Legislature(2011 - 2012)BUTROVICH 205

02/29/2012 06:00 PM RESOURCES


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06:05:02 PM Start
06:05:53 PM SB192
08:24:01 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 192 OIL AND GAS PRODUCTION TAX RATES TELECONFERENCED
Heard & Held
Public Testimony
            SB 192-OIL AND GAS PRODUCTION TAX RATES                                                                         
                                                                                                                                
6:05:53 PM                                                                                                                    
CO-CHAIR  PASKVAN  stated  that  the purpose  of  this  evening's                                                               
meeting  was  to  continue  hearing  from  the  public  on  their                                                               
thoughts about SB  192. Comments on the  proposed amendments were                                                               
welcome. He thanked the people  who testified previously and said                                                               
that written  testimony was  welcome via  email. He  provided his                                                               
address.                                                                                                                        
                                                                                                                                
6:07:43 PM                                                                                                                    
RALPH RENZI,  Palmer Chamber of  Commerce, Palmer, AK,  asked the                                                               
committee  to adopt  meaningful  tax reform  that would  increase                                                               
Alaska's  oil production.  He said  he  had seen  the results  of                                                               
complacency  when faced  with difficult  decisions like  this and                                                               
related an  example of how GE  couldn't afford to keep  its plant                                                               
going  in  Schenectady,  New  York,  because  it  didn't  get  an                                                               
adjusted  tax  rate. As  a  result,  the  population fell  by  25                                                               
percent. He said  we can't continue to take some  of the region's                                                               
largest  and  most reliable  employers  for  granted by  assuming                                                               
they'll  stay  here no  matter  what  we  throw at  them.  Making                                                               
meaningful changes  to the oil  tax structure will help  insure a                                                               
successful future  for our  economy and the  people of  the great                                                               
State of Alaska.                                                                                                                
                                                                                                                                
6:09:34 PM                                                                                                                    
SKIP REIERSON,  representing himself, Seward, AK,  opposed SB 192                                                               
and supported HB  110. He said the current oil  tax structure has                                                               
left Alaska  in an  uncompetitive position and  as a  result, oil                                                               
companies have  relocated to more  competitive world  class finds                                                               
around  the world.  Canada  continues to  flourish,  as well.  He                                                               
applauded the  committee and DNR  for their efforts in  trying to                                                               
better understand  this problem,  but they  need to  do something                                                               
soon.                                                                                                                           
                                                                                                                                
6:12:20 PM                                                                                                                    
JOHN  CHRISTENSEN,  representing  himself, Seward,  AK,  did  not                                                               
support  SB 192  and  supported  HB 110.  The  oil industry  will                                                               
invest more  in Alaska  if HB  110 is passed.  He said,  "If they                                                               
pack it  in and leave, we  will lose what we've  got." Taxes will                                                               
diminish  and we  won't have  the  standard and  quality of  life                                                               
people who moved here several years ago have gotten used to.                                                                    
                                                                                                                                
SENATOR MCGUIRE and SENATOR FRENCH joined the committee.                                                                        
                                                                                                                                
6:14:26 PM                                                                                                                    
JOHN CALLAHAN,  representing himself, Fairbanks, AK,  said he was                                                               
a  lifelong  Alaskan  and   retired  state  highway  construction                                                               
engineer and  did not  think ACES should  be changed,  because it                                                               
was  only recently  put into  effect  after the  state had  hired                                                               
experts and  put a lot  of time and  effort into it.  Further, he                                                               
didn't see  why oil companies  need subsidies so they  can profit                                                               
even more under "free enterprise."                                                                                              
                                                                                                                                
He stated that  the ACES tax rate  is in the middle  of the major                                                               
producers in  the world and  it just  doesn't make sense  to push                                                               
production   to   the   maximum   when   considering   that   our                                                               
grandchildren should also benefit from the state's oil reserves.                                                                
                                                                                                                                
CHUCK  WIEGERS, Fairbanks  Chamber  of  Commerce, Fairbanks,  AK,                                                               
urged meaningful  tax reform to  attract investment on  the North                                                               
Slope. Failing  to do  so, he warned,  will ensure  the continued                                                               
decline  of  throughput in  the  pipeline.  High oil  prices  are                                                               
masking the effects of the decline,  but it will catch up with us                                                               
eventually and the effects will be drastic.                                                                                     
                                                                                                                                
6:16:22 PM                                                                                                                    
SENATOR WIELECHOWSKI joined the committee.                                                                                      
                                                                                                                                
6:16:32 PM                                                                                                                    
CORY  BAGGINS,  representing  herself, Sitka,  AK,  testified  in                                                               
support of  significant tax reform  saying SB 192 doesn't  go far                                                               
enough. She  said her family had  been in Alaska since  the 1900s                                                               
and she is now raising six children. She works for an Alaskan-                                                                  
owned  and   operated  marine   transportation  company   and  is                                                               
concerned for  its future.  In the past  three years  very little                                                               
oil field cargo  has passed through their terminals  and in years                                                               
past it was a good portion of their business.                                                                                   
                                                                                                                                
