Legislature(2011 - 2012)CAPITOL 106
02/28/2012 08:00 AM STATE AFFAIRS
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
HB 2-DIVEST INVESTMENTS IN IRAN [Contains mention of SB 131.] 9:34:12 AM CHAIR LYNN announced that the final order of business was HB 2, "An Act relating to certain investments of the Alaska permanent fund, the state's retirement systems, the State of Alaska Supplemental Annuity Plan, and the deferred compensation program for state employees in certain companies that do business in Iran, and restricting those investments; and providing for an effective date." 9:34:34 AM KAREN SAWYER, Staff, Representative Carl Gatto, Alaska State Legislature, co-presented HB 2 on behalf of Representative Gatto, joint prime sponsor. She noted that Senator Wielechowski has a companion bill, SB 131, in the Senate. She said there is a committee substitute, Version M, which makes changes to match HB 2 with SB 131; it adds "or gas" after "oil" in certain places. She relayed that Sam Gottstein would present a PowerPoint presentation. She said because of scheduling conflicts, there would not be a representative from the Permanent Fund Corporation available to testify. 9:36:11 AM REPRESENTATIVE KELLER moved to adopt the proposed committee substitute (CS) for HB 2, Version LS0007\M, Wayne, 2/8/12, as a work draft. CHAIR LYNN objected for the purpose of discussion. 9:36:29 AM SAM GOTTSTEIN, Staff, Senator Bill Wielechowski, Alaska State Legislature, co-presented HB 2 on behalf of Senator Wielechowski, sponsor of SB 131, the companion bill to HB 2. He said HB 2 is the same bill as House Bill 241 of the previous legislature and is identical to SB 131 of the current legislature. 9:37:21 AM MR. GOTTSTEIN gave a PowerPoint presentation. He stated that the Iranian regime is a threat to national security, and not having a divestment policy in place is financing America's enemies. He stated that since 1984, the U.S. has listed Iran as a state sponsor of terrorism, and Iran has known ties with Hamas, Hezbollah, and the Taliban - groups that work against the interests of the U.S. at home and abroad. He said Iran's military has, in recent weeks, threatened to close the Strait of Hormuz, which would disrupt worldwide oil supplies. MR. GOTTSTEIN said the Iranian regime is under strong international sanctions. Most recently, the U.S. Treasury announced sanctions against Iran's national bank, and the European Union has banned the purchase of Iranian oil and gas. He said these unprecedented sanctions are forcing companies to decide whether they will do business with the Western World or with Iran. He stated that Iran continues to work toward developing nuclear weapon capabilities; a recent International Atomic Energy Agency Report stated that "information indicates that Iran has carried out activities relevant to the development of a nuclear explosion devise." He stated that the Iranian regime has a long history of human rights violations; today Amnesty International issued a statement that there are widespread and persistent human rights violations occurring in Iran. MR. GOTTSTEIN stated that for all these reasons, divestment and sanctioning policies have greater bi-partisan support today than ever before, which he said is illustrated by a recent 100-0 vote in the U.S. Senate to increase sanctions. He related that Alaska Governor Sean Parnell has come out in support of Iran divestment in a recent Anchorage Daily News "Compass" piece. He said large companies still invest in Iran, which helps the Iranian regime bring its oil and gas reserves to market. He reported that Iran produces approximately 3.6 million barrels of oil a day and is known to use its oil profits to advance the regime's agenda. Mr. Gottstein read a quote by Timothy Geithner, U.S. Secretary of the Treasury, as follows: Iran's greatest economic resource is its oil exports. Sales of crude oil line the ... regime's pockets, sustain its human rights abuses, and feed its nuclear ambitions like no other sector of the Iranian economy. 9:40:14 AM MR. GOTTSTEIN opined that HB 2 is what the State of Alaska can and should do to weaken the Iranian regime by cutting off investment to Iran. The intent of the proposed legislation, he said, is "to bring Alaska in line with America's foreign policy" by slowing down Iran's nuclear program, weakening its ability to support terrorism, and putting pressure on the regime for political change. 9:40:37 AM MR. GOTTSTEIN said under HB 2, the Department of Revenue (DOR) would be directed to compile a list of companies that have invested an aggregate of $20 million or more in Iranian oil and gas development. The department would have some flexibility in determining which companies would be on the scrutinized list and could obtain a list from companies around the country that specialize in Iran divestment policies. Once the list is compiled, he explained, companies on the list will have 90 days to justify this investment. If the company fails to do so within 90 days, the department will ask the state's fund managers, including the Permanent Fund [Corporation] to liquidate assets of that company within 90 days. He said many lists already exist for other states. MR. GOTTSTEIN stated that Iran poses any even greater threat today to the security of the U.S. than it did a few years ago. The country is closer to obtaining nuclear weapons and "continues to