Legislature(2013 - 2014)BARNES 124
03/26/2013 06:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB21 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 21 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 21-OIL AND GAS PRODUCTION TAX
6:07:48 PM
CO-CHAIR FEIGE announced that the only order of business is CS
FOR SENATE BILL NO. 21(FIN) am(efd fld), "An Act relating to the
interest rate applicable to certain amounts due for fees, taxes,
and payments made and property delivered to the Department of
Revenue; providing a tax credit against the corporation income
tax for qualified oil and gas service industry expenditures;
relating to the oil and gas production tax rate; relating to gas
used in the state; relating to monthly installment payments of
the oil and gas production tax; relating to oil and gas
production tax credits for certain losses and expenditures;
relating to oil and gas production tax credit certificates;
relating to nontransferable tax credits based on production;
relating to the oil and gas tax credit fund; relating to annual
statements by producers and explorers; establishing the Oil and
Gas Competitiveness Review Board; and making conforming
amendments."
6:08:37 PM
DAN SECKERS, Tax Counsel, ExxonMobil Corporation, stated he is
not providing any slides or graphs because there is nothing he
can produce that will be any different than what the committee
has already seen from the [legislature's and administration's]
consultants and others, which is that Alaska's fiscal regime is
broken. He said he agrees with most everything the consultants
have told this and other committees - under Alaska's Clear and
Equitable Share (ACES), Alaska is not globally competitive and,
more importantly, not globally attractive to bring needed
investments to the state. In ExxonMobil's view, the most
important issue facing Alaska today is the need for the state to
develop a competitive, attractive, and stable fiscal regime that
allows Alaska to attract the needed investments for the North
Slope. Deciding whether it is time for Alaska to make a change
rests with legislators, not his company. Do legislators want to
continue under the uncompetitive and unattractive system of
ACES, or do legislators want to make a step change to get the
investment that Alaska needs?
6:10:24 PM
MR. SECKERS said ExxonMobil believes CSSB 21(FIN) am(efd fld)
makes significant progress to improving Alaska's overall fiscal
environment. Three features of the bill improve ACES and move
Alaska forward in global competitiveness. First, eliminating
progressivity represents significant improvement and this change
alone significantly improves Alaska's global competitiveness.
Progressivity is difficult and complicated to work with, plus it
takes away all the upside. Upside is needed for investors that
risk a lot in Alaska given its unique situation of high cost and
other issues. Upside is what ExxonMobil is able to retain in
the other places that Alaska is competing with. Eliminating
progressivity fixes one of the most penalizing and crippling
aspects of Alaska's fiscal regime. The second feature is the
gross revenue exclusion (GRE). It is critically important for
the state to stimulate exploration and development in resources
yet to be discovered in new fields and increasing production
from all fields, both new and existing. To be significant any
reform to Alaska's fiscal structure must include the legacy
fields and the GRE can do just that. However, as currently
written it is unclear as to exactly how it will work and how it
will be applied to the legacy fields. As a tax practitioner, he
said, that level of uncertainty makes him nervous and when he
gets nervous he must advise his client who then gets nervous,
which then makes the decision under that revenue exclusion that
much more hard to make. The third feature is the $5 per barrel
credit. It is important to tie incentives to production because
more production is what everyone wants. This is a very unique
simple creative way to do that. However, ExxonMobil's concern
is whether $5 is enough to balance the other features of the
bill, particularly the impact of the increased base tax rate.
6:13:17 PM
MR. SECKERS reiterated that CSSB 21(FIN) am(efd fld) makes
Alaska more competitive, but said the real question is whether
it makes Alaska attractive enough to get the investments the
state really needs. Alaska's competitors - places like North
Dakota and Texas - do not face the challenges that are faced in
Alaska, such as high costs, remoteness, and distance to market,
which are factors that investors have to overcome when wanting
to invest in Alaska. While making Alaska more competitive is
great, the question that should be before the committee is
whether CSSB 21(FIN) am(efd fld) makes Alaska as attractive as
it should be. In ExxonMobil's view, the bill's base tax rate of
35 percent is too high and reducing it should be considered.
Alaska represents an important and critical component of
ExxonMobil's worldwide global portfolio. ExxonMobil is
committed to Alaska to help craft a fiscal environment that is
stable, competitive, and attractive to bring new investments
that will allow Alaska to develop its great resource potential
now and in the future. The question now before the committee is
whether CSSB 21(FIN) am(efd fld) makes Alaska as competitive as
ExxonMobil thinks Alaska should be relative to the competition
the state faces. Concluding, he said it is up to the policy
makers to decide whether it is time to make a step change from
ACES and whether to take CSSB 21(FIN) am(efd fld), improve it,
and make Alaska what it can be - competitive and attractive for
the investments that everyone wants.
6:16:32 PM
REPRESENTATIVE TUCK asked what new projects could be expected
over the next five years if CSSB 21(FIN) am(efd fld) was passed.
MR. SECKERS replied ExxonMobil cannot speak for the legacy
fields of Prudhoe Bay and Kuparuk because it is not the
operator; he suggested the question be addressed to BP or
ConocoPhillips Alaska, Inc. He added ExxonMobil is progressing
Point Thomsen as best it can. ExxonMobil looks for every
competitive, attractive investment in Alaska and that is why it
is hoping legislators will make changes to increase the
opportunities that are there in the legacy fields and elsewhere.
A small improvement in the recovery from legacy fields is likely
to dwarf any new discovery on the North Slope. It is hoped this
bill would attract other players as well as ExxonMobil to look
at opportunities.
6:17:51 PM
REPRESENTATIVE HAWKER inquired what language could be used to
remove the lack of clarity in the GRE relating to legacy fields.
MR. SECKERS responded he does not have any specific language.
However, of concern are terms such as "accurately metered and
measured," or something to that effect, because he is uncertain
what that really would mean. More importantly, however, is what
would actually qualify as one of the wells. Current language
states the well would have to tap into either a new vein or part
of a reservoir that was not contributing before, but it is
uncertain as to what that exactly might mean. For example, if a
well was drilled that produces 10,000 barrels a day, does it all
have to be 100 percent new recovery, which is what ExxonMobil's
engineers would probably argue, he asked. Would all of it be
nullified if someone says 2 barrels out of the 10,000 are an
acceleration, he further asked. From a tax practitioner's
viewpoint, the clearer the language in a statute, the better off
the state will be.
6:19:36 PM
REPRESENTATIVE TUCK asked what projects ExxonMobil would like to
do that are currently uneconomical under the ACES regime.
MR. SECKERS answered he will get back to the committee because
as a tax person he does not have an inventory of such projects.
However, ExxonMobil is working with its partners to pursue every
opportunity identified by the operators in the legacy fields.
The goal is to make that inventory of projects being looked at
grow even larger.
REPRESENTATIVE TUCK, with regard to progressivity, noted that
[tax on] the upside can be significantly reduced by investing in
Alaska. He asked whether Mr. Seckers, as a tax attorney, has
looked at models to see how much more investment ExxonMobil
could have made in Alaska that would have bought down that tax
burden to make it even more profitable.
MR. SECKERS replied ExxonMobil looks at all the investments and
tax is a key component to the analysis. A problem with ACES is
that progressivity relates all the way back to dollar one, so
the marginal take is huge; even if a company makes investments,
it is a huge impact to the economics. Because tax is calculated
monthly, under progressivity there can be huge swings even
though the tax is trued up on an annual basis. Any project that
made the cut, ExxonMobil wanted to fund under ACES.
REPRESENTATIVE TUCK surmised that while ExxonMobil has been very
profitable in Alaska, the issue is that it is not as profitable
as ExxonMobil would like it to be competitively with other areas
that the company is looking at investing in.
MR. SECKERS responded ExxonMobil has invested in Alaska, paid an
enormous amount of taxes and royalties, and has enjoyed its time
in Alaska. ExxonMobil is in the business to invest to make
money and to produce oil and gas, and if it is attractive and
viable to do so in Alaska, the company will do that and wants to
do that for the long term. ExxonMobil wants to continue making
investments in Alaska if the fiscal regime gets improved enough
to allow that to happen.
6:22:55 PM
CO-CHAIR FEIGE inquired how the provision within CSSB 21(FIN)
am(efd fld) for a Competitiveness Review Board might affect
ExxonMobil's investment decisions.
MR. SECKERS answered such a board, in premise, might work but
would create some concern about the stability of the tax regime
because the board would be constantly looking at the regime year
after year. While it is prudent for any taxing regime to make
certain it remains competitive and attractive, he said he is
unsure whether this is the best vehicle in which to do that.
There is concern about what information the board would require
companies to produce, how confidentiality would be retained, and
the amount of interaction that would be necessary for companies
to comply with the board's requests.
6:24:28 PM
REPRESENTATIVE P. WILSON noted concern has been heard over the
past few years about why legislators cannot get guarantees. To
enable listeners to understand why it is hard for Mr. Seckers to
make a guarantee, she requested him to explain how ExxonMobil in
Alaska must compete within its own company.
MR. SECKERS responded he does not know of any regime where the
host government considering making changes demands guarantees,
and he would be surprised if the consultants could identify one.
Continuing, he said investments undergo much scrutiny and are
tested under a number of different metrics in terms of which
projects get funded. The decision is not his to make, it is
done in Dallas by people way above his pay grade. It is
competitive and looked at worldwide; ExxonMobil has businesses
in virtually every country and every state, so an investment has
to pass a lot of tests. However, ExxonMobil is bullish on
Alaska and wants to invest in Alaska, so it hopes the changes
the legislature makes will allow that to happen.
