Legislature(2013 - 2014)BUTROVICH 205
02/21/2014 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB138 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 138 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 138-GAS PIPELINE; AGDC; OIL & GAS PROD. TAX
CHAIR GIESSEL announced SB 138 to be up for consideration; CSSB
138(RES), version 28-GS2806\N, was before the committee.
4:21:35 PM
SENATOR FRENCH moved Amendment 1, version\N.1.
28-GS2806\N.1
Bullock
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR FRENCH
TO: CSSB 138(RES), Draft Version "N"
Page 13, line 18, following "party":
Insert
"(A) may not include a provision relating
to the tax rate applicable to the oil and gas
production tax under AS 43.55 as it relates to the
production of oil; and
(B)"
Page 15, line 10, following "party":
Insert
"(A) may not include a provision relating
to the tax rate applicable to the oil and gas
production tax under AS 43.55 as it relates to the
production of oil; and
(B)"
Page 23, line 17, following "project":
Insert "; the commissioner shall ensure that a
contract negotiated under this paragraph does not
include a provision relating to the tax rate
applicable to the oil and gas production tax under
AS 43.55 as it relates to the production of oil"
Page 24, line 24, following "project":
Insert "; the commissioner shall ensure that a
contract negotiated under this paragraph does not
include a provision relating to the tax rate
applicable to the oil and gas production tax under
AS 43.55 as it relates to the production of oil"
SENATOR FAIRCLOUGH objected.
SENATOR FRENCH explained that Amendment 1 would take oil taxes
off the table in this process. It basically inserts at several
points in the bill a prohibition on including oil tax terms in a
contract developed under the act. It prevents oil taxes from
becoming a point of negotiation. And industry was evasive when
he talked to them about it. He explained that the CS has a
provision that would keep the commissioners from negotiating our
royalty rate too low and this is the same idea.
One concern he had about the general approach of this bill was
that it's very similar to the general approach taken from 1998
to 2006 under the Stranded Gas Development Act (AS 43.82.010).
It was a deeply one-sided contract that didn't even get brought
up for a vote in the legislature. He hoped they learned from
that, but he thought the industry would not be able to keep
themselves from pressing and potentially winning concessions
from the state in the oil tax arena if that's an option. After
all, they offered us a dime on the dollar in the Pipeline
evaluation case.
SENATOR FAIRCLOUGH asked if there is a reason the state would
want to have that flexibility.
4:24:21 PM
JOE BALASH, Commissioner-designee, Department of Natural
Resources (DNR), Juneau, Alaska, said he appreciated the
sentiment expressed in Senator French's amendment, but he was
concerned that the wording would cast too wide a barrier. He
explained that the language reads may not include a provision
relating to the tax rate applicable to the tax rate applicable
to the oil and gas production tax under AS 43.55 as it relates
to the production of oil. So, while he understands the desire is
to keep the oil out of the contract in a direct way, there will
be some indirect matters that will have to be brought up,
particularly as it relates to the manner in which lease
expenditures are handled. They are moving to the gross mechanism
for gas and yet still going to have lease expenditures available
for deduction and the calculation of oil taxes. So, indirectly,
if anything is changed by the legislature over the period of the
contract that relates to oil some indirect things may occur -
and they need to be provided for. And this specific language may
cast too wide of a side board and prevent them from taking up
those indirect matters.
SENATOR FAIRCLOUGH said the Finance and Resources Committees
talked about using a healthy oil industry and providing an
incentive to apply credits for gas development against oil
production.
MR. BALASH responded that a healthy oil business is needed as
part of the this economic model for commercialization of gas;
right now all of their economics are being run as if the oil
will carry the costs of Prudhoe Bay and Pt. Thomson and the gas
production is going to be a revenue stream that will be used in
the manufacture of LNG. So the cost of operating those fields
will remain deductible on the oil side of the equation. However,
maybe 15 years from now maybe the legislature will decide to
deduct the tax rate or go to a gross production tax and those
kinds of changes will have changes on gas and that's what they
need to make sure they don't erect too high of an obstacle to be
able to deal with in the contracts to come.
SENATOR FAIRCLOUGH asked if a competitive advantage could be
lost by adopting this amendment now or would other language be
better.
4:29:39 PM
COMMISSIONER BALASH said she was correct about our competition
in western Canada; they have not developed the fields that will
produce the gas that will go into the LNG projects on the west
coast of Canada and in that regard we enjoy a certain advantage
having the infrastructure in place. But out infrastructure is
not cheap to operate and they will need to continue to be borne
by oil. The question is what is going to happen over the next
many years to the oil business to keep that business healthy and
if it will have an indirect effect on the gas business.
SENATOR FRENCH said his concern was having seen the Stranded Gas
Development Act keeping the state frozen in a structure for 35
years and he wanted to keep the flexibility to raise or lower,
if necessary, oil taxes. Oil is the life blood of the state.
SENATOR FAIRCLOUGH said she and Senator Bishop would take up an
analysis of what the state is giving up in the Finance
Committee.