6:17:51 PM                                                                                                                    
CHARLIE  POWERS,  representing  himself,  Kodiak,  AK,  supported                                                               
making meaningful  tax reform  and wasn't sure  about SB  192. He                                                               
asked the committee  if SB 192 in its current  form would sustain                                                               
the state  for the  next 25-50 years  given the  uncertainties of                                                               
markets,  the   escalating  cost  of  pipeline   maintenance  and                                                               
production and  the need to  meet growing budgets. If  the answer                                                               
was no,  he wanted to  know the  legislature's plan to  deal with                                                               
the "state's line  of business." Like other  Alaskans, he enjoyed                                                               
the  benefits  that  a  lucrative  oil  industry  brings  to  the                                                               
communities, and in Kodiak, he has  the benefit of talking to the                                                               
oil and  gas industry  people and  it sounds  like the  future is                                                               
bleak given the decline in TAPS throughput.                                                                                     
                                                                                                                                
MR.  POWERS  advised  that  in   business  you  look  at  leading                                                               
indicators for you organization's  success. Management and boards                                                               
work together  to evaluate  different scenarios  in an  effort to                                                               
mitigate risks and assure sustainability and project growth.                                                                    
                                                                                                                                
6:20:24 PM                                                                                                                    
PAUL  GLAVINOVICH,  geologist, representing  himself,  Anchorage,                                                               
AK, said  that SB 192  doesn't accomplish the goal  of increasing                                                               
throughput in the  TAPS. But he urged  them to pass it  on to the                                                               
Finance  Committee for  a  more expanded  review.  He said  their                                                               
focus must  be on  continued flow  of oil  through the  TAPS. The                                                               
decline  is  well  documented,  but  what  is  missing  from  the                                                               
discussion is the  continuing increase in the  state general fund                                                               
spending.                                                                                                                       
                                                                                                                                
6:22:20 PM                                                                                                                    
IRA PERMAN, Chair,  Institute of the North,  Anchorage, AK, asked                                                               
them to  include investment incentive  amendments into SB  192 to                                                               
make Alaska truly  competitive, align us with  industry and boost                                                               
our  production.  He said  many  went  to  Norway this  year  and                                                               
learned how  it successfully competes for  investment capital for                                                               
its oil and  gas development and now is the  opportunity to apply                                                               
what they learned.                                                                                                              
                                                                                                                                
He  explained that  Norway competes  with  Alaska for  investment                                                               
capital  as all  of the  companies operating  on the  North Slope                                                               
also invest in Norway, along  with 60 other companies. Successful                                                               
attraction of capital  has allowed Norway to stop  the decline of                                                               
its  oil production  and they  now  produce three  times the  oil                                                               
Alaska  does  and the  oil  sector  employs  nine times  as  many                                                               
people. They  do this  while having a  remarkably high  tax rate.                                                               
They do  it by  offering investment incentives  that result  in a                                                               
predictable, fast, high rate of return.                                                                                         
                                                                                                                                
He  said   Norway's  tract  licensing  system   reduces  risk  by                                                               
providing 2D  seismic data  to the  industry; it  reduces upfront                                                               
costs to industry  by replacing the bonus bid system  with a work                                                               
plan competition  that drives toward  production in six  years or                                                               
less;  they  have  replaced  the  royalty  payments  with  equity                                                               
ownership  that results  in more  return to  the industry  in the                                                               
short term.  Importantly, Norway  co-invests with  industry; they                                                               
provide  cash for  an ownership  position;  they take  calculated                                                               
risks  with industry  and  reap the  rewards  alongside it.  This                                                               
aligns the state and industry's  financial interests resulting in                                                               
fields coming into production in as little as two years.                                                                        
                                                                                                                                
MR. PERMAN  said without these  investment incentives,  return on                                                               
investment   in  Alaska   will  be   insufficient  to   encourage                                                               
significant development  of its  medium-sized and  smaller fields                                                               
or  encourage significant  development of  its heavy  viscous and                                                               
shale oil.                                                                                                                      
                                                                                                                                
DENNIS KNEBEL,  representing himself, Anchorage, AK,  wanted more                                                               
jobs  for  Alaskans. He  was  a  journeyman electrician  and  had                                                               
worked everywhere  and hadn't seen  as many  out-of-state workers                                                               
as on the North Slope.                                                                                                          
                                                                                                                                
6:25:43 PM                                                                                                                    
SUZANNE   ARMSTRONG,    President,   Associated    Builders   and                                                               
Contractors of Alaska, Seward, AK,  said increased oil production                                                               
should be our  goal and that SB  192 will not drive  the level of                                                               
investment that  is needed to put  a single new barrel  of oil in                                                               
production.  She  said  her   members  are  primarily  industrial                                                               
commercial  contractors  and   subcontractors,  and  as  business                                                               
owners they are  keenly aware of the economic  trends. One member                                                               
shared that his company had not  worked on a project on the North                                                               
Slope in  the past four years  that has added or  that would lead                                                               
to one new  barrel of oil production. Others say  the industry is                                                               
in a "sustain  and maintain mode" and production  has declined by                                                               
40 percent  over the past  decade. She asked that  lawmakers keep                                                               
their focus  on the long  term economic  future of our  state and                                                               
not just on short term monetary gain.                                                                                           
                                                                                                                                