6:26:15 PM
REPRESENTATIVE SEATON understood the United Kingdom's brownfield
development to be a case in which there is a guarantee.
MR. SECKERS replied his understanding is that a guarantee was
not demanded per se. While a company would have to invest there
to get that allowance, he does not believe the United Kingdom
said investors had to tell what they would invest for the
government to make this adjustment. Generally, market economics
dictate an investment is attractive and competitive to make, and
that is what ExxonMobil does and that is where it will invest.
REPRESENTATIVE SEATON understood the United Kingdom's brownfield
situation to be one in which a challenged development will go
forward when an agreement is reached between the government and
a company that a tax reduction or large credit will be received.
He inquired whether Mr. Seckers believes the first two elements
of the GRE - new units and new participating areas - are clear.
He agreed with Mr. Seckers that the third element could be very
contentious because any company drilling in a legacy field would
claim the oil is new in order to have 20 percent of the gross
revenue excluded.
MR. SECKERS responded the first two provisions of the current
GRE language are much clearer than is the third. However, the
third provision is more critical because it is intended for
legacy fields which, in ExxonMobil's view, are where the state's
economic future lies. No other resource can stem the state's
production in the near term than can the legacy fields, he said.
6:29:38 PM
REPRESENTATIVE SEATON believed the new participating area is
very definitely targeted for within legacy fields. Not talking
about guarantees, he asked how long ExxonMobil anticipates it
would take to see results if the changes made are significant
enough to change behavior.
MR. SECKERS concurred the second element of the GRE could apply
to legacy fields. However, ExxonMobil's engineers have said
there are no projects in the legacy fields in the near-term or
mid-term range that would qualify for that element, which is why
he focused on the third element. Regarding the time it would
take to see results, he said he cannot speak for other
companies, but recalled that Mr. Pulliam, [the administration's
consultant], anticipated it would be rather quickly. ExxonMobil
is committed to Alaska and wants to invest here, so to the
extent that a law is passed that significantly changes ACES, the
company would be looking at it as quickly as it can.
REPRESENTATIVE SEATON believed Mr. Pulliam's estimate was the
effects would be seen within three years.
MR. SECKERS answered he cannot remember Mr. Pulliam's exact
words and the best he can recall is that Mr. Pulliam said it
would be sooner rather than later.
6:32:13 PM
CO-CHAIR SADDLER inquired whether there are other regimes that
tax new oil differently than old oil.
MR. SECKERS suggested asking this question of the consultants,
but said some regimes offer certain holidays and exemptions for
stripper wells, if one considers that new oil. The concept
itself is similar to holidays and things of that nature, but he
would have to get back to the committee as to whether it is
specifically targeted to new oil per se. In further response,
he explained a holiday concept is where a company gets relief
from a taxing provision, either entirely or a portion, for a
period of time based on the happening of certain events; for
example, exemption from a tax for a certain period of time in
return for drilling a well or for drilling a certain type of
well or for doing a certain type of activity. A holiday is also
very common with property tax when a company receives exemption
for a period of time for constructing an office building.
CO-CHAIR SADDLER recounted Pedro van Meurs telling the
legislature a year or so ago about the concept of establishing a
baseline of decline, and where oil produced above that predicted
decline line would be taxed as new oil and below that line is
existing oil that would have been produced anyway. He asked
whether Mr. Seckers has heard of such a tax regime in practice.
MR. SECKERS responded none come to mind.
CO-CHAIR SADDLER inquired whether ExxonMobil reports proven
reserves to the Securities Exchange Commission (SEC).
MR. SECKERS answered that is not his job to do but imagines the
company does, although he does not know the extent of the report
that is filed.
CO-CHAIR SADDLER asked how it is determined what a proven
reserve is, explaining that he is trying to find out whether
this is a method for identifying old oil versus new oil.
MR. SECKERS replied he will have to ask a company engineer as to
what the exact criteria is.
6:35:26 PM
CO-CHAIR SADDLER requested Mr. Seckers to ask an ExxonMobil
reservoir engineer the following question: "Would the
difference between what is proven reserves this year and what
might be seen as proven reserves in future years be seen as one
possible mechanism for identifying what is new oil versus old
oil?" He explained the reason for his asking this question is
Mr. Seckers' statement that the mechanism proposed by the
Department of Natural Resources (DNR) is not real clear, so he
is searching for something that might be clearer.
MR. SECKERS responded he will have to give that some thought.
Proven reserves, unproven reserves, and static reserves are not
an exact science. He recalled there was concern about the
decline curve and where that is measured from. He offered his
hope for a simpler result, such as having the Alaska Oil and Gas
Conservation Commission (AOGCC) certify a well that is drilled,
as opposed to having to barrel-track it or making it more
complicated. In further response, he offered his belief that
when a well is drilled and starts to flow it is in the purview
of the AOGCC to make certain that it is, in fact, a producing
well. He concurred with Co-Chair Saddler that the AOGCC does
not determine whether it is new or old oil; however, he added,
he is not 100 percent certain.
6:37:12 PM
CO-CHAIR SADDLER inquired whether Mr. Secker's would like to
propose a better way under the third element of the GRE to
determine what is new oil that would have not been produced
absent the changes in tax law.
MR. SECKERS answered he would have to give that some thought,
but he knows from talking to ExxonMobil's engineers that the
only way for wells to get funded is if it is to bring on new
reserves, not to accelerate production. Therefore, he is not
certain the split that Co-Chair Saddler is looking for is
actually necessary. The better test might be that if the well
is drilled and it flows, then some sort of relief to make it
more attractive could be in order.
CO-CHAIR SADDLER understood Mr. Seckers to be saying, then, that
it is not an incentive to maximize production within the
parameters of the health of the reservoir when profits from
drilling are higher at high oil prices.
MR. SECKERS replied the version of the bill before the committee
is clearly a significant improvement. The goal now is to make
it as attractive as possible by having it apply to the legacy
fields - which are the state's lifeblood - so that investments
occur there. ExxonMobil has an inventory of items it hopes to
expand when they become competitive to do so. In further
response, he agreed to take Co-Chair Saddler's aforementioned
question to ExxonMobil's reservoir engineers.
6:39:15 PM
REPRESENTATIVE TARR noted Point Thomsen is the only project Mr.
Seckers mentioned as something that will be adding new oil soon.
Since that oil is the result of a court case, she said she
cannot imagine that Mr. Seckers is suggesting the best way to
get to new production is through litigation. She asked whether
Mr. Seckers has any additional information about what projects
are potentially coming on line. Regarding the gross revenue
exclusion, she pointed out that some legislators have concern
that it is inappropriate for already-planned activities to be
eligible for the GRE.
MR. SECKERS responded his comments on Point Thomsen were in
response to a question about what ExxonMobil is currently doing.
He said it is inappropriate for him to speak to projects at
legacy fields because ExxonMobil is not the operator. He
suggested the question be asked of the operators when they
testify today. In terms of the gross revenue exclusion, he said
ACES does not make Alaska attractive or competitive. It is
ExxonMobil's view that legislators want to make Alaska
competitive as well as attractive and incentivize all
production, whether from new or existing fields. To get to
production, to stem the decline in the near term, ExxonMobil
believes the legacy fields should be part of that target.
Incentivizing as many opportunities as possible is a critical
component of any major change to the fiscal regime.
6:41:20 PM
REPRESENTATIVE TUCK understood tax breaks in the legacy fields
will help in the short term, but inquired whether ExxonMobil
would be looking at doing new exploration if the bill passes.
MR. SECKERS answered ExxonMobil looks at every lease sale that
comes up and has bid on some in recent times. While people like
to refer to ExxonMobil as "harvesting" - which his company
thinks is an inappropriate comment - the company is exploring
every opportunity to expand the legacy fields to get as much
improvement into those fields as possible. He is unable to say
whether ExxonMobil would look into long-term exploration
opportunities because he is not on the exploration side of the
company. However, ExxonMobil is looking at Alaska all the time
and if any competitive opportunities present themselves the
company would be very interested in them.
REPRESENTATIVE TUCK asked what years in Alaska were the most
profitable, or the heyday, for ExxonMobil.
MR. SECKERS replied ExxonMobil provides all its information to
the Department of Revenue. As a matter of course, the company
does not talk about profits.
6:43:18 PM
CO-CHAIR FEIGE opined that a wide range of different things
could be done in this legislation, pointing out that over the
last year legislators have investigated many different options.
He inquired what type of incentive, in Mr. Seckers' best
estimate, would result in the most production the soonest.
MR. SECKERS responded policy change affects many taxpayers, so
different buttons affect different people different ways, making
it a difficult question to answer. If members stay within the
structure of CSSB 21(FIN) am(efd fld), he would suggest that the
base rate is too high and is an area that ExxonMobil thinks
should be lowered. Clarity around the GRE would be important.
The $5 per barrel is a simple and good concept, but members
should check with consultants as to whether $5 is the right
number. Of those three areas, he said the base rate is the most
critical.
6:44:42 PM
CO-CHAIR SADDLER asked how ExxonMobil would deal with the third
category of GRE provisions if they became law.
MR. SECKERS answered clarity could be added by regulation should
the statute become law as currently written, in which case
ExxonMobil would be active in providing guidance. However, his
personal perspective is that he would much rather see it in
statute where it is clearer.
CO-CHAIR SADDLER inquired whether ExxonMobil would wait until
there was clarity through regulation before the company factored
this provision into calculating its investment decisions.