threaten to destabilize the region." He said Alaska has a better understanding about the impacts of divestment policies and what it would mean to the production on the North Slope and rates of return for the permanent fund and other accounts. Furthermore, he said, recent federal legislation provides greater cover for state and local governments to divest from Iran. Mr. Gottstein said federal legislation alone cannot be relied upon for divestment, and the federal government cannot dictate to states where they can and cannot make investments. He said the federal legislation of 2010, urging states to divest from Iran, is as far as the federal government can go. 9:42:34 AM MR. GOTTSTEIN reported that over 20 states already have Iran divestment policies in place, including: California, Florida, Minnesota, Nevada, Colorado, Texas, and Washington. He said New York recently passed Iran divestment legislation this year. He reiterated that the European Union has banned the purchase of Iranian oil and gas. 9:43:05 AM MR. GOTTSTEIN offered some points targeted at common misconceptions regarding HB 2, as follows: First, no North Slope operators should be considered for investment; this includes new entrants like ENI, who have committed to pulling out of Iran. A great legislative research report is included in your committee packet to explain this, and I highly recommend that committee members take the time to read it. Second, even if there were a North Slope operator that did business with Iran, there will be no changes to Alaska's oil and gas incentives on the North Slope for any company through HB 2. Third, because the United States does not allow any domestic companies to invest in Iran, only foreign companies would be subject to divestment. A good list can be found in the legislative research report, and you will see that under this legislation, we would likely divest from companies based in China, Russia, India, Malaysia, and Thailand. Fourth, the legislative research report estimates that about one-tenth of one percent of the state's holdings would likely be subject to divestment, which was valued at approximately $79 million as of September 30, 2011. ... There are three fiscal notes for this bill, including two from the Permanent Fund Corporation. MR. GOTTSTEIN said Alaska is "behind the curve on this issue"; the state's inaction works against its own foreign policy objectives. He quoted the late Martin Luther King, Jr., as having said, "He who passively accepts evil is as much involved in it as he who helps to perpetuate it." Mr. Gottstein opined that Alaska should not passively stand by and accept the Iranian regime's aggression. The proposed legislation would direct the state to divest from companies that do business in Iranian oil and gas to "ensure that our funds do not support our enemies." 9:45:11 AM CHAIR LYNN posited that the state should not invest a single penny in Iran. He relayed a story he had read about man who was being executed in Iran for refusing to renounce his faith. 9:46:13 AM REPRESENTATIVE KELLER indicated that he had read an article in The Economist, which said the occurrence of a "strike" was a matter of "when" not "if." He supported the movement of HB 2 as timely. 9:46:36 AM REPRESENTATIVE JOHANSEN noted that in a prior legislative session there had been a bill to divest from Sudan, and Worksilla was one of the companies on the list. He said that at the same time, the state was writing checks from its capital budget directly to Worksilla, to buy generators for rural communities. He said this was not investing, but was direct capital spending, and he asked if there has been any thought given to "that." 9:48:21 AM MR. GOTTSTEIN responded that as written, HB 2 would affect only the Permanent Dividend Corporation and the Department of Revenue; it would not affect purchases made by the state from specific companies. REPRESENTATIVE JOHANSEN said he thinks it is probably just as egregious to buy products from a company on the list using capital funds as it is to invest in a company on the list, and he encouraged Representative Gatto and Senator Wielechowski to find a way to let legislators know when the money they appropriate is going to support Iran. 9:49:43 AM CHAIR LYNN, after ascertaining that there was no one who wished to testify, closed public testimony. 9:50:02 AM REPRESENTATIVE JOHANSEN remarked upon the short time spent on a complicated bill. He said, "Sometimes we mistake activity for achievement." 9:50:32 AM REPRESENTATIVE SEATON said social considerations in investing have been made by Alaska for a while now, the countries in question changing with time. He said he is happy to see repeal language in HB 2 that would make it unnecessary for the legislature to pass new legislation if, for example, Iran was taken off the list in the future. 9:52:07 AM CHAIR LYNN said there are social aspects of bill, but the primary focus of HB 2 is national security. 9:52:46 AM CHAIR LYNN removed his objection to the motion to adopt the proposed committee substitute (CS) for HB 2, Version LS0007\M, Wayne, 2/8/12, as a work draft. There being no further objection, Version M was before the committee. 9:52:49 AM REPRESENTATIVE KELLER moved to report CSHB 2, Version LS0007\M, Wayne, 2/8/12, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 2(STA) was reported out of the House State Affairs Standing Committee.