4:33:34 PM
SENATOR MICCICHE noticed the first two sections on page 13, line
17, where this would have been inserted - " 'a, any, the'
contract negotiated under this paragraph to which the state is a
party is not affective unless the legislature authorizes the
governor to execute the contract." And page 15, line 9, the
second part of the amendment was going to be added: "'a'
contract negotiated under this paragraph - any contract- to
which the state is a party is not effective unless the
legislature authorizes the governor to execute the contract. If
there is any change that is related to an oil tax we would have
a look at it before it would be approved.
4:35:36 PM
SENATOR FAIRCLOUGH upheld her objection and CHAIR GIESSEL asked
for a roll call vote: Senator French voted yeah; Senators
Bishop, Dyson, Fairclough, Micciche and Chair Giessel voted nay;
therefore the Amendment 1 failed.
4:35:43 PM
SENATOR FRENCH moved Amendment 2, version \N.2.
28-GS2806\N.2
Bullock
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR FRENCH
TO: CSSB 138(RES), Draft Version "N"
Page 4, lines 13 - 14:
Delete "project labor agreements,"
Page 13, line 18, following "party":
Insert
"(A) must include a provision that requires
the parties to the contract to negotiate, before
construction, a project labor agreement to the maximum
extent permitted by law; in this subparagraph,
"project labor agreement" means a comprehensive
collective bargaining agreement between the licensee
or its agent and the appropriate labor representatives
to ensure expedited construction with labor stability
for the project by qualified residents of the state;
(B)"
Page 15, line 10, following "party":
Insert
"(A) must include a provision that requires
the parties to the contract to negotiate, before
construction, a project labor agreement to the maximum
extent permitted by law; in this subparagraph,
"project labor agreement" means a comprehensive
collective bargaining agreement between the licensee
or its agent and the appropriate labor representatives
to ensure expedited construction with labor stability
for the project by qualified residents of the state;
(B)"
SENATOR MICCICHE objected.
SENATOR FRENCH explained that it is a simple amendment that
inserts into the body of the bill the requirement of a project
labor agreement (PLA) (language taken from the AGIA statute).
He noted the good words about PLAs in the HOA and in the
findings section of the bill, but the best place to put it is in
statute. PLAs are the best way to ensure local hire and to
ensure the project stays on time and on line and on budget.
4:37:29 PM
SENATOR MICCICHE said on page 4, line 13, there is a statement
about "to the maximum extent permitted by law contract
provisions for project labor agreements, employment of Alaska
residents, contracts with Alaska businesses and provisions to
work with state job centers associated services and job training
services" was mentioned. They also talked about changes that
bring in language from the HOA for a more exact record of
everything that was signed by all the parties into this bill.
Again, he said no one at the table favors either union or
nonunion workers. This is such a large project that union and
non-union Alaskan workers will have all of the opportunities
they would ever want to work on this project. It's too early to
isolate that language in the bill.
SENATOR FRENCH remarked that if you like the idea in findings
you should also like it in statute.
SENATOR MICCICHE upheld his objections and Senator Giessel asked
for a roll call vote: Senator French voted yeah; Senators
Bishop, Dyson, Fairclough, Micciche and Chair Giessel voted nay;
therefore Amendment 2 failed.
4:40:26 PM
SENATOR FRENCH moved Amendment 3.
28-GS2806\N.3
Bullock
AMENDMENT 3
OFFERED IN THE SENATE BY SENATOR FRENCH
TO: CSSB 138(RES), Draft Version "N"
Page 23, line 17, following "project":
Insert "; the commissioner shall ensure that a
contract negotiated under this paragraph does not
authorize payments in lieu of taxes to a municipality"
Page 24, line 24, following "project":
Insert "; the commissioner shall ensure that a
contract negotiated under this paragraph does not
authorize payments in lieu of taxes to a municipality"
SENATOR DYSON objected.
SENATOR FRENCH explained the purpose behind Amendment 3 is
similar to Amendment 1, to leave intact the taxing authority of
municipalities across whose land the pipeline someday runs. The
idea is to leave them free to tax within statutory boundaries;
it's a way to let them deal with the impacts of construction and
operating a pipeline. This goes back to the Stranded Gas
Development Act and the onerous provisions that tied up not only
production taxes, corporate income tax and royalties but also
property taxes. A letter from Pedro van Meurs discovered after
the Contract collapsed to the Governor's Chief of Staff said he
believed the
...Concept of capping municipal taxes of general
application is totally unnecessary. Any reasonable
evaluation of the municipal taxes in Alaska clearly
indicates that the margin that municipalities have to
create taxes of general application is limited. The
impact of variation in municipal taxes of general
application on the project economics is negligible.
Therefore, in my opinion, municipalities should be
free to tax as they wish and the (producers) should
pay these taxes without limit.
Just before this paragraph he had written a sentence that many
remember: there's absolutely no need to treat Alaska as a banana
republic in order to secure the gas line.
CHAIR GIESSEL offered that the intent language in section 1,
(a)(5) speaks to this with the intent that the interests of the
state and local governmental entities must be considered in
contract negotiations to protect the financial and other
interests of the state and those local governmental agencies.