MR. SECKERS replied he would have to check with his company's
engineers before he could answer. On a general sense, he said,
it is hard to make investments when it is uncertain how the law
is going to operate. It is hard to advise a client to take an
action in the hope that a regulation will be drafted a certain
way. However, ExxonMobil does have faith that the regulations
would be drafted to provide the clarity that would be required.
CO-CHAIR SADDLER surmised ExxonMobil would hang back until there
was more certainty.
MR. SECKERS responded ExxonMobil would definitely take a
cautious look because it would not know for certain what the
outcome might be.
6:46:56 PM
CO-CHAIR SADDLER asked whether the timing of the decision about
the GRE qualification, i.e. if that decision was made closer to
the front end or towards the end of a decision to invest, would
have any bearing.
MR. SECKERS answered the most clarity upfront the easier it is
to make a decision. It is no different than for a person trying
to make decisions when there is a tax impact. The sooner one
can get that clarity, the better the investment decision would
be and the more certainty one would make that decision under.
CO-CHAIR SADDLER inquired how much trust ExxonMobil would have
that the Department of Natural Resources (DNR) will make a
decision the company could live with should the GRE provisions
pass as currently written.
MR. SECKERS replied both the Department of Natural Resources and
the Department of Revenue do the best job they can and he thinks
they do a great job. One would hope the intent of this
provision is for them to provide the certification that one can
rely on. Guidance to that effect, clarity in terms of what
information a company needs to provide to get that certification
and the timeframe the director or commissioner has to issue
that, are critical and one would hope they would be addressed in
the regulations. He offered his belief that the administration
would operate in good faith, as it always has, and that if DNR
issued certification that both departments would respect that.
6:48:47 PM
CO-CHAIR SADDLER asked whether there is anything about the
consultants' views or representations of the GRE, as it is
defined and would be applied, that ExxonMobil would like to
answer or to correct.
MR. SECKERS responded all of the consultants, including Mr.
Marks, have done a great job and have represented the state of
Alaska's competitiveness accurately. He said he cannot question
the data the consultants used because he does not have access to
that, but he believes what they presented is fair and objective
and he sees no fault in what they have provided thus far.
6:49:43 PM
REPRESENTATIVE P. WILSON understood Mr. Seckers to be saying
that ExxonMobil would act quicker if clarity was provided in the
bill itself rather than waiting for regulations to do so, given
that putting regulations into place can sometimes take years.
MR. SECKERS answered the more concise and specific the language,
the better. He suggested DNR be asked how long it expects it
will take to create the regulations that it would want companies
to operate under should the bill pass, given there are a lot of
missing pieces. To the extent the information is known in
advance, the easier the decision to work under that provision
becomes.
6:50:55 PM
REPRESENTATIVE OLSON thanked Mr. Seckers for his testimony,
stating that in a number of meetings the only testimony from
ExxonMobil was on paper or lasted less than five minutes. He
noted ExxonMobil has been tied to the history of Alaska for an
event that had more to do with the name of a vessel than
something the company was directly responsible for, but which
has had a negative impact on relationships between Alaska and
the company. He said he has been told throughout his 30 years
of involvement with the industry that ExxonMobil is the toughest
of the three companies in Alaska to deal with when it comes to
putting together a deal, but once the deal is put together and
signed ExxonMobil is the easiest because it does not micro-
manage. He inquired whether that is an accurate assessment.
MR. SECKERS replied the aforementioned event was a tragic
accident that ExxonMobil regrets. That event, he continued,
made ExxonMobil look at its internal operations, improvements
were made, and the company is now an industry leader in
operational safety. When ExxonMobil says something it says what
it means and it means what it says. It is unfortunate that
people say ExxonMobil is hard to deal with, but it is because
ExxonMobil likes to make certain the answer is right and is the
best answer for all parties involved. Once that cut is made,
ExxonMobil will do things to the best operational safety
standards possible.
REPRESENTATIVE OLSON added he was not making a negative comment,
just trying to get to the chase without taking half an hour.
6:53:42 PM
REPRESENTATIVE TUCK, regarding the instability that ExxonMobil
fears a Competitiveness Review Board might cause, requested Mr.
Seckers' opinion on whether the legislature should continue with
its approach of making decisions based on what it hears from the
experts it hires rather than establishing a board. He further
asked how more stability could be created to give ExxonMobil
more confidence going forward.
MR. SECKERS responded stability is important but only works if
it is not at too high of a price. The Competitiveness Review
Board could work, but to require by law that an analysis and
reporting be done every single year adds an element of concern
because that means it is likely to change or could be changed.
While ExxonMobil understands the legislature is free to change a
law whenever it wants, putting in statute that the legislature
will constantly look at a law makes it concerning.
6:55:41 PM
REPRESENTATIVE TUCK recalled that during the 2012 special
session, PFC Energy stated that the decline curve could be
looked at and negotiated to incentivize anything above the
curve. Regarding the GRE and the question of what would
constitute old oil versus new oil, he asked whether Mr. Seckers
thinks it would be better to look at all oil as being the same.
MR. SECKERS answered he was aware of the proposals made last
year regarding the decline curve idea. While he is personally
unaware of any current regime that employs this, that is not to
say there are none. The legacy fields represent the only known
resource that is able to stem the production decline in the
near-term or mid-term and it is ExxonMobil's view that the goal
should be to make that as attractive as possible. The idea he
mentioned before - [giving some relief] if a well is drilled and
it flows - would make it simpler under the GRE and would be an
attractive incentive. It is hard to distinguish; it is not an
exact-measurement science. ExxonMobil's engineers do not drill
wells to accelerate, they drill wells to add production, to add
recovery, and therefore it should qualify. So, to the extent
clarity can be made in the GRE and make it apply to the legacy
fields, that is a step forward in the right direction.
6:58:14 PM
REPRESENTATIVE TARR referenced Mr. Seckers' statements about the
proposed base tax rate being too high and about overall
competitiveness. She asked whether Mr. Seckers has seen the
chart provided by Mr. Janak Mayer of PFC Energy showing that
Alaska would be well below many other oil producing areas,
particularly for new development. She requested that he
elaborate on what he means in terms of competitiveness.
MR. SECKERS replied he has seen the chart but does not have it
committed to memory. He said his reference to the base rate and
competitiveness was in regard to whether this proposal makes
Alaska more competitive, which it unquestionably does. And it
is absolutely better than ACES because it cannot get much worse
than ACES. While CSSB 21(FIN) am(efd fld) would make Alaska
more competitive and put Alaska's regime in the middle of the
pack, he would like to see Alaska become more attractive. He
wants Alaska to beat North Dakota and Texas. To the extent that
Alaska can make itself as attractive as it can be, the more
investments are likely to flow. He said ExxonMobil believes the
base rate is too high - it affects the effective tax rates.
Look at all of the other issues that Alaska faces. For example,
a slide produced by Mr. Mayer for the Senate Special Committee
on TAPS Throughput shows how Alaska compares cost-wise and the
cost in Alaska is staggering. ExxonMobil suggests consideration
be given to making Alaska more attractive than these other
places that do not have such high costs and distance to market.
Addressing the base tax rate, which ExxonMobil thinks is too
high, is one way to do that.
REPRESENTATIVE TARR offered to share a copy of the chart, saying
that in the example she is looking at Alaska would be more
competitive than North Dakota under CSSB 21(FIN) am(efd fld).
Responding to Co-Chair Feige, she said she is referring to the
chart the committee was given yesterday. She further confirmed
the example is under the GRE fields.
7:01:00 PM
CO-CHAIR SADDLER noted there are a number of other provisions in
the bill besides the GRE, base rate, and $5 [credit] per barrel.
He asked Mr. Seckers to provide ExxonMobil's opinion regarding
the proposed change in interest rate, the carry forward loss,
and the Alaska manufacture credit.
MR. SECKERS responded ExxonMobil encourages Alaska to make
itself as competitive and attractive as possible. Reducing the
interest rate is a critical step and something ExxonMobil has
endorsed for years. While the manufacturing credit would help
make Alaska more competitive in terms of more jobs and more
investment, it is hard to say whether it would impact ExxonMobil
per se. Regarding the tax loss carry forward provisions, he
remarked that if ExxonMobil found itself in a loss, everyone
would be hurting. But, he continued, from the perspective that
the rate was changed to match the proposed new base rate, it is
probably incentive to many companies, and smaller companies in
particular. Some of these provisions may be very critical to
encouraging other companies to come to Alaska, and ExxonMobil
supports these changes being made for them.
CO-CHAIR SADDLER, regarding Mr. Seckers' statement that a 35
percent base tax rate is too high, inquired what number would
not be too high.
MR. SECKERS declined to say, stating it is up to legislators to
decide how attractive Alaska should be. He suggested asking
this question of the legislature's consultants.
7:03:32 PM
REPRESENTATIVE P. WILSON observed that the chart mentioned by
Representative Tarr only mentions the government take and
therefore does not tell overall where Alaska is at. She asked
whether ExxonMobil just looks at government take or looks at the
overall package when making its decisions.
MR. SECKERS answered government take is a key component to any
investment decision that ExxonMobil makes. It is just one gauge
that is used, but not the only one; a number of measurements are
used that are proprietary to ExxonMobil.
REPRESENTATIVE P. WILSON inquired whether other changes, such as
allowing permanent roads so that work could be done year-round
instead of only certain times, would make a difference.