6:27:54 PM                                                                                                                    
PETE  STOKES, representing  himself, Anchorage,  AK, stated  that                                                               
Alaska isn't  competitive in attracting  oil and  gas investment,                                                               
and progressivity is the problem.  Reform ACES! He said Alaska in                                                               
going  from ELF  to PPT  to ACES  "overshot the  sweet spot"  and                                                               
investment  has  languished,  especially   at  high  oil  prices.                                                               
Companies will  simply not  invest here if  they can  make better                                                               
returns in  other jurisdictions. He quoted  Steve Forbes: "Please                                                               
let Alaska become competitive in energy. Cut tax rates."                                                                        
                                                                                                                                
6:31:02 PM                                                                                                                    
DICK COOSE, representing himself,  Ketchikan, AK, stated that the                                                               
oil industry  is overtaxed at the  higher priced oil and  that is                                                               
limiting production.  Alaska has to  be competitive in  the world                                                               
market or we're going to lose out.                                                                                              
                                                                                                                                
6:32:15 PM                                                                                                                    
ANDREW BOND, representing himself,  Anchorage, AK, opposed SB 192                                                               
and supported HB  110 that will make Alaska's  fiscal policy more                                                               
competitive with  the Lower 48.  He was an engineer  with Pioneer                                                               
Natural  Resources  and  had  been  working  in  the  Alaska  oil                                                               
industry for  25 years; he had  raised his family here  and calls                                                               
it home. His concern  was that he will not be  able to stay here,                                                               
because Pioneer is  fighting to get investment  dollars for their                                                               
Alaska  projects  while  huge  amounts  of  money  are  going  to                                                               
developing  projects  in Texas.  The  economics  of their  Alaska                                                               
projects are challenged  compared to the Texas  projects not only                                                               
due  to the  high cost  of operating  in Alaska  but because  the                                                               
progressivity takes away the upside at current prices.                                                                          
                                                                                                                                
He advised  that the  best way  for new projects  to occur  is to                                                               
maintain appropriate  tax credits  for new investment  and reduce                                                               
progressivity  at current  oil prices.  New  technology and  huge                                                               
shale  developments are  driving investment  dollars into  places                                                               
like Texas and North Dakota. If  that continues, he may be forced                                                               
to  move to  where  the  work is  being  done.  He supported  the                                                               
changes to ACES  as outlined in HB 110 and  didn't support SB 192                                                               
as introduced.                                                                                                                  
                                                                                                                                
6:34:08 PM                                                                                                                    
JAMELIA  SAIED, representing  herself,  Anchorage,  AK, said  the                                                               
evidence is now in; ACES is  working and the oil taxes don't need                                                               
to be lowered or  changed. She did not support SB  192 or HB 110.                                                               
When oil  prices are  high companies  do pay  more in  taxes, but                                                               
they  are  also making  more  in  profits. More  exploration  and                                                               
development is  being done in this  state now than has  been done                                                               
in the last  25 years. The big three oil  companies are trying to                                                               
hold the  state hostage and we  should not allow that  to happen.                                                               
HB 110  is simply a giveaway  to the oil companies  and the state                                                               
gets nothing in return.                                                                                                         
                                                                                                                                
6:35:41 PM                                                                                                                    
BOB STAFFORD,  representing himself, Anchorage, AK,  supported SB                                                               
192  and Amendment  B.14.  He supported  Amendment  B.14 for  the                                                               
following reasons:                                                                                                              
                                                                                                                                
     1. The separate accounting  method is used worldwide by                                                                    
     a majority of the oil producing sovereigns.                                                                                
                                                                                                                                
     2.  The separate  accounting method  was upheld  by the                                                                    
     Alaska Supreme Court and the  U.S. Supreme Court by way                                                                    
     of denying oil companies the standing as plaintiffs.                                                                       
                                                                                                                                
     3.  Separate  accounting   would  have  captured  $13.4                                                                    
     billion, which went to the foreign oil industry.                                                                           
                                                                                                                                
     4. The current method,  UMWA accounting, will cause the                                                                    
     state to  lose over $100  million when BP factors  in a                                                                    
     $14  billon judgment  for  their part  in  the Gulf  of                                                                    
     Mexico disaster.                                                                                                           
                                                                                                                                
MR. STAFFORD said he had been  an Alaskan for over a half century                                                               
and his vested interest is on  behalf of the three generations of                                                               
Alaskans following him.  He thanked them for their  work and said                                                               
he was grateful that someone  was standing between us and special                                                               
interests.                                                                                                                      
                                                                                                                                
6:37:38 PM                                                                                                                    
LEONTY WILLIAMS,  representing himself, Sitka, AK,  applauded the                                                               
Senate for taking  a reasoned approach to this issue  and said he                                                               
supported  the approach  in  SB  192. He  was  a  student at  UAS                                                               
working on a business degree and  intends to run his own business                                                               
in Sitka.                                                                                                                       
                                                                                                                                
MR. WILLIAMS  noted that much  had been said about  the decisions                                                               
made today impacting the next  generation of Alaskans, but little                                                               
has been said  about what the next generation  of Alaskans thinks                                                               
about  it.  He  attended  the Conference  of  Young  Alaskans  in                                                               
January this  year in which 55  people came to Juneau  to discuss                                                               
critical  issues  facing  Alaska;  one of  them  was  oil  taxes.                                                               
Ninety-six percent  of the  delegates voted  that changes  to the                                                               
oil tax structure should be based on research and knowledge.                                                                    
                                                                                                                                
