATING TAX INCENTIVES IN THE QUALIFYING CERTIFICATE PROGRAM FOR THE MANUFACTURE, DISTRIBUTION AND SALE OF ALTERNATIVE FUELS AND EXEMPTING SUCH FUELS FROM THE LIQUID FUEL TAX," was referred, wishes to report its findings and recommendations TO PASS Bill No. 367 (LS).

The voting record for Bill No. 367 (LS) is as follows:

TO PASS 5'

NOTTO PASS 0

TO REPORT OUT l

ABSTAIN (}

TO PLACE IN INACTIVE FILE b

Please review copies of the attached Committee Report and other pertinent documents on Bill No. 367 (LS). Si Y t'os Ma'iis for your attention.

ED A

155 Hesler Place • Hagiitfia, GU 96910 •Tel: (671) 475-8801/02 •Fax: (671) 475-8805 Email: sencalvo@gmail.com •Website: www.senatoreddiebazacalvo.com

I Mina'Beute Nuebe Na Liheslatura11 Guaha11 TWENTY-NINTH GUAM LEGISLATURE

Senator Edward J.B. Calvo CHAIRMAN

Committee on Finance, Taxation, Commerce & Economic Development Office of Finance and Budget

November 14, 2008

MEMORANDUM

To: Committee Members

From: Chairman, Committee on Finance, Taxation, Commerce and Economic Development

Subject: Committee report on Bill No. 367 (LS).

The following is attached for your review and appropriate action:

1. Committee voting sheet 2. Public Hearing sign-in sheet 3. Notice of Public Hearing 4. Testimonies submitted

I sincerely appreciate your attention and cooperation. Please feel free to contact my office at 475-8801 should there be any questions regarding this matter.

EDd!:L

155 Hesler Place • Hagatiia, GU 96910 •Tel: (671) 475-8801/02 •Fax: (671) 475-8805 Email: sencalvo@gmail.com •Website: www.senatoreddiebazacalvo.com

I MINA' BENTE NUEBE NA LIHESLATURAN GuAHAN

Committee Voting Sh~et

Bill No. 367 (LS): "AN ACT TO AMEND §58104 OF CHAPTER 58 OF 12 GCA RELATIVE TO CREATING TAX INCENTIVES IN THE QUALIFYING CERTIFICATE PROGRAM FOR THE MANUFACTURE, DISTRIBUTION AND SALE OF ALTERNATIVE FUELS AND EXEMPTING SUCH FUELS FROM THE LIQUID FUEL TAX."

Senator Chairperson

Senator Jesse A. Lujan Vice Chairperson

Senator James V. Espaldon Member

/1 /l ,,~~-

Senator Tina Rose Muna-Barnes Member

Speaker Judith T. Won Pat, Ed. D. Membe·

Dr. David LG. Shimizu Member

155 Hesler Street Hagatfia, Guam 9691 O

Report Out Abstain

/

Inactive File

Phone: (671) 475-8801/2 Fax: (671) 475-8805

2

I MINA' BENTE NUEBI NA LIHESLATURAN GUAHAN 2008 (SECOND) Regular Session

Bill No. 3&1(~)

Introduced by: Ray Tenori -::::;..

AN ACT TO AMEND §58104 OF CHAPTER 58 OF 12GCA AND ITEMS (3) AND (4) OF §26401(a) OF llGCA RELATIVE TO ,.._, CREATING TAX INCENTIVES IN THE QUALIFYING 155

CERTIFICATE PROGRAM FOR THE MANUFACTURE, ~=· t DISTRIBUTION AND SALE OF ALTERNATIVE FUELS AND ....,, EXEMPTING SUCH FUELS FROM THE LIQUID FUEL TAX.

BE IT ENACTED BY THE PEOPLE OF GUAM: ~ \.J1 w

3 Section 1. Legislative Intent. I Liheslaturan Guahan finds that Guam's year-

4 round tropical climate makes conditions suitable for growing agricultural products that

5 can be used in the production of bio-fuels. Recent research and advancements in bio-

6 fuel production have shown that bio-fuels can be extracted from vegetable sources

7 other than com kernels or soy beans. Such research includes chemical extraction from

8 vegetative waste and microbes known as microalgae.

9 I Liheslatura further finds that research into the cultivation of micro-algae as

10 energy crops shows promise for places such as Guam. Microalgae are photosynthetic

11 and heterotrophic meaning that it requires sunlight and a carbon-based food supply to

12 grow. Guam has both in great abundance. Microalgae can also be grown at a much

13 faster rate than traditional energy crops and require much less land. Studies have also

14 shown that certain microalgae are effective in the production of hydrogen and oxygen

1 5 through the process of biophotolysis.

I It is the intent of I Liheslatura to encourage the creation of a new bio-fuels

2 industry by providing incentives through the Qualifying Certificate Program and

3 through an exemption from the Liquid Fuel Tax for bio-fuels manufactured on Guam.

4

5 Section 2. Section 58104 of l 2GCA is hereby amended to read:

6 § 58104. Eligibility Defined.

7

8

A Qualifying Certificate shall only be issued to the following

entities:

9 Any trust, partnership, sole proprietorship, Limited Liability

10 Partnership ('LLP'), Limited Liability Company ('LLC'), corporation formed

11 under the laws of Guam, or possessions corporation as defined in § 58106 of this

12 Chapter, engaged, or about to engage in any of the following activities:

13 1. agriculture;

14 2. aquaculture;

15 3. mariculture;

16 4. manufacturing;

1 7 5. commercial fishing;

18 6. services;

19 7. tourism;

20 8. improvement of real property for purposes which are specifically

21 determined by the Authority to be beneficial, desirable, and necessary for the

22 economic development of Guam;

23 9. insurance issuance, either by commercial insurers, re insurers, or

24 captive insurers which meet the requirements of22 GCA Chapter 15, Article 3;

25 10. export trading company, as defined in 11 GCA § 2610l(d), if the

26 main office of the export trading company is established on Guam;

2

11. producing water or disposing of wastewater, or both, jointly with

2 the Guam Waterworks Authority;

3 12. operating on a military base on Guam a Base Operating Service

4 Contract;

5 13. a small business entity operating on a military base on Guam, a

6 Base Operating Service contract, or as a subcontractor to a BOS Contractor; and

7 14. a global internet infrastructure services company(ies) providing

8 Internet connectivity and co-location facilities and its/their tenant-sellers in the

9 sales of goods, services and information over the Internet; provided that:

10 (i) the seller is legally established in and operates from Guam;

11 (ii) the sale does not include the local saleof goods, services and

12 information;

13 (iii) the sale is conducted exclusively through the Internet; and

14 (iv) the seller does not sell or distribute in any fashion material that

15 is harmful to minors as that term is defined in the Internet Tax Freedom Act, a

16 part of the Omnibus Appropriations Act of 1998, Public Law Number 105-277.

17 For purposes of this Paragraph, a "minor" is a person under the age of eighteen

18 (18).

19 15. The manufacture, distribution and sale of non-petroleum based fuels

20 that include but are not limited to biofuels such biodiesel and ethanol and

21 hydrogen fuels.

22

23 Section 3. Item (3) of §2640l(a) of l IGCA is hereby amended to read:

24 (3) Liquid fuel or fuel shall mean and include all liquids ordinarily, practically and

25 commercially usable in internal combustion, turbo-jet and jet engines for the generation

26 of power and shall include all distillates of, and condensates from petroleum, natural

2 7 gas, coal, coal tar and vegetable ferments, such distillates and condensates being

3

1 ordinarily designated as gasoline, butane, naphtha, benzol, benzine, kerosene and

2 alcohol so usable, but not restricted to such designation. However, kerosene purchased

3 for actual use other than internal combustion, turbo-jet, or jet engines and crude oil are

4 specifically excluded from the meaning of liquid fuel under this Article. Bio-fuels such

5 as bio-diesel, ethanol and vegetable/microbe ferments and non-petroleum-based fuels

6 including hydrogen fuels manufactured on Guam from are specifically excluded from

7 the meaning of liquid fuel under this Article.

8

9 Section 4. Item (4) of §2640l(a) of l IGCA is hereby amended to read:

10 ( 4) Diesel fuel shall mean and include all petroleum-based liquids ordinarily, practically

11 and commercially usable in those ignition-compression engines commonly known as

12 diesel engines.

4

MINA'BENTE NUEBE NA LIHESLATURAN GUAHAN TWENTY-NINTH GUAM LEGISLATURE

Senator Edward J.B. Calvo

Chairman COMMITTEE ON FINANCE, TAXATION COMMERCE AND ECONOMIC DEVELOPMENT

Website: www.senatoreddiebazacalvo.com E-Mail address: sencalvo@gmail.com 155 Hesler Street Hagatfia, Guam 96910

OFFICE OF FINANCE AND BUDGET

Telephone: (671) 475-8801 Facsimile: (671) 475-8805

Cotntnittee Report on

Bill 367 (LS): "AN ACT TO AMEND §58104 OF CHAPTER 58 OF 12 GCA RELATIVE TO CREATING TAX INCENTIVES IN THE QUALIFYING CERTIFICATE PROGRAM FOR THE MANUFACTURE, DISTRIBUTION AND SALE OF ALTERNATIVE FUELS AND EXEMPTING SUCH FUELS FROM THE LIQUID FUEL TAX"

Committee Report Bill Number 367 (LS)

Committee on Finance, Taxation, Commerce and Economic Development

I Mina' Bente Nuebe Na Liheslaturan Guahan Committee on Finance, Taxation, Commerce and Economic

Development Sinadot Edward J.B. Calvo, Ge' hilo

I. OVERVIEW

The Committee on Finance, Taxation, Commerce and Economic Development held

a public hearing on Wednesday November 13, 2008, at I Liheslaturan Guahan 's Public

Hearing Room on Bill No. 367 (LS) "AN ACT TO AMEND §58104 OF CHAPTER 58

OF 12 GCA RELATIVE TO CREATING TAX INCENTIVES IN THE

QUALIFYING CERTIFICATE PROGRAM FOR THE MANUFACTURE,

DISTRIBUTION AND SALE OF ALTERNATIVE FUELS AND EXEMPTING

SUCH FUELS FROM THE LIQUID FUEL TAX." Notices of the public hearings

were disseminated throughout all local media via facsimile and are attached herein meeting

the requirements of the Open Government Law.

a. Committee Members and Senators present:

Senator Edward J.B. Calvo, Chairman

Senator Adolpho Palacios, Sr.

Senator Jesse Lujan

Senator Ray Tenorio

b. Appearing before the Committee:

Written Testimonies received:

Mr. Anthony Blaz, GEDA Administrator

Committee Report Bill Number 367 (LS)

Committee on Finance, Taxation, Commerce and Economic Development

II. SUMMARY OF VERBAL TESTIMONIES:

Chairman Calvo began the hearing by welcoming fellow Committee members,

since there were no persons present to submit oral or written testimony at the on-set of the

hearing, Senator Tenorio provided an opening statement on the merits of providing

incentives for the manufacture and use of bio fuels as a means to reduce our community's

dependence on petroleum and other fossil fuels while at the same time providing for new

business and employment opportunities.

III. WRITTEN TESTIMONIES:

The Committee received written testimony for GEDA which recommended that

only the exemption from Liquid Fuels Tax be afforded to any company engaging in the

manufacture and sale of bio fuels. The Committee will continue to receive written

testimonies regarding Bill 367 (LS) for the next ten working days in compliance with local

law.

IV. COMMITTEE RECOMMENDATIONS:

The Committee on Finance, Taxation, Commerce and Economic Development to

which Bill No. 367 (LS). "AN ACT TO AMEND §58104 OF CHAPTER 58 OF 12

GCA RELATIVE TO CREATING TAX INCENTIVES IN THE QUALIFYING

CERTIFICATE PROGRAM FOR THE MANUFACTURE, DISTRIBUTION AND

SALE OF ALTERNATIVE FUELS AND EXEMPTING SUCH FUELS FROM

THE LIQUID FUEL TAX" was referred, does hereby submit recommendations to I

Mina' Bente Nuebe Na Liheslaturan Guahan TO PASS Bill No. 367 (LS).

2

I Mina'Bente Nuebe Na Liheslaturan Guahan TWENTY-NINTH GUAM LEGISLATURE

Senator Edward J.B. Calvo

···~-· ---"chairman, Committee on Finance, Taxation, Commerce & Economic Development Office of Finance and Budget

November 13, 2008

Notices for the public hearing were disseminated to all local media via electronic mail on Friday, November 7 and Tuesday, November 11, 2008 meeting the requirements of the Open Government Law.

AGENDA

I Liheslaturan Guahan's Public Hearing Room

9:30 a.m.

• Bill No. 361(EC) - "An act to provide Five Hundred Thousand Dollars ($500,000) to the Guam Public School System or a Teacher Mentor Program".

• Bill No. 364(EC) - "An act to add a new §9511 to Chapter 9.5 of 7GCA and a new §77135 to Chapter 77 of 10GCA relative to the creation of the Forensic Laboratory Operations and Maintenance Fund."

• Bill No. 366(EC) - "An act to add a new article 3 to chapter 9, title 12, Guam Code Annotated, creating a Guam Visitors Bureau "Rainy Day Fund".

• Bill No. 367(EC) - "An act to amend §58104 of Chapter 58of12GCA and Items (3) and (4) of §26401(a) of llGCA relative to creating tax incentives in the qualifying certificate program for the manufacture, distribution and sale of alternative fuels and exempting such fuels and exempting such fuels from the Liquid Fuel Tax."

• Bill No. 375(EC) - "An act to amend subsection (d) and to repeal subsection Q) of Section 35104 of Title 22 of the Guam Code Annotated."

• Bill No. 377(EC) - "An act to authorize the Governor of Guam to pledge Compact Impact Funds for the construction costs of a new landfill."

The Committee will allow up to ten (10) working days after the public hearing date for submission of testimonies to Senator Edward J.B. Calvo, Chairman, Committee on Finance, Taxation, Commerce and Economic Development. Deadline for submission of testimonies will be Friday, November 28, 2008.

155 Hesler Place • Hagiitiia, GU 96910 •Tel: (671) 475-8801/02 •Fax: (671) 475-8805 Email: sencalvo@gmail.com •Website: www.senatoreddiebazacalvo.com

Governor Felix P. Camacho

Guam Economic Development and Commerce Authority

Aturidiid Inadilanton Ikunumihan yan Kumetsion Gu ah an

TESTIMONY ON

Lt. Governor l\1ichael W. Cruz M.D.

BILL 367 (LS) AN ACT TO AMEND §58104 OF CHAPTER 58 OF 12GCA AND ITEMS (3) AND (4) OF §26401(a) OF 11 GCA RELATIVE TO CREATING TAX INCENTIVES

IN THE QUALIFYING CERTIFICATE POGRAM FOR THE MANUFACTURE, DISTRIBUTION AND SALE OF ALTERNATIVE FUELS AND EXEMPTING SUCH

FUELS FROM THE LIQUID FUEL TAX.

Submitted by Anthony C. Blaz

Administrator Guam Economic Development Authority

November 13, 2008

Good morning, Mr. Chairman, members of the Committee on Finance, Taxation, Commerce, and Economic Development, ladies and gentlemen.

My name is Anthony C. Blaz, and I am the Administrator of the Guam Economic Development Authority (GEDA). I am here on behalf of the Authority to provide testimony on Bill 367 that provides incentives to encourage the creation of a new bio-fuels industry.

While we support the intent of the bill, we have some concerns with the technical aspects of the bill as follows:

o Adding the industry to §58104 Eligibility Defined results in qualifying certificate applicants under this bill to benefit for more tax benefits then we believe the law intended. They would qualify for (1.) 75% rebate of corporate tax (2.) 100% abatement of real property tax and (3.) 7 5% rebate of dividend tax.

We recommend that if it the intent of the sponsors of this bill to limit the benefit to the liquid fuel tax then the language should be added under §58127 perhaps as §58127.7 Alternative Fuels to include the full definition of such which is to be added to §26401 of 11 GCA. We suggest this section be patterned after §58127.4 Sale of Petroleum Products which already exists in the QC law.

o The intent of the bill seems sound but there needs to be mechanisms in place to ensure that there are fair incentives in place to entice biofuel producers and distributors to do business on Guam, but not take away from the dedicated source of funding in the form of excise taxes. For pure Biofuel, there should be an exemption from the Liquid Fuel Tax (LFT) and possibly other tax credits for the use of the equipment, facilities, and property used for the production and distribution of Biofuels. Other businesses that

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"This institution is an equal opportunity provider and employer."

"blend" or modify Biofuel with petroleum-based products should get a lower tax percentage based on the amount of Biofuel in the product.

Most states with the except Alaska, have legislation in place for alternative fuel tax credits that we could mirror in part to encourage the production or distribution of bio fuels. One of the concerns is that the fuels should be made out of non-food grade stock (com, soybeans or anything that can be consumed) as parts of the world are in short supply food. The technology is available and should be used for non food grade supply stock

o Industry standards and testing methods also need to be incorporated into the legislation with oversight by Guam Environmental Protection Agency (GEPA) to ensure a stable and consistent product.

We applaud the sponsors of this bill in recognizing the immediate need to attract providers of alternative energy sources to our island to provide a means to reduce our dependence on fossil fuel, assist in creating a new industry, and mitigate impact to our fragile ecosystem.

Si Yu'os Ma'ase,

fr~ ANTHONY C. BLAZ Administrator

Committee on Finance, Taxation, Commerce and Economic Development Senator Edward J.B. Calvo

Chairman

Public Hearing: Thursday, November 13, 2008 • 9:30 a.m. I Liheslaturan Guahan, Hagatiia

Witness Sign-in sheet

Bill No. 367(EC) "'An act to amend §58104 of Chapter 58 of 12GCA and Items (3) and (4) of §26401 (a) of llGCA relative to creating tax incentives in the qualifying certificate program for the manufacture, distribution and sale of alternative fuels and

' hf I d . hf I f h L' 'd F IT " exemptmg sue ue s an exemptm: sue ue s rom t e IQUI ue ax. NAME AGENCY/ ORAL WRITTEN IN NOT IN CONTACT

(Please print) ORGANIZATION TESTIMONY TESTIMONY FAVOR FAVOR NUMBER

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

112. I I i _L

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I

I Mina'Bente Nuebe Na Liheslaturan Guahau TWENTY-NINTH GUAM LEGISLATURE

Senator Edward J.B. Calvo

Chairman, Committee on Finance, Taxation, Commerce & Economic Development Office of Finance and Budget

November 11, 2008 (48 hours prior to hearing date)

Public Hearing Notice 5 GCA §8107(Regulnr)

The Committee on Finance, Taxation, Commerce and Economic Development has scheduled a public hearing on Thursday, November 13, 2008, 9:30 a.m. at I Liheslaturan Guahan's Public Hearing Room, Hagatiia on the following:

• Bill No. 361(EC) - "An act to provide Five Hundred Thousand Dollars ($500,000.00) to the Guam Public School System or a Teacher Mentor Program".

• Bill No. 364(EC) - "An act to add a new §9511 to Chapter 9.5 of 7GCA and a new §77135 to Chapter 77 of lOGCA relative to the creation of the Forensic Laboratory Operations and Maintenance Fund."

• Bill No. 366(EC) - "An act to add a new article 3 to Chapter 9, title 12, Guam Code Annotated, creating a Guam Visitors Bureau "Rainy Day Fund".

• Bill No. 367(EC) - "An act to amend §58104 of Chapter 58 of 12GCA and Items (3) and (4) of §26401(a) of llGCA relative to creating tax incentives in the qualifying certificate program for the manufacture, distribution and sale of alternative fuels and exempting such fuels and exempting such fuels from the Liquid Fuel Tax."

• Bill No. 377(LS) - "An act to authorize the Governor of Guam to pledge Compact Impact Funds for the construction costs of a new landfill."

• Bill No. 375C) - "An act to amend subsection (d) and to repeal subsection G) of Section 35104 of Title 22 of the Guam Code Am1otated."

If written testimonies are to be presented at the hearing, the Committee requests that copies be submitted one day prior to the public hearing date, to the Office of Senator Edward J.B. Calvo, 155 Hesler Place, Hngdtfin, or sent via fax to 475-8805, or emailed to sencalvo@gmail.com.Copies of the aforementioned bills may be obtained at I Li/zeslnturmz Gudlznn's website, www.guamlegislature.com. Individuals requiring special accommodations or services should contact the office at 475-8801/2.

155 Hesler Place • Hagii:tiia, GU 96910 •Tel: (671) 475-8801/02 •Fax: (671) 475-8805 Email: sencalvo@gmail.com •Website: www.senatoreddiebazacalvo.com