MR. SECKERS replied it clearly would make a difference in
respect to access to resources, but he cannot say how that would
relate in terms of making Alaska more competitive and attractive
for investment dollars. He suggested this question be asked of
the legislature's consultants.
7:05:42 PM
SCOTT JEPSEN, Vice President External Affairs, ConocoPhillips
Alaska, Inc., began his PowerPoint presentation by framing the
issues within Alaska that pertain to the kind of investments
ConocoPhillips Alaska, Inc. ("ConocoPhillips") is currently
pursuing [slide 2]. The easy oil is gone, he said; the easy oil
being the type of development that was had when Kuparuk and
Prudhoe Bay were first developed. Those were high rate wells
that were relatively simple, although at the time those wells
were pushing technology. There was very little or no water with
those wells, the kind of development that every engineer strives
to be in on the front end. As they mature, however, continuing
to increase production, increase recovery, becomes a more
complex problem, which is where things are right now in the
North Slope legacy fields of Alpine, Kuparuk, and Prudhoe Bay.
Although Alpine is younger, it still has its own particular
challenges.
MR. JEPSEN pointed out that ConocoPhillips is currently drilling
very complex wells, such as the octa-lateral, and the wells
being drilled tend to be very high cost. Drilling inexpensive
wells is pretty much not done in the "oil patch" these days, but
in Alaska they tend to be higher than average. ConocoPhillips
is targeting smaller reserves and fault blocks that take a lot
of technology to identify, as well as drilling around the flanks
of the fields where oftentimes the sands are thinner, rates are
lower, and sand quality is often not as high. ConocoPhillips
has developed satellites and will continue doing so, but they
tend to be capital intensive because most of the satellites
require roads, pads, new wells, pipelines, and power lines.
Viscous oil is also being looked at, but the billions of barrels
of viscous oil on the North Slope are challenged by relatively
poor reservoir quality, thick oil, and low rates. Accessing
much of the viscous oil will require infrastructure investments,
not just drilling off of existing pads.
7:08:40 PM
MR. JEPSEN said a technique being used by ConocoPhillips to
maximize recovery in these aging fields is water flood, which
produces more and more water as the oil is produced. Right now,
about three times as much water as oil is being produced, which
drives up the operating cost per barrel and is a trend that will
probably continue. However, he emphasized, there is tremendous
resource potential in the legacy fields. A few years ago, the
Department of Revenue (DOR) put out a forecast of over 4 billion
barrels of oil to be recovered from the legacy fields for the
years 2010-2050. In that same study, DOR looked at the recovery
from the fields of Nikaitchuq, Oooguruk, Point Thomsen, and
Liberty, and the total from these fields was less than a quarter
of the legacy fields. He said he is not diminishing the
significant accomplishments of the companies that have been
exploring and developing these other opportunities, but in the
near-term the greatest opportunities for increased production,
increased reserves, are in the legacy fields.
7:10:19 PM
BOB HEINRICH, Vice President Finance, ConocoPhillips Alaska,
Inc., began by reviewing the issues that ConocoPhillips sees
with Alaska's Clear and Equitable Share (ACES) [slide 2]. He
said the primary issue is the high average and high marginal tax
rates. The top right graph on slide 2 illustrates the effect of
marginal tax rates by the state and federal governments and the
producers across a range of prices, he continued. Marginal
share is the incremental cash that is generated by a $1 increase
in price and how that incremental dollar is split between those
three parties. At today's price environment of roughly $110,
less than $.20 on every incremental dollar is actually retained
by the producer; the other $.80 is split among the state and
federal authorities. The red bars on the graph represent the
State of Alaska, he explained, and their increasing height as
prices increase is wholly a function of the progressivity
surcharge under ACES. As prices increase, this progressivity
eliminates the upside from prices that producers typically see
when working in other oil-producing regions.
MR. HEINRICH said the effects of progressivity and the high
marginal tax rates are best illustrated by looking at the bottom
right chart on slide 2 which depicts earnings by ConocoPhillips
Alaska, Inc. From 2007-2011, oil price movements were between
$60 and $110 per barrel [ANS West Coast], but the earnings of
ConocoPhillips Alaska hardly moved - staying between $22 and $25
per barrel. Nearly all of that upside was paid to the State of
Alaska through the progressivity feature of ACES. The tax
credits, however, do help offset a small part of the high tax
rates that result from ACES and they serve a purpose in helping
to offset the high cost environment and difficult conditions of
Alaska. Another positive aspect of those ACES tax credits is
that they do apply to all fields; they are providing incentives
to improving production in the legacy fields as well as the new
developments. However, those tax credits in the structure of
ACES are not enough to offset the high average and high marginal
tax rates that result from the progressivity feature of ACES.
7:12:52 PM
MR. HEINRICH turned to discussing his company's point of view on
CSSB 21(FIN) am(efd fld) [slide 3]. He said ConocoPhillips has
advocated for elimination of progressivity due to its impact at
the high price environment, the prices of today and above.
Also, creating a flatter tax rate over a broad range of prices
is a positive approach to taxation, he continued. The proposed
bill achieves both of those.
MR. HEINRICH drew attention to the upper right graph on slide 3
that compares ACES and CSSB 21(FIN) am(efd fld) from a producer
share basis across a range of prices using industry data from
the Department of Revenue. He explained that producer share
calculations depend on many factors, including assumptions like
cost structure - operating and capital expenditures - which vary
from field to field and producer to producer and person to
person doing the analysis. The resulting producer share under
CSSB 21(FIN) am(efd fld) is basically flat across a range of
prices [$60-$120], which ConocoPhillips likes because it
represents a consistent split of results across this range of
prices between the state and the industry. It means as the pie
gets bigger the industry and the state share a portion in the
same tax rate. At an ANS West Coast price of $60 per barrel and
below, the gross minimum tax kicks in under both ACES and CSSB
21(FIN) am(efd fld). That eventually results in situations
where the producers are paying taxes despite their negative cash
flows from their operations. Below a price of $91, the Senate
bill represents a tax increase compared to ACES, while above $91
it represents a benefit to the producers. The loss in producer
share [at prices between about $61 and $91], is a result of the
elimination of tax credits, which provide a significant portion
of the benefit at lower prices. The combination of the higher
base rate of 35 percent, offset in part by the $5 per barrel of
produced oil credit, is not enough to offset the loss of the tax
credits at these low prices.
7:15:39 PM
MR. HEINRICH stated ConocoPhillips supports establishing a tax
structure that creates an attractive investment climate for an
overall competitive tax rate helping offset the high cost of
Alaska's operating environment and that incentivizes both the
existing fields and new fields for new production. He
reiterated that CSSB 21(FIN) am(efd fld) represents a tax
increase at lower prices. While it is a good improvement, it
still puts Alaska at the upper end of its competitive peer group
and that does not differentiate enough to offset Alaska's high
cost and difficult operating environment. Lastly, the GRE
concept, as currently structured, does not appear to do much for
the legacy fields.
MR. HEINRICH moved to bar chart on slide 4, noting it is similar
to the one shown earlier by Representative Tarr, but is instead
from PFC Energy's [March 12, 2013,] testimony before the Senate
Finance Committee. He explained the chart shows the effective
tax rates of different fiscal structures in different oil
producing areas at the four different crude prices of $80, $100,
$120, and $140 per barrel. The red arrow on the far right of
the chart points to Alaska's current system under ACES for an
existing producer, which essentially is the legacy fields and
which, in these scenarios, do not get a benefit from the GRE.
Here, the effects of the progressivity surcharge under ACES can
be seen - the [percent] government take increases as prices
increase. However, as shown by the bars to the left of the ACES
arrow, the majority of the more competitive structures actually
have slightly regressive systems. He noted that the blue arrow
located in the middle of the pack for competing jurisdictions
represents Alaska at a 30 percent base rate with a $5 per barrel
of oil produced credit, a provision that was considered for a
point in time in the Senate Finance Committee. The left red
arrow, labeled 65 percent, was pulled from a another slide that
PFC Energy showed in its [March 12, 2013,] presentation for the
bill's current provision of a 35 percent base rate with a $5 per
barrel of oil produced credit. At the 65 percent government
take level, CSSB 21(FIN) am(efd fld) positions Alaska at the
high end of the middle of the pack. While ConocoPhillips
expects the activity levels to increase, at that tax rate it may
not be as high everyone would like to see.
7:18:34 PM
MR. JEPSEN then addressed the gross revenue exclusion (GRE)
provision, saying ConocoPhillips' comments echo much of what was
said by Mr. Seckers. While the GRE by itself does provide a
mechanism to incentivize investment, ConocoPhillips sees a
couple of problems with it. The currently proposed criteria for
how a well would qualify states that it cannot be contributing
to production. As mentioned earlier, ConocoPhillips is
searching its legacy fields for fault blocks, isolated fault
blocks that are not being drained very effectively. In many
instances these fault blocks may not be completely sealing.
ConocoPhillips is going back and developing reserves that will
not produce into the life of the field if another well is not
put there. From a strictly rigorous reservoir engineering point
of view, it might be very tough to convince the Department of
Natural Resources (DNR) that this particular location has not
been contributing to production, even though at the end of field
life a lot of oil will be left behind and even though by
drilling the well it will book additional proven developed
reserves. As the GRE is currently written, ConocoPhillips is
greatly concerned as to whether it will be able to convince DNR
that many, if any, of its legacy field projects qualify for the
GRE. It could be that DNR's intent is different than what is
seen in the written words, but it would make ConocoPhillips feel
better if there was greater clarity around that.