He said  HB 110 would  give away billions  of dollars to  the oil                                                               
industry  when the  research hadn't  shown  definitively at  what                                                               
point  the current  system  is broken.  The  next generations  of                                                               
Alaskans  want  increased  production   to  sustain  the  state's                                                               
economy and  simply giving away  billions without  any guarantees                                                               
will hurt  us the  most. He  said to  keep up  the good  work and                                                               
asked them to please not give away their future.                                                                                
                                                                                                                                
6:39:38 PM                                                                                                                    
LON PUTNAM,  representing himself, Bethel, AK,  supported SB 192.                                                               
He  said his  fuel  bill "just  about broke  my  heart this  last                                                               
winter." When  oil companies are  making record high  profits and                                                               
at the same time  trying to get Alaska to bribe  them to take its                                                               
oil, SB  192 at least has  a reasoned approach and  provides some                                                               
guarantees  in  return  for  some  incentives.  He  couldn't  see                                                               
handing the  oil industry  "bunches of money"  on the  hopes that                                                               
they might do something, because  their track record has not been                                                               
extremely good  in keeping any  type of promises  or commitments.                                                               
People  are still  trying to  get  some compensation  for an  oil                                                               
spill many years after the fact.                                                                                                
                                                                                                                                
6:41:27 PM                                                                                                                    
JAY QUAKENBUSH,  representing himself,  Fairbanks, AK,  said ACES                                                               
is the best contract for now.  He thanked each legislator who had                                                               
looked at the governor's tax  legislation and said "not so fast."                                                               
Giving large  tax breaks to  oil companies will not  maximize the                                                               
benefits to the people of  Alaska as the Constitution states. The                                                               
governor's bill uses  hope as a strategy to increase  the flow of                                                               
oil in the pipeline and he prefers staying with ACES.                                                                           
                                                                                                                                
6:43:48 PM                                                                                                                    
HUGH  FATE,   representing  himself,  Fairbanks,   AK,  supported                                                               
changing the  oil tax regime.  Any tax  regime in Alaska  must be                                                               
more  than   competitive,  he  said.   Alaska  has   high  costs,                                                               
tremendously  difficult  logistics,  land  acquisition  problems,                                                               
seasonal  delays and  regulatory problems  that are  mitigated in                                                               
the Lower 48 states. He said  changing the tax regime is going to                                                               
be difficult, but it must be done.                                                                                              
                                                                                                                                
He recalled  11 other sedimentary  basins besides Cook  Inlet and                                                               
the  North Slope  that hadn't  been mentioned  much, but  if they                                                               
chase industry  away today because  of being  uncompetitive, what                                                               
makes us think  they'll come back to help develop  those other 11                                                               
basins in  the future? He  thanked them  for their work  and said                                                               
"God speed in your deliberations."                                                                                              
                                                                                                                                
6:45:26 PM                                                                                                                    
KEN L. LARSON, representing himself,  Fairbanks, AK, said he is a                                                               
retired  engineer and  was  against changing  ACES  at this  late                                                               
date. He described  his high heating and utility  bills saying he                                                               
is one of  many Alaskans who feel disenfranchised  and totally at                                                               
the mercy of  big oil and their various lobbyists  and shills who                                                               
work for and  with them and some elected officials  in Juneau and                                                               
Washington, D.C. He  said the high fuel price at  the pump is not                                                               
due to any oil shortages, but  to big oil's speculation caused by                                                               
Iran's threatened current status in the straits.                                                                                
                                                                                                                                
MR. LARSON added  that ACES was strongly debated  and analyzed by                                                               
the Palin  administration and  he thought  the bills  before them                                                               
now  should be  withdrawn. To  make Alaska  more competitive,  he                                                               
suggested getting  the north coast drilling  restrictions removed                                                               
and getting ANWR, Prudhoe Bay  and other known deposits going. He                                                               
said their  time would be better  spent on getting a  natural gas                                                               
bullet line to Fairbanks and Valdez.                                                                                            
                                                                                                                                
6:47:44 PM                                                                                                                    
NORM   PHILLIPS,   Steering   Committee   member,   Make   Alaska                                                               
Competitive Coalition, Fairbanks, AK, did  not support SB 192. He                                                               
stated that  the Coalition was  created because of  their concern                                                               
about  the  potentially  serious consequences  of  declining  oil                                                               
production on both the state  economy and the state operating and                                                               
capital budget. They  believe the best way to  reduce the decline                                                               
or reverse it is to reduce the  state's share of the taxes on the                                                               
oil industry to the point that  it encourages the large amount of                                                               
private investment  that is necessary to  achieve that objective;                                                               
many of the members support HB 110.                                                                                             
                                                                                                                                
6:50:15 PM                                                                                                                    
BEAU OBRIGEWITCH, representing himself,  Eagle River, AK, did not                                                               
support SB 192. He said most  people don't realize that once TAPS                                                               
is shut  down the party is  over. It doesn't matter  how high oil                                                               
and gas go;  TAPS will be gone  and Alaska's oil and  gas will be                                                               
stranded forever.  He said  lawmakers were  elected "to  lead and                                                               
make tough decisions  and not be the harbingers of  bad news." He                                                               
will leave when it no longer makes financial sense to live here.                                                                
                                                                                                                                