They have heard loud and clear from the municipalities that they
wish to be part of the negotiations.
4:43:41 PM
SENATOR MICCICHE said his former job before this one was to be a
mayor of a small town and Alaska municipalities that are
impacted by the pipeline must retain the ability to tax. He
hoped the negotiations were not individual. But he wasn't sure
the amendment got there.
SENATOR FAIRCLOUGH said they tried to make this clear to the
administration when the municipalities brought the issue to the
committee during public testimony. They are trying to develop a
process where the municipalities retain that taxing authority in
a similar process for each community - not trying to limit their
ability but to come together in a group.
SENATOR DYSON maintained his objection and Chair Giessel asked
for a roll call vote: Senator French voted yeah; Senators
Bishop, Fairclough, Micciche, Dyson and Chair Giessel voted nay;
therefore Amendment 3 failed.
4:47:02 PM
SENATOR FRENCH said he would not offer Amendment 4, labeled \N.4
and offered Amendment 5.
28-GS2806\N.5
Bullock
AMENDMENT 5
OFFERED IN THE SENATE BY SENATOR RENCH
TO: CSSB 138(RES), Draft Version "N"
Page 13, line 17, following "project;":
Insert "the licensee receiving the license issued
under AS 43.90 or an affiliate of the licensee that
received the license under AS 43.90 may not, without
competitive bidding, be a party to a contract under
this paragraph that takes effect after the effective
date of this paragraph and provides for the state to
acquire an equity interest in a North Slope natural
gas project or for the transportation of natural gas
received by the state as royalty-in-kind or under
AS 43.55.014;"
Page 15, line 9, following "project;":
Insert "the licensee receiving the license issued
under AS 43.90 or an affiliate of the licensee that
received the license under AS 43.90 may not, without
competitive bidding, be a party to a contract under
this paragraph that takes effect after the effective
date of this paragraph and provides for the state to
acquire an equity interest in a North Slope natural
gas project or for the transportation of natural gas
received by the state as royalty-in-kind or under
AS 43.55.014;"
SENATOR DYSON objected for explanation purposes.
SENATOR FRENCH explained that this amendment requires the state
to conduct a competitive bid process before TransCanada can be a
party to the contract and addresses what he thinks is a quandary
in the MOU that grants them a significant role without examining
any other option. They need to find out what went wrong with
AGIA before inviting TransCanada into this project. He has no
ill will toward TransCanada and was impressed with their
competence.
4:48:59 PM
SENATOR FAIRCLOUGH asked how long that process would take.
SENATOR FRENCH said he didn't have an answer. A week or a month
he would hope.
SENATOR FAIRCLOUGH said she was a no vote on the AGIA license.
But there was a presentation last night about the question of
value of TransCanada to the project. One of the values is trying
to reach a market inside of 10 years and time is of essence if
we want to compete with other projects that are trying to reach
the Asian market. She thought the AGIA process took over a year,
and as far as TransCanada's partnership in this issue she was
going to be a no vote.
4:50:37 PM
SENATOR MICCICHE said he wished they would have completed that
review process, but no matter what pipeline project they would
have built 25 years ago, the time value of money would have made
it at a significant savings today; even the wrong choice could
have been adjusted.
4:52:41 PM
SENATOR BISHOP said we all go back over the failed stops and
starts. Experts in the room say there are less than a handful of
people in the world that can do this project; two have already
been "kicked to the curb" and the other three and wondering why
they should come to the dance.
SENATOR DYSON maintained his objection and Chair Giessel asked
for a roll call vote. Senator French voted yeah; Senators Dyson,
Micciche, Bishop, Fairclough and Chair Giessel voted nay and
Amendment 5 failed.
4:54:56 PM
CHAIR GIESSEL moved Amendment 6, labeled \N.6.
28-GS2806\N.6
Bullock
AMENDMENT 6
OFFERED IN THE SENATE BY SENATOR GIESSEL
TO: CSSB 138(RES), Draft Version "N"
Page 3, line 19:
Delete "(3)"
Insert "(4)"
Page 3, line 23:
Delete "(4)"
Insert "(5)"
SENATOR MICCICHE objected to lighten the atmosphere and then
removed his objection.
CHAIR GIESSEL announced that without further objection,
Amendment 6 was adopted. She held SB 138 in committee.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SRES enalytica 20140221.pdf |
SRES 2/21/2014 3:30:00 PM |
|
| SB 138 Amendment N.1.pdf |
SRES 2/21/2014 3:30:00 PM |
SB 138 |
| SB 138 Amendment N.2.pdf |
SRES 2/21/2014 3:30:00 PM |
SB 138 |
| SB 138 Amendment N.3.pdf |
SRES 2/21/2014 3:30:00 PM |
SB 138 |
| SB 138 Amendment N.5.pdf |
SRES 2/21/2014 3:30:00 PM |
SB 138 |
| SB 138 Amendment N.6.pdf |
SRES 2/21/2014 3:30:00 PM |
SB 138 |