7:20:03 PM
MR. JEPSEN stated that the GRE language of "accurately metered
and measured" is also a potential issue. However, he continued,
there is precedent for statutory language of this nature and
still making it work within the fields. ConocoPhillips does not
meter and measure every single well in the field. It tests the
wells on a periodic basis and compares that to how much oil is
actually being put down the pipeline for a particular field.
For example, oil going into the Kuparuk pipeline is allocated
back to the individual fields, individual drill sites and wells,
based upon the well tests. While this allocation methodology
sounds a bit complicated, it is one that ConocoPhillips has used
in the past when there were the separate economic limit factors
(ELF). ConocoPhillips is using this allocation methodology for
leases that have different royalty rates and how much oil comes
from each lease. Thus, it is not without precedent, but from
ConocoPhillips' point of view, the company would feel more
confident if the issue about what qualifies for a GRE can be
solved and there is something either on the record or in the
statute that clarifies what is meant by "accurately metered and
measured."
MR. JEPSEN provided ConocoPhillips' suggestions for changes to
the GRE. He said one suggestion is that production from any new
well (whether a sidetrack, a coil tubing drilling well, or a
grassroots well) that meets the criteria for qualified capital
receives the GRE. The reason for using qualified capital is
because the term is defined under ACES as part of the
calculation for determining the net profit per barrel.
Generally speaking, when a company is going to capitalize the
well, new reserves are being produced - additional recovery is
being produced - versus what the company is getting out of the
field. From the viewpoint of ConocoPhillips, using that as
criteria for what qualifies will be clearer. A company would
understand going into it that a particular well qualifies for
the GRE. It would make it a greater incentive, particularly for
the legacy fields, and would bring more investment and drilling
rigs into those fields. If the intention is that it is not
going to apply to the legacy fields, then the language as
written probably accomplishes that.
7:22:31 PM
MR. JEPSEN reiterated that it is ConocoPhillips belief that the
greatest opportunities for incremental investment, production,
proven developed reserve additions, are within the legacy
fields. He urged the committee to take a look at the
aforementioned suggestion as an option for the GRE. Making it
simple and clear is going to be the key to making it work. The
more complicated it is, the more retrospective the analysis is.
The more technical it is, the less applicable it is probably
going to be. The less of an impact, the less of a factor it is
going to be in making investment decisions.
MR. JEPSEN concluded by stating that CSSB 21(FIN) am(efd fld),
as currently proposed, is an improvement over ACES and would
lead to incremental and more investment. It would put Alaska at
the high end of places that are taking the lion's share of
ConocoPhillips' investment right now. For example, in the Lower
48 the company's investment between the years 2010 and 2012 has
gone from $1.5 billion to $4.8 billion. That investment is
partly because of the resources and partly because of
technology, as well as because of the favorable tax framework.
Alaska has many of the same characteristics, but under ACES it
does not have the same kind of favorable tax framework. While
CSSB 21(FIN) am(efd fld) is a positive step, if Alaska wants to
see the kind of investment it would like, then ConocoPhillips
would ask the committee to consider reducing the base rate to
move Alaska into a regime that is more attractive than under the
bill as currently written. Modifying the GRE so it can be
counted on for legacy field investments would be another
significant improvement.
7:24:47 PM
REPRESENTATIVE TUCK asked what the decline curve is today within
ConocoPhillips' legacy fields.
MR. JEPSEN replied the curve is a function of the maturity of
individual wells and individual patterns. For a new well coming
on stream, the base natural decline without water flood, without
enhanced oil recovery (EOR), is about 18 percent. A mature well
that has been on stream for 30 years might have a decline of 8-9
percent. In addition to being a function of that particular
well's maturity, the decline curve is also a function of the
kind of processes being used to enhance recovery. The decline
rates seen in these fields generally are not what he would call
natural decline rates because ConocoPhillips has a lot of
enhanced oil recovery processes going on.
REPRESENTATIVE TUCK inquired where the legacy fields belonging
to ConocoPhillips Alaska, Inc. currently stand.
MR. JEPSEN responded he does not have handy the actual decline
rate for the Kuparuk field, but will get back with that number.
REPRESENTATIVE TUCK asked how many of ConocoPhillips' operations
in its legacy fields require collective decisions with the other
two producers.
MR. JEPSEN answered in the Kuparuk Field it takes ExxonMobil,
BP, and ConocoPhillips Alaska, Inc. to approve the majority of
the investments.
REPRESENTATIVE TUCK inquired whether ConocoPhillips has some
projects it would like to get released as soon as ACES is fixed.
MR. JEPSEN replied if a change to ACES is seen, ConocoPhillips
will factor that into investment decisions; a range of options
has been discussed during this legislative session. If the bill
passes as currently written, his company will push for some
additional investments, but it may not be as much investment as
the company thinks it could potentially fund in these fields if
it had a more robust tax framework.
7:27:19 PM
REPRESENTATIVE HAWKER understood ConocoPhillips has had two
significant oil exploration successes in the Gulf of Mexico. He
asked whether those successes could be discussed to illustrate a
difference in productivity and the economic competitiveness of
the Gulf of Mexico compared to Alaska.
MR. JEPSEN responded he probably cannot give the granularity
being looked for because he is not that familiar with deepwater
Gulf of Mexico. However, as seen on the far left side of the
[slide 4] chart, the Gulf of Mexico is the most competitive
place in the world to invest. That is generally true on federal
offshore waters because there is no severance tax and the
royalty rate is usually about 12.5 percent. ConocoPhillips is
one of largest lease holders in deepwater Gulf of Mexico, the
reasons being that it is resource rich and a very competitive
place to invest.
7:28:44 PM
REPRESENTATIVE HAWKER noted that while much is included in CSSB
21(FIN) am(efd fld), he is also interested in things that may
not be in it. A perennial issue for him is where the state can
remove impediments that make it possible for everyone to better
administrate Alaska's tax code. He inquired how important or
helpful it would be if state auditors were able to place a
reasonable and tested reliance upon joint interest buildings.
MR. HEINRICH answered ConocoPhillips supports that concept that
joint interest buildings do represent a reasonable approach in
identifying costs that are audited among the partners as well.
Responding further, he said it may help streamline the process
of the state's audits. For example, ConocoPhillips Alaska, Inc.
is still waiting for its first audit under ACES.
7:30:05 PM
REPRESENTATIVE HAWKER stated that in the definition of lease
expenses he believes the legislature has abrogated its ability
to write statute, and to write very clear statute, when it
allows the Department of Revenue to adopt regulations as well as
to establish additional standards for purposes of carrying out
this section. He asked whether giving that extraordinary
latitude to the Department of Revenue has caused the industry
any problems with the surety of being able to go through the
code and know what can and cannot be claimed.
MR. HEINRICH responded the clarity of the regulations has been a
challenge for ConocoPhillips in terms of not knowing how they
are going to be interpreted and applied in practice. Some of
that clarity will happen over time as audits are concluded and a
history is developed.
7:31:53 PM
REPRESENTATIVE SEATON, regarding testimony by ConocoPhillips and
others about the complexity of the GRE when applying it to
existing producing areas and where those determinations will be
made, said he anticipates the determinations will be challenged
and result in administrative appeals and court cases. However,
he continued, the two provisions of the GRE for new units and
new participating areas are clear and simple. He recounted that
at ConocoPhillips' February 28, [2013,] analysts meeting, it was
stated that the company is working hard to develop and produce
every last barrel it can get at economically and is trying to
get to hard-to-reach pockets of oil that have been bypassed and
are not being produced by existing wells, and to do it without
spending a lot of money. It was said that accessing these
pockets using conventional drilling was not economic, which
resulted in use of the lower cost method of coil tube drilling.
He recounted that the House and Senate resource committees just
returned from an excellent tour of ConocoPhillips' facilities on
the North Slope where members saw that this coil tube drilling
is neat and clean and does not require bores, casing, or blowout
preventers. Given there are more economic ways than
conventional drilling to get to that oil, he asked why the
legislature would try to apply a very complex GRE to determine
which oil was participating rather than taking ConocoPhillips'
word that this is a very economical way to get at those and
enhance that production. He requested an explanation of the
reasoning for why ConocoPhillips would be supporting something
that is going to be very administratively complex.
7:34:42 PM
MR. JEPSEN, regarding the GRE itself, answered ConocoPhillips is
advocating something that is considerably simpler than what is
in the current bill. ConocoPhillips would urge the committee to
change that so it is not so difficult to interpret. Regarding
the analysts' presentation, ConocoPhillips was talking about how
to apply technology to its worldwide portfolio to help increase
production and increase recovery. What was being discussed
during that presentation is what is being done day in and day
out at Kuparuk; it is nothing new, it is not an incremental
stream of investment, it is not a new project, it is not a new
initiative. ConocoPhillips has been doing essentially that same
kind of work - that same level of investment - in those same
kinds of projects for the last five years under ACES. So, if
ConocoPhillips is going to do that, the question being asked is
why apply for a GRE. One reason is that even under CSSB 21(FIN)
am(efd fld), Alaska is still at the top of the middle of the
pack. ConocoPhillips anticipates what it will do in the future
and the disclaimers at the front end of all these presentations
is, "investor make your own decisions about ... what the
company's performance might be." The world could change, so no
plans are cast in stone. If things remain as they are today in
terms of the company's capital situation and other opportunities
for investment, this is what the company will probably do. To
be clear - ConocoPhillips could do more in Alaska. If Alaska
was in a place where it could attract more investment,
ConocoPhillips would do more of those types of activities. If
the question is whether the status quo is okay so nothing needs
to be done to secure it or whether the state would like to see
more, he would argue that as a state he would like to see more -
more jobs, more oil down TAPS, a long-term healthy economy - and
that can be done if substantial changes are made to ACES.
7:37:12 PM
REPRESENTATIVE SEATON appreciated that global look, but argued
the problem is that there is a substantial change to ACES under
CSSB 21(FIN) am(efd fld). The biggest change is SB 21, not the
GRE applied to the third category, which is very complex.
Something legislators have been told all along is to make it
simple. But this one element is being said to be very complex;
therefore, companies will apply for everything, which he
presumes will mean the state is going to have a lot more
decisions and frustration on everyone's part. He said he can
understand a company wanting to have 20 percent of a field's
gross revenue excluded, but asked why stimulate a very complex
system that has an indeterminate measurement that nobody will
agree on, whereas the other two portions of the GRE are pretty
cut and clear. He requested a response to the coiled tubing
drilling and other things that ConocoPhillips is currently doing
in the field and why that should have the extra incentive of a
ross revenue exclusion.
7:39:18 PM
MR. JEPSEN replied, "This is not a global answer, this is a
specific answer. If you change ... the tax framework in Alaska,
it will attract more investment. ... This gets back to ... where
we stand in other places we are investing money, we are at the
high end of ... the government share in those other places where
we are investing a lot of money right now." To put Alaska in a
more competitive position, one of the few things in legislators'
control is the tax rate. Getting to the middle of the pack
would be a better position for Alaska and one way to get there
is to apply the GRE to new wells that have production, have
reserves, in the legacy fields. But, it will take time to get
there. Regarding the second part of the GRE that applies to
participating areas (PAs), he said he thinks it would be hard to
administer in the existing fields for several reasons. First,
he does not see a lot of opportunities for new PAs, which means
talking about expansion of existing PAs, and the vagaries
currently seen in the [proposed] statute make it uncertain as to
whether that is something that a company can count on. It has
the measurement issues and whether the Department of Natural
Resources might say that at least a portion of the expansion was
probably contributing to production in some way. So, even the
second item in the GRE will have little applicability. If the
purpose of the GRE is to bring new investment and see more
production in the next 5-10 years, then it needs to be applied
to legacy fields, otherwise no one will be qualifying for a GRE
for quite some time. Lastly, ConocoPhillips is advocating for
making it simple. As currently written, the GRE will be very
complicated and may not have the desired consequences because
ConocoPhillips may not bother trying to pursue one. It is the
job of the Department of Natural Resources and Department of
Revenue to protect the state's interests; so, if written in such
a fashion that they can deny the GRE, he anticipates that they
will and he cannot fault them. ConocoPhillips might test it
once or twice and if it is applied in a very conservative
fashion, he would just decide it is as suspected. He therefore
thinks it needs to be simpler and should apply to the legacy
fields, and the suggestions that ConocoPhillips has laid on the
table would make it simple and clear.
7:42:10 PM
REPRESENTATIVE HAWKER, regarding ConocoPhillips' suggestion for
new wells that meet the criteria for qualified capital, inquired
whether ConocoPhillips is suggesting it be linked back to the
definition of a qualified capital expenditure under the [AS
43.55.023] credits section, where as long as it meets the
state's criteria for a lease expense and is essentially
incorporated into the internal revenue code, that this be the
basis for the determination.
MR. HEINRICH responded correct, saying a reason ConocoPhillips
came to that particular metric is because it is already in the
existing structure. The company is familiar with how it is
calculated, the company's returns are filed on a monthly basis,
and it is already going through the audit process. It is a
metric ConocoPhillips can use to file its federal income taxes
that then feed in to the determination under the qualified
capital under ACES.
7:43:31 PM
REPRESENTATIVE TARR recalled that about a week ago in the Senate
Finance Committee, ConocoPhillips stated it could not say how
much it would do differently if this bill were to pass. She
asked whether that is still the company's position.
MR. JEPSEN answered correct, ConocoPhillips feels it is going
directionally the way it should go. Projects are looked at on a
case-by-case basis and he thinks they will fare better than they
would under ACES.
7:43:58 PM
REPRESENTATIVE TARR recalled seeing a legislative research
report showing the per-barrel profits and, except for the Asian
Pacific Region, Alaska was at the top and had record profits
over the last several quarters. If that is not a situation that
allows ConocoPhillips to invest in Alaska, then where is the
company investing, she inquired, and what would give the
committee reason to believe that ConocoPhillips would invest,
then, under a situation where it does not have record profits.
MR. HEINRICH replied he may not speak specifically to the data
points, but said the aforementioned material looks like it may
be coming from ConocoPhillips' recent Form 10-K report outlining
the metrics from the different regions in which the company is
producing. What cannot be seen from the numbers, he explained,
is the type of production in those different areas. In the
Lower 48, where the company's profits are probably on the lower
side of the different regions, almost 70 percent of production
is natural gas. In recent times natural gas has been at
historical low prices, which affected the company's earnings for
the last several years, particularly in 2012. In Alaska, over
95 percent of ConocoPhillips' production is oil, with Alaska
being about as pure of an oil area as the company has. So, when
trying to compare oil producing regions to areas that include
natural gas or are predominantly natural gas, it is very hard to
get much information because it is an apples and oranges
comparison. When comparing ConocoPhillips' activities in Alaska
versus other places where it is making new investments, the data
point to look at is the cash margin because the earnings
reported in the Form 10-K represent the company's historical
investments. In the last 12 years ConocoPhillips has invested
over $25 billion in Alaska, so earnings are generated from
activities that have been done in the past. When looking at
where ConocoPhillips is putting its new money, the company's
cash margins in Alaska are currently in the range of $30-$35,
but in the Eagle Ford and Bakken plays they are in the range of
$40-$50; so, 40-50 percent higher margins from places like the
Eagle Ford and Bakken where a significant part of
ConocoPhillips' investment capital is going.
7:47:23 PM
REPRESENTATIVE TARR asked where cash-margin basis information
could be found.
MR. HEINRICH responded analyst presentations done over the last
couple of years are available on the Internet, but said he could
provide them. In further response, he confirmed they are from
ConocoPhillips' presentations.
MR. JEPSEN added that ConocoPhillips' investor presentations are
available on its public web site.
7:47:56 PM
REPRESENTATIVE TUCK noted Alaska is trying to figure out the
sweet spot for itself in comparison to other places. Referring
to [slide 4], he surmised fewer investments are happening in
Norway and Indonesia than in Canada-Nova Scotia and Brazil.
MR. JEPSEN answered ConocoPhillips has invested in Norway for
more than 30 years and has significant assets there. It would
not be farfetched to say, he continued, that ConocoPhillips
would make more investments there if Norway had a different tax
regime. Alaska's tax framework is comparable to Norway's and
ConocoPhillips still makes investments and is not walking away
from Alaska. But a different type of tax framework is needed if
Alaska wants to see more investment.
7:49:08 PM
REPRESENTATIVE TUCK recalled the 2001 [Gerking study] in Wyoming
which concluded that doing anything with the production tax is
inelastic in making changes in investments in that area. He
understood that ConocoPhillips testified before the Senate that
it planned on spending $2.5 billion over the next 5 years.
Given this, and what is being proposed under CSSB 21(FIN) am(efd
fld), he asked how much more investment can be expected in
Alaska.
MR. JEPSEN disagreed that taxes do not matter, pointing out that
everyone has experience with his/her own taxes and it does make
a difference. The ACES environment of being at the very top
does make a difference and is a factor that determines the
economics of individual projects. While he is unfamiliar with
the aforementioned study, he said his opinion is that it makes
no sense to say that taxes do not matter. The $2.5 billion
mentioned in the analysts meeting is the continuation of what
ConocoPhillips has been spending for about the last 5 years on
those same types of activities. How much more ConocoPhillips
would invest would be a function of where the proposed bill
actually ends up. Where the bill is right now is a positive
start, he said, and he thinks some additional investment will be
seen. Any projects will have to be taken to the company's board
for consideration along with other projects the company has.
MR. HEINRICH added that the roughly $500 million referenced
about ConocoPhillips' development projects in Alaska is only a
part of its overall capital budget. In the last 3-4 years,
ConocoPhillips has spent $700-$900 million and expects to spend
similar levels with the current fiscal structure. The [spending
above $500 million] is going into maintenance and asset renewal
work that is viewed as important to keeping existing production
in a safe state as facilities reach ages of 30-40 years. Thus,
ConocoPhillips has been spending much more than $500 million.
7:52:46 PM
REPRESENTATIVE TUCK allowed he can see how the third portion of
the GRE could be problematic. He asked whether there would
still be the same amount of hesitation with ConocoPhillips'
future projects as under ACES should CSSB 21(FIN) am(efd fld) be
passed as currently written
MR. JEPSEN replied part of the message that ConocoPhillips has
been trying to convey is that more investment would probably be
seen with the changes on the table today. However, it would
probably not be as much investment as everyone would like to
see. He said he thinks changes could be made to this bill that
will put Alaska in a more favorable position for investment and
that will bring more investment.
7:53:41 PM
REPRESENTATIVE TUCK understood that ConocoPhillips, unlike other
producers, separates out Alaska in its taxes. He inquired which
years were the most profitable for ConocoPhillips in Alaska.
MR. JEPSEN responded the price of oil in the early 1980s was $40
per barrel and ConocoPhillips was producing an awful lot of oil
out of Alaska. To do that comparison he would have to go back
and make some inflation adjustments; so he cannot readily answer
the question as to what year has been the most profitable.
REPRESENTATIVE TUCK asked whether the question could be answered
by which years in Alaska had the best cash flow.
MR. JEPSEN said his answer would be the same - prices and
profits cannot be compared from one point in time to another
point in time 30 years later and have it be an apples-to-apples
comparison.
7:55:16 PM
REPRESENTATIVE P. WILSON requested a description of what
ConocoPhillips Alaska, Inc. goes through, what areas in the
world it is up against, when it presents projects in Alaska to
the board for consideration.
MR. HEINRICH answered the process has many metrics, some of
which are confidential, but it is not just rates of return. The
slate of opportunities is ever-changing, so on any given day it
depends in part on what other opportunities the company can work
itself into that may require capital. It is a changing process
because ConocoPhillips comes into different opportunities and
exits different areas as they get into different phases of their
lifecycle.
REPRESENTATIVE P. WILSON requested further elaboration on where
those other opportunities might be located throughout the world.
MR. HEINRICH replied his response is more around portfolio
management. When looking at West Africa or Australia, the
company is trying to balance many things, such as oil versus gas
exposure and whether to shift the portfolio to being more oil in
nature versus gas. Today, those investment dollars are going
into liquid rich oil plays around the world as opposed to gas,
which ConocoPhillips had made a conscious effort to get into
through the mid-2000s and some of the company's projects in
Australia came about during that timeframe. It depends on what
the view is of the direction of the industry, prices,
opportunities, and how ConocoPhillips wants its portfolio to
evolve over time. Dispositions resulting out of that portfolio
management also drive some of that.
7:57:50 PM
REPRESENTATIVE P. WILSON inquired whether portfolio management
is the reason why ConocoPhillips cannot make a commitment about
exactly what is going to happen. She said she is asking this
question for the record given that some people have said they
want certainty that things will increase in Alaska and are
unwilling to do something unless there is a commitment.
MR. HEINRICH responded the recent analyst discussions show that
ConocoPhillips' strategy is about increasing its exposure in oil
and increasing its overall margin contributions. That margin
contribution is driving some dispositions for areas that are not
generating high returns and driving investment into places that
are. So, those two things actually favor the types of things
that ConocoPhillips could do in Alaska.
MR. JEPSEN added the more Alaska is positioned to favor
investment, the better it is going to fare in all those kinds of
discussions. Even though a commitment cannot be made, it can be
said that ConocoPhillips just had two major discoveries in the
U.S. Gulf of Mexico, one of the best places in the world for
investment. Those places are going to fare well no matter how
the rest of the world changes. An idea he would put to the
committee is to position Alaska such that investment is favored
here over other opportunities.
7:59:43 PM
CO-CHAIR SADDLER asked whether ConocoPhillips can guarantee to
anyone - its shareholders, its managers - that X amount of
spending will result in Y amount of increased production.
MR. JEPSEN answered that is certainly talked about at analyst
presentations. "We talk about we are going to make this kind of
investment, we anticipate this kind of production. To say that
that never happens is probably not accurate, but that is done in
a very methodical basis after much review with our board of
directors, with our executive committee. We are not here in a
place today where we can say that, nor do we take these projects
and have them matured to the point where we could say to our
board or to our executive management 'this is something you
ought to commit to doing.' So the things that you typically see
in those presentations are things that we are pretty confident
about. Right now, Alaska has been in a place where, quite
frankly, I do not think as much effort has been put into trying
to mature projects as you might have seen if we had a different
tax framework."
CO-CHAIR SADDLER noted he has often heard that if Alaska reduces
its taxes, the money that would be retained by the oil industry
will be spent elsewhere. He inquired whether money is fungible
or if investment in Alaska is made with Alaska-earned dollars.
MR. HEINRICH replied he does not believe ConocoPhillips actually
tracks money in/money out, but said it is very natural in this
industry that money moves across geographic boundaries. Forty
years ago, for example, the money to fund development of the
assets in Alaska came from somewhere.
8:01:42 PM
CO-CHAIR SADDLER commented the committee has heard lots of
dollar figures tossed around about the amount of spending on the
North Slope that is currently taking place to keep the rate of
decline at a certain point. He asked what ConocoPhillips' level
of investment is to keep the decline rate at its current level.
MR. JEPSEN responded ConocoPhillips has invested around $1
billion a year for about the last 3-4 years, and it can be seen
the kind of declines that have resulted from that.
CO-CHAIR SADDLER inquired whether Mr. Jepsen or Mr. Heinrich is
familiar with any taxing regimes that are predicated on new oil
or that might have a better way of identifying new oil that the
GRE exclusion could be applied to.
MR. JEPSEN answered nothing comes to mind that mimics the GRE.
8:02:53 PM
CO-CHAIR SADDLER asked how ConocoPhillips would deal with the
third category GRE if it became law as currently written.
MR. JEPSEN replied he is "guesstimating" as to ConocoPhillips'
behavior because there have been no conversations with the
Department of Natural Resources as to how the department would
try to apply it. But, he would say that it would be reasonably
difficult for ConocoPhillips to prove or live up to the standard
currently written into the bill. His guess is that it would not
stimulate a whole lot of litigation - if ConocoPhillips found
out that the interpretation of the Department of Natural
Resources and Department of Revenue was such that the type of
wells the company is planning on drilling would not qualify,
then that is probably where the company would leave it.
MR. HEINRICH added that from an economic analysis perspective it
would be real hard for ConocoPhillips to factor it into a
decision-making process until there is clarity in the likely
outcome. At best, it might get a footnote in the company's
analysis until a point where there is confidence it is something
that can be counted on for a particular type of project.
CO-CHAIR SADDLER surmised the ambiguity would cause a chilling
factor.
[Response inaudible.]
8:04:35 PM
CO-CHAIR SADDLER inquired whether any of the other less critical
provisions of CSSB 21(FIN) am(efd fld) raise any concerns.
MR. JEPSEN responded he concurs with ExxonMobil about the
Competitive Review Board, adding it would take some time to see
how that is going to work. He said the consultants advising the
committee about how Alaska fares in terms of competitiveness are
highly experienced and highly educated experts and the board, as
currently set up, would not consist of those same people. There
are also the issues around confidentiality and whether that
board could make that judgment without the breadth of experience
had by PFC Energy or Econ One Research. If it becomes an issue
every year it becomes the center of at least the first 30 days
of every session waiting for this report, which throws some
uncertainty into it. While it may be just fine, he said there
are certainly questions in his mind as to how it would work. He
added that the other provisions mentioned earlier by Co-Chair
Saddler generally do not apply to ConocoPhillips, so the company
is relatively indifferent to those.
8:05:58 PM
CO-CHAIR SADDLER understood ConocoPhillips generally supports
the work that the [legislature's and administration's]
consultants have done. He asked whether there is any particular
thing the company would like to draw attention to, highlight,
dispute, or correct.
MR. HEINRICH answered he does not believe there is much
disagreement, but the one area in which differences are seen is
around the modeling work that goes into looking at the producer
take. Because there are different assumptions there are
differences between the different consultants, but it is not
because ConocoPhillips does not understand potentially what
those are. Generally speaking, the consultants have represented
the case very well. Responding further, he confirmed the
differences are in the assumptions used for the producer share
or government take analyses. He said those analyses are very
much dependent on the assumptions used for operating and capital
expenses, tax rates, and effective tax rates. Some assumptions
might use a theoretical asset. ConocoPhillips uses the data
from the Department of Revenue's sources book to model the
industry. It is not to say any of the approaches are wrong,
they just give slightly different variances.
8:07:18 PM
REPRESENTATIVE SEATON read from the aforementioned February 28,
2013, analysts meeting [report] in which it was stated that:
there are numerous development opportunities in Alaska in and
around the ConocoPhillips' existing assets from Prudhoe Bay to
Kuparuk to Alpine and associated satellite fields; the company
is applying high technology drilling capabilities so that
investment results in an incremental 35,000 barrels a day by
2017, which mitigates the base decline in Alaska to about 3
percent a year; and this does not include the Alpine West major
project, but when Alpine West is added the base decline is
mitigated to about 2 percent a year. Because he heard 9 percent
mentioned earlier, Representative Seaton said he would like to
ask Mr. Jepsen and Mr. Heinrich whether they agree with the
analysts meeting that this is what ConocoPhillips is currently
projected to be doing.
MR. JEPSEN pointed out the previous answer was to a question
dealing with natural decline in the fields when nothing is done
after a well is drilled. Instead, ConocoPhillips is doing quite
a bit more to maintain production in these fields by working
over wells, fixing broken wells, and stimulating wells. New
wells are also being drilled. A base of investment goes on to
keep the decline from being at the rates talked about earlier;
enhanced oil recovery (EOR) is a big component in trying to
maintain production. He explained Mr. Fox was representing the
agglomeration of all of ConocoPhillips' interests across the
North Slope, and he does not take exception to what Mr. Fox
said. It is a function of the performance that is being seen
today and the historical investments the company has made and,
hopefully, will be making in the future.
8:09:26 PM
REPRESENTATIVE TARR noted that during the time of the economic
limit factor (ELF), some areas basically had no tax yet there
was no explosion in investment. When asked about this before,
people have responded that it had to do with the price of oil at
that time. She requested Mr. Jepsen to comment on that in the
context of what is being thought about today.
MR. JEPSEN presumed Representative Tarr is talking about the
time period between 1996 and 2006. Displaying a chart that used
data from the Department of Natural Resources to plot all the
new fields brought on stream during that time frame, he said it
amounts to about 260,000 barrels a day of production by the year
2005 or so. During that time frame, considerable investment was
going on and considerable new production came on stream.
Additionally, in existing fields like Kuparuk, ConocoPhillips
was investing in wells and investing in EOR. The EOR project in
Kuparuk was started in 1996 or 1997 and moved from being a
small-scale project to field-wide, adding 25,000-30,000 barrels
per day production. So, the comment that ConocoPhillips was not
doing anything when ELF was low is simply wrong. A reason this
may not have been seen in the decline is that Prudhoe Bay and
Kuparuk are gigantic fields and their base decline is pretty
steep. A million barrels a day naturally declining at 10 or 15
percent a year is a pretty steep hill to climb when it is doing
that year in and year out. Given where things are at right now,
there is probably the opportunity to offset the decline pretty
significantly because the field rates are lot lower than they
were back in that time frame.
8:11:58 PM
REPRESENTATIVE TARR requested the aforementioned chart be
provided to the committee. She asked Mr. Jepsen to comment on
the following statements from the study in Wyoming [2001 Gerking
et al, abstract, page 1]:
A production tax rate increase is shown to decrease
early period exploration effort, affect little change
in reserve additions and future production, and
substantially increase discounted tax revenue. Policy
implications of this outcome suggest that state
officials may consider raising production tax rates as
a way to increase revenue while risking little in the
way of loss to future oil activity.
MR. JEPSEN replied he will look at the study and get back to the
committee with comments.
8:13:28 PM
CO-CHAIR FEIGE observed that slide 3 of yesterday's Econ One
Research presentation shows the crossover between ACES and CSSB
21(FIN) am(efd fld) for government take to be about $80 per
barrel while the chart provided today on slide 3 by
ConocoPhillips shows it at approximately $90 per barrel. He
asked why this difference.
MR. HEINRICH responded that is what he was referencing earlier
today when he said a lot depends on the assumptions used for
operating costs, capital costs, state tax rates, and federal
income taxes. ConocoPhillips modeled this data using the
Department of Revenue's sources book information for the
industry taxpayers, which he believes represents essentially
producers and production on the North Slope. So, it may be a
different set of data than the different consultants have used
in constructing their models. Additionally, the ConocoPhillips
chart specifically represents fiscal year 2014 as though CSSB
21(FIN) am(efd fld) were in effect for the whole fiscal year; it
is not a five-year average or a full field-wide average. The
reason for choosing to represent 2014 is because it is much
nearer in time and therefore more accurate and a better
portrayal of what can be expected in a given year as opposed to
a five-year average or some other metric that does not relate to
a specific year.
MR. JEPSEN pointed out that oil price inflated over time and
then discounted back drives that crossover point lower; doing
the discounted cash flow economics leads to a lower current oil
price for a crossover point than if it is done as shown here in
today's presentation. While it is complicated, it is part of
the issue in terms of how different presenters present this
data.
8:16:33 PM
REPRESENTATIVE SEATON understood, then, that in ConocoPhillips'
modeling and decision making, the company is not looking at
inflation factors and if the discount rate is used it is just
the discount rate based on the nominal rate/nominal dollars.
MR. HEINRICH answered [the chart on slide 3] is an undiscounted
view of the world for fiscal year 2014.
The committee took an at-ease from 8:17 p.m. to 8:27 p.m.
8:27:36 PM
DAMIAN BILBAO, Head of Finance, BP Exploration (Alaska) Inc.,
thanked all legislators for addressing the shortcomings of ACES
and "working hard to meet the governor's principles of a
simpler, fairer, more durable tax policy that attracts the
needed investment Alaska requires." These efforts indicate a
common understanding of the seriousness that production decline
presents to Alaska, most notably evidenced by the Trans-Alaska
Pipeline System (TAPS) flowing three-quarters empty. He said
CSSB 21(FIN) am(efd fld) is a step change from the current ACES
policy and signals to investors that Alaska is serious about
attracting investment to the state. However, while it is a step
forward in making Alaska more attractive to investment, Alaska's
geographic, technical, and cost challenges are such that the
state may not want to be satisfied with settling on the upper
end of average on the competitive scale. He urged the committee
to consider opportunities for improving the bill's first two
elements of base rate and credit per barrel, which he said
cannot be decoupled, and its third element providing of gross
revenue exclusion (GRE).
MR. BILBAO, referring to the only slide in his PowerPoint
presentation, discussed what BP Exploration (Alaska) Inc. ("BP)
believes the bill does well. Elimination of progressivity is a
game changer, he said, and puts Alaska back in the game of
competition of competition for investment. Progressivity has
made Alaska noncompetitive for rate-adding investment that is
needed to create a different decline curve than what is seen
today and over the last several years. While BP recognizes that
non-rate-adding investment, or rate sustaining investment, has
continued, the large rate-adding investments that are necessary
to create a different production profile going forward have gone
elsewhere. Removing progressivity should make for a more
productive discussion with potential investors in the Lower 48
who are not currently investing in Alaska and have found the tax
policy to be complex and difficult to model. If one considers
the number of players operating in areas like the Bakken and
Eagle Ford relative to the number of investors in Alaska today,
at today's prices this should be an item of both surprise and
concern for the people of Alaska.
8:32:06 PM
MR. BILBAO pointed out that CSSB 21(FIN) am(efd fld) raises the
base rate from 25 percent [as originally introduced] to 35
percent, but offsets this with a $5 per barrel credit. He said
it is important to recognize that those two elements are
inextricably linked. The balance between the base rate and the
credit is critical and must be maintained or the bill loses its
effectiveness for investors. Furthermore, the focus of the
credit shifts from being linked to investment to instead being
linked to production - a clear message on policy priorities.
This shift in policy encourages a near-term focus on developing
new production. The gross revenue exclusion provision could
have a positive impact on near-term and long-term economics, he
continued. Changing the GRE component to include the legacy
fields was a significant shift because it targets where the
opportunity is greatest.
MR. BILBAO added that an important point is CSSB 21(FIN) am(efd
fld) simplifies Alaska's fiscal system, allowing for greater
certainty around planning and analyzing projects. For example,
inefficient elements of administering ACES are removed. He
reminded members of testimony provided by Tom Williams, former
commissioner of the Department of Revenue, in which Mr. Williams
explained how calculating the progressivity tax under a price
that changes over the course of the year may result in a tax
payment more than 50 percent higher than a payment where the
average price is actually the same but with less volatility
throughout the year. It makes it very difficult to plan BP's
business when something entirely beyond BP's control such as the
volatility of price, much less the change of it, can so
significantly impact the company's cash profile. Continuing, he
said CSSB 21(FIN) am(efd fld) proves to board rooms worldwide
that Alaska is serious about competing and attracting investors.
When investors look at where to invest, they consider not only
the fiscal climate, but also the commitment to be competitive,
which is something this bill signals very clearly. Lastly, the
bill levels the playing field and moves away from picking
winners and losers by providing a more level playing field and
encouraging all the players to pursue all the projects that are
economically competitive.
8:35:43 PM
MR. BILBAO next addressed where BP believes the bill can be
improved, saying the [35 percent] base rate would be challenging
at lower prices. He recounted testimony in which [the
administration's consultant], Barry Pulliam [of Econ One
Research], stated that at $80 per barrel, CSSB 21(FIN) am(efd
fld) is less competitive than ACES. In 2010, ANS West Coast
prices averaged around $80 per barrel; given this was not very
long ago, BP encourages the committee to consider the impact of
the bill at prices below $100. The current GRE is an
improvement to the original bill, he continued, because its
focus now includes the development of resources inside the
legacy fields. However, BP would encourage the committee to
improve how the GRE is applied and how parties can rely on it
when they run their economics. The GRE applies at the
discretion of the Department of Revenue and the Department of
Natural Resources. It must be considered that it takes many
years for a project to make its way through the conveyor belt of
opportunity - from when BP first decides to dedicate resource to
the project to when it actually gets sanctioned. As currently
written, it is uncertain whether the project can benefit from
the GRE. Whether that decision is made earlier on when the
resources are dedicated to begin to look at a project or later
on when the project is sanctioned, which may be years, it is
important that those two decisions remain consistent even though
many years have passed in between both points. More certainty
is needed in this provision so BP can have confidence that the
GRE assumption should be included in its economic modeling.
MR. BILBAO concluded by stating that BP believes
CSSB 21(FIN) am(efd fld) puts Alaska back in the game and
creates a simpler and more balanced system. He encouraged
members to consider BP's suggestions for improving the bill and
said BP looks forward to supporting the committee as this
process continues.
[CSSB 21(FIN) am(efd fld) was held over.]
| Document Name | Date/Time | Subjects |
|---|---|---|
| HRES SB21 BP - Bilbao 3.26.13.pdf |
HRES 3/26/2013 6:00:00 PM |
SB 21 |
| HRES SB21 ConocoPhil. 3.26.13.pdf |
HRES 3/26/2013 6:00:00 PM |
SB 21 |
| HRES SB21 Production Under ELF Slide 3.26.13 Backup.pdf |
HRES 3/26/2013 6:00:00 PM |
SB 21 |
| HRES SB21 Historical Investment Slide.Adjusted to 2012 Dollars 3.26.13 Backup.pdf |
HRES 3/26/2013 6:00:00 PM |
SB 21 |