6:52:45 PM                                                                                                                    
CHANCY  CROFT,  representing  himself,  Anchorage,  AK,  said  he                                                               
thought  ACES  was working.  He  said  he  was  a member  of  the                                                               
legislature in 1969  to 1978 when the basic structure  and all of                                                               
the  existing programs  were established.  He  observed that  the                                                               
State of  Alaska has benefited  whenever it  stood up to  the oil                                                               
industry and  that you  don't have  to go  much further  than the                                                               
first  rule  of negotiation,  which  is  "if you  have  something                                                               
concrete, do not give it up for a promise."                                                                                     
                                                                                                                                
MR. CROFT  said ACES is  a fair plan and  it has not  resulted in                                                               
any reduction in production or  in competition. If they are going                                                               
to engage in  meaningful reform, he urged them  to adopt separate                                                               
accounting;  that  would  ensure   what  the  state  receives  is                                                               
measured by the oil companies' actual profit.                                                                                   
                                                                                                                                
MR. CROFT  said the  reason new companies  are not  interested in                                                               
coming to  Alaska is  because in  the 1980s  the state  created a                                                               
monopoly with ConocoPhillips, ExxonMobil and British Petroleum.                                                                 
                                                                                                                                
6:55:57 PM                                                                                                                    
JOHN  DICKENS, representing  himself, Bethel,  AK, said  Alaska's                                                               
tax system  needs reform now. The  State of Alaska warned  in its                                                               
most  recent forecast  that half  of the  revenue stream  in 2020                                                               
will  depend on  oil industry  investments  that have  yet to  be                                                               
made. The  bottom line  is that  people invest  capital to  get a                                                               
return on  it, and Alaska  is known  throughout the world  as the                                                               
land of the "raw deal."                                                                                                         
                                                                                                                                
6:58:18 PM                                                                                                                    
AVES THOMPSON,  Executive Director, Alaska  Trucking Association,                                                               
representing himself, Anchorage,  AK, supported restructuring the                                                               
oil and  gas tax regime with  the intent of making  Alaska a more                                                               
attractive place to  invest in order to  increase oil production.                                                               
TAPS could  be nonfunctional  within five to  ten years  with the                                                               
current decline  rate, he said,  and while lower tax  rates could                                                               
reduce revenue flowing  into state coffers in the  short term, in                                                               
the  long  term  this  reduction  will  make  the  state  a  more                                                               
attractive  place  in which  to  invest  and ultimately  lead  to                                                               
higher revenues. He said progressivity must be fixed.                                                                           
                                                                                                                                
MR. THOMPSON said  two of the oil producers  announced they would                                                               
invest  $5 billion  if the  production taxes  were reduced.  This                                                               
looks like a  fair trade off since that level  of investment will                                                               
produce thousands of good paying, private sector jobs.                                                                          
                                                                                                                                
7:00:33 PM                                                                                                                    
CALEB  STEWART,  representing  himself,  Juneau,  AK,  urged  the                                                               
committee to stick to its guns. He  said he had been here all his                                                               
life and  the tax rate  hasn't changed oil production.  It's been                                                               
high, low, good  and bad, but here we are!  The Big Three haven't                                                               
developed a  single new stand-alone  field since 1977.  No matter                                                               
how much we give them, it won't affect their behavior.                                                                          
                                                                                                                                
7:01:56 PM                                                                                                                    
BARBARA  HUFF TUCKNESS,  Director,  Governmental and  Legislative                                                               
Affairs, Teamsters Local 959, Anchorage,  AK, opposed the current                                                               
draft of  SB 192. She  commended the  committee for the  time and                                                               
effort they  have put in on  this issue. She said  she represents                                                               
members in every single industry  within the State of Alaska with                                                               
the exception  of fishing: mining,  telecommunication, hospitals,                                                               
railroad workers, water carriers and  truck drivers. They are all                                                               
touched  by the  ultimate decisions  made by  this committee  and                                                               
other committees as this bill moves through.                                                                                    
                                                                                                                                
MS. TUCKNESS said  they believe this bill doesn't  create any new                                                               
production, and that is exactly  what is needed. Alaska needs the                                                               
smaller companies that  are coming into the state to  stay in the                                                               
state and  also produce. Exploration  is going on, but  long term                                                               
commitments aren't being made.                                                                                                  
                                                                                                                                
She  stated that  this bill  doesn't create  new jobs  either and                                                               
part of  her job is  representing employees. During  the pipeline                                                               
days,  the Teamsters  had  25,000 members  working  on in.  Today                                                               
their numbers are  in the hundreds. She urged  that they continue                                                               
their  due diligence  and  hopefully  come up  with  a bill  that                                                               
promotes job  stability in the  industry and long  term financial                                                               
viability for the State of Alaska.                                                                                              
                                                                                                                                
7:04:31 PM                                                                                                                    
RACHEL  PETRO,  President  and   CEO,  Alaska  State  Chamber  of                                                               
Commerce, Anchorage,  AK, said they  do not support SB  192. They                                                               
support  HB  110, because  it  brings  an additional  $5  billion                                                               
investment.  She said  each fall  Alaska  Chamber members  gather                                                               
during their  legislative policy  forum to decide  priorities for                                                               
the  upcoming session;  this  year  less than  7  percent of  the                                                               
members  participating  in  the  forum were  companies  with  any                                                               
direct  ties  or relationship  with  the  oil and  gas  industry.                                                               
Despite this,  they overwhelmingly prioritized reforming  oil tax                                                               
policy to encourage new production.                                                                                             
                                                                                                                                
CSSB  192  does little  to  fundamentally  change the  investment                                                               
climate in  Alaska and change  is needed,  she said. As  an owner                                                               
state,  Alaska  has the  responsibility  to  properly market  its                                                               
resources  and receive  a fair  return. Marketing  includes being                                                               
competitive  and  for  Alaska  that  means  being  a  trustworthy                                                               
business  partner  and  providing  an  environment  that  invites                                                               
investment.                                                                                                                     
                                                                                                                                
She said  there has  been discussion about  an oil  tax reduction                                                               
bankrupting the state in a few  years, but the reality is without                                                               
increasing production,  diversifying the economy and  reigning in                                                               
government expenditures,  we're going to  be in fiscal  hot water                                                               
in a matter  of time. You have  to spend money to  make money and                                                               
this involves  calculated risk  for calculated  potential return.                                                               
There  are  no guarantees.  She  concluded:  "Making and  keeping                                                               
Alaska  competitive   nationally  and   globally  is   simply  an                                                               
investment in Alaska's long term sustainability."                                                                               
                                                                                                                                
7:07:11 PM                                                                                                                    
STUART  COHEN,  Owner,  Invisible   World  Imports,  Juneau,  AK,                                                               
advised that as  they move into the amendment process  on SB 192,                                                               
to avoid  any unilateral  giveaways and  untargeted cuts;  and he                                                               
opposed HB  110. He agreed with  all the testimony today:  oil is                                                               
our life blood  and he wanted his  children to have a  job in the                                                               
state, but  the question they are  looking at is how  to increase                                                               
production and maximize benefits to  the people of Alaska. HB 110                                                               
certainly  does  not  do  that.  All  the  tax  cuts  in  it  are                                                               
"untargeted."  If they want to  develop new fields and felt taxes                                                               
were  the   problem,  they  could   conceivably  cut   taxes  for                                                               
production in  those new undeveloped  fields, which is  what some                                                               
of the proposed amendments to SB 192 suggest."                                                                                  
                                                                                                                                
But the governor's  bill cuts taxes on Prudhoe Bay,  a field that                                                               
is already mature and in which  there won't be new discoveries no                                                               
matter  how  low taxes  go.  It  rewards  oil companies  not  for                                                               
exploring  but for  sitting  back and  milking  Prudhoe Bay.  His                                                               
second problem with the governor's bill  was that it gives away a                                                               
huge amount without getting anything  in return. It would cut the                                                               
state's revenue from  ACES by 37 percent, but nothing  in it says                                                               
any oil company will do any  new exploration, drill a single well                                                               
or create  a single job.  As a  citizen, he was  incredulous that                                                               
anyone would propose a plan that  would cut the state's income by                                                               
nearly  $2 billion.  The jobs  and infrastructure  that would  be                                                               
lost by  the cut  would not be  worth whatever  hypothetical jobs                                                               
might be picked up on the North Slope.                                                                                          
                                                                                                                                
MR.   COHEN  said   the  Department   of   Labor  and   Workforce                                                               
Development's   (DOLWD)  own   documents  say   that  oil   field                                                               
employment is  at an all-time high  and more new wells  are being                                                               
drilled next  year than in the  last decade; and Alaska  is still                                                               
very profitable.   As they  move into the amendment process on SB                                                               
192,  he  asked  them  to  avoid  any  unilateral  giveaways  and                                                               
untargeted cuts.                                                                                                                
                                                                                                                                
7:09:56 PM                                                                                                                    
KIM BURROWS,  representing herself,  Palmer, AK, agreed  with the                                                               
gentleman who spoke about Norway's  oil tax and that there should                                                               
be oil tax reform, but it should  be in the form of oil companies                                                               
paying corporate  income taxes in  the same way  other businesses                                                               
in  Alaska do  - on  their earnings  in Alaska.  Norway has  high                                                               
taxes  and  the  oil  companies  are  still  making  billions  of                                                               
dollars. They don't have to  reinvent the wheel. The state should                                                               
also have guarantees  of more oil production,  more investment on                                                               
the North Slope and more jobs for Alaskans.                                                                                     
                                                                                                                                
7:11:31 PM                                                                                                                    
KELLY  WALTERS, representing  himself,  Anchorage, AK,  supported                                                               
keeping ACES intact. He thanked  the Senate bi-partisan coalition                                                               
for  their great  efforts in  protecting  Alaska's interests  and                                                               
fulfilling  their  constitutional  duty  to  secure  the  maximum                                                               
benefit  of our  resources for  all Alaskans.  Maybe an  argument                                                               
could be  made to tweak  progressivity, but  if they do  that, he                                                               
agreed with Lazy  Mountain Jim who talked about  a rebate program                                                               
yesterday  that  would provide  tax  incentives  as the  pipeline                                                               
incremental production  targets were  hit. "The  governor's plan,                                                               
HB 110, is a one-sided  entitlement program for the oil industry,                                                               
and, as I see it, nothing in it for Alaskans."                                                                                  
                                                                                                                                
He said  while the oil companies  are good partners in  our state                                                               
and  necessary,  and  we  all benefit  from  development  of  our                                                               
resources,  they  have not  been  the  most trustworthy  business                                                               
partners. You  only need  to look  back to  2006 and  the scandal                                                               
that  landed some  of their  colleagues in  jail as  well as  the                                                               
Amerada Hess case  from 1977 to 1992 in which  oil companies were                                                               
found guilty  of deliberate falsification in  computing the price                                                               
paid to Alaska  for its royalty oil. At the  time, the judge said                                                               
"the  state was  guilty  of inexcusable  trustfulness in  dealing                                                               
with the oil companies."                                                                                                        
                                                                                                                                
7:14:32 PM                                                                                                                    
MERRICK  PIERCE,  representing  himself,  North  Pole,  AK,  said                                                               
before  fixing  the  tax  rates, fix  the  obvious  problems  the                                                               
committee  has  heard  about  that   limit  competition  and  oil                                                               
throughput:  transparency,  honest  tariffs  and  common  carrier                                                               
regulations.  He  thanked them  for  working  so hard  to  really                                                               
understand oil  taxation saying  that HB 110  is a  terrible bill                                                               
and  neither  the House  nor  the  administration did  their  due                                                               
diligence on it. He thanked some of them individually.                                                                          
                                                                                                                                
MR. PIERCE  said with a  conservative TAPS throughput  of 600,000                                                               
barrels per  day and current  ANS price  of $125 per  barrel, the                                                               
gross value of oil leaving Alaska  per year is about $27 billion.                                                               
From that  $27 billion,  the multinationals  will take  about $20                                                               
billion  and Alaskans,  the owners  of  the oil,  will only  take                                                               
about  $7 billion.  Yet some  believe  we should  give away  even                                                               
more.                                                                                                                           
                                                                                                                                
He  said that  more  transparency is  critically  needed for  the                                                               
public  and  the  legislators,  so  everyone  can  make  informed                                                               
decisions.  At  all costs,  they  need  to prevent  inflated  and                                                               
fraudulent tariffs in  TAPS and a common  carrier type regulation                                                               
of oil  field infrastructure and  gathering facilities  to ensure                                                               
independents are not  shut out and to build a  large diameter gas                                                               
line, which helps oil explorers  monetize the gas they find. That                                                               
could be paid  for with the $2  billion a year that  HB 110 would                                                               
have given away.                                                                                                                
                                                                                                                                
7:16:35 PM                                                                                                                    
RENEE SCHOFIELD,  representing herself, Ketchikan,  AK, supported                                                               
Ms. Petro's  testimony opposed to  SB 192 and supporting  HB 110.                                                               
MS. SCHOFIELD said  she is a small business owner,  and while her                                                               
company doesn't provide  direct services to the  oil industry, it                                                               
provides  services  to  agencies  that benefit  from  the  direct                                                               
funding in  the state  budget. It's  extremely important  to keep                                                               
oil  in the  pipeline;  something is  needed  that will  increase                                                               
throughput significantly and quickly.                                                                                           
                                                                                                                                
7:17:59 PM                                                                                                                    
JERRY HAUGEBERG,  Fairbanks Chamber  of Commerce,  Fairbanks, AK,                                                               
opposed  SB 192.  He  supported modifying  ACES  saying that  the                                                               
current tax structure inhibits development  and new production on                                                               
the  North Slope.  They should  do  whatever they  can to  remove                                                               
those restrictions this session.                                                                                                
                                                                                                                                
7:19:57 PM                                                                                                                    
DOUG ISAACSON, Mayor, City of  North Pole, North Pole, AK, didn't                                                               
support SB  192 as  written. He  said last  march the  North Pole                                                               
City  Council  passed  a resolution  urging  the  legislature  to                                                               
protect  jobs in  Alaska,  ensure  longer life  of  the TAPS  and                                                               
decrease  refining   costs  in  Alaska  by   making  Alaska  more                                                               
competitive  for  oil  exploration, development,  production  and                                                               
instate refining.  He commended  the committee for  its diligence                                                               
in working  to define a  balance between profits coming  into the                                                               
state and incentivizing production.                                                                                             
                                                                                                                                
MR. ISAACSON  said he testified  earlier on the  negative impacts                                                               
the high cost  of energy and, now, how the  possible loss of more                                                               
than 1,500 immediate jobs and  Eielson Air Force Base will impact                                                               
Interior Alaska. He said much  of the non-government workforce is                                                               
oil refining  and oil field related.  He said North Pole  is also                                                               
host to the  state's largest instate refiner of  royalty oil, and                                                               
while  he didn't  support SB  192 as  presently written,  several                                                               
proposed amendments should  have greater consideration, including                                                               
the  bracket   provisions  for  progressivity,  because   it  de-                                                               
incentivizes production when the price of oil increases.                                                                        
                                                                                                                                
He  urged  the committee  to  remember  that revenue  sharing  to                                                               
municipalities  is very  beneficial, and  they don't  want it  to                                                               
stop.  Production decline  can be  arrested by  implementing four                                                               
more of their discussion points:                                                                                                
1. Implement  a new  licensing system  that attracts  new capital                                                               
for developing new  fields or when expanding  existing fields and                                                               
is taxed  according to  the product whether  heavy oil,  shale or                                                               
the like.                                                                                                                       
2. The State of Alaska should  conduct the initial 2D seismic and                                                               
make the results available to the public.                                                                                       
3. Restrict  leases to  a six-year license  that requires  a work                                                               
plan and active development. Don't allow  any company to sit on a                                                               
lease indefinitely.                                                                                                             
4.  The  total  marginal  take  should not  exceed  that  of  our                                                               
northern  competitors. Currently,  Alberta is  at 55  percent and                                                               
Norway is at 78 percent, and Alaska exceeds both.                                                                               
                                                                                                                                
7:22:38 PM                                                                                                                    
KARM SINGH, representing himself,  Fairbanks, AK, urged them keep                                                               
ACES  in place.  The  extra  taxes we  get  from  ACES should  be                                                               
invested in state  infrastructure for cheap energy  like a bullet                                                               
line and the  Susitna dam. This is  the only way we  will be able                                                               
to  break away  from  the  oil companies  with  cheap energy  and                                                               
develop our  mining, and  then smelting  and manufacturing  to be                                                               
shipped  off to  the Far  East and  the West  Coast of  the U.S.,                                                               
Canada and  Mexico. He said the  oil companies already get  a $40                                                               
billion tax  benefit from  the federal  government; they  are the                                                               
most profitable  companies in  the world. He  said no  one offers                                                               
him breaks for the high cost of heating and lighting his house.                                                                 
                                                                                                                                
7:24:29 PM                                                                                                                    
LISA HERBERT, Executive Director,  Fairbanks Chamber of Commerce,                                                               
Fairbanks, AK, said  SB 192 doesn't go far enough  to make Alaska                                                               
more competitive and attractive to  the oil and gas industry. She                                                               
said she works  for the business community of  Fairbanks, many of                                                               
which are directly and indirectly supported by the oil industry.                                                                
                                                                                                                                
7:26:01 PM                                                                                                                    
ROGER  BURGGRAF, representing  himself, Fairbanks,  AK, supported                                                               
restructuring the oil tax, but  he had reservations about both SB                                                               
192 and HB  110. He said Prudhoe  Bay is running out  of easy oil                                                               
and while it has  a lot of heavy oil, getting it  out is going to                                                               
cost a  lot of money. He  thought the oil companies  need a break                                                               
because they go wherever they can make the most money.                                                                          
                                                                                                                                
7:27:26 PM                                                                                                                    
KAREN GORDON,  representing herself,  Fairbanks, AK, said  SB 192                                                               
has  the potential  of being  economically  suicidal for  Alaska.                                                               
Instead  of encouraging  investment, SB  192 could  send the  oil                                                               
companies packing.  They need to  create incentives  to encourage                                                               
development  and attract  investments that  feed our  economy and                                                               
contribute  to the  powerful economic  multiplier  and jobs  that                                                               
capital  investments  provide.   Alaska's  economic  independence                                                               
rides  on Alaska's  ability  to compete  with  other cheaper  oil                                                               
fields.                                                                                                                         
                                                                                                                                
7:28:18 PM                                                                                                                    
BUZ OTIS,  representing himself,  Fairbanks, AK, stated  that oil                                                               
prices  are killing  people and  that  oil companies  need to  be                                                               
supported;  we need  their business.  In 1976,  he started  Great                                                               
Northwest  with  $7,000  and  a   dream  and  he  has  reinvested                                                               
everything he has made back into Fairbanks.                                                                                     
                                                                                                                                
7:29:52 PM                                                                                                                    
KIM  MCDANIEL, representing  herself and  her family,  Anchorage,                                                               
AK, stated  Alaska is no  longer competitive and  something needs                                                               
to be  done to change  that quickly. She  has been in  Alaska her                                                               
whole life and her husband has  worked in the oil industry for 33                                                               
years.  Most of  the people  who work  for her  husband's company                                                               
live  in-state;  they   are  local  high  school,   UAA  and  UAF                                                               
graduates.                                                                                                                      
                                                                                                                                
She  related  that  a  news  article  about  how  oil  booms  are                                                               
happening in  west Texas  and production  is predicted  to double                                                               
within  five to  seven  years.  It says  that  similar booms  are                                                               
happening  in  south Texas,  North  Dakota,  Montana and  western                                                               
Alberta, Canada. But Alaska's headlines  tell about how our state                                                               
has declining  revenues; the North  Slope production  declined by                                                               
6.3 percent last  year with a 4.7 percent  decrease predicted for                                                               
this year.                                                                                                                      
                                                                                                                                
MS.  MCDANIEL  said  the  governor's approval  rating  is  at  75                                                               
percent and  that is saying we  trust him and approve  of what he                                                               
is doing. He is trying to increase Alaska's oil production.                                                                     
                                                                                                                                
7:31:09 PM                                                                                                                    
RICHARD BALES,  representing himself,  Anchorage, AK,  opposed SB                                                               
192 and  said HB  110 offers  meaningful reform.  He had  been in                                                               
Alaska  for 38  years;  he  is a  small  business owner,  father,                                                               
husband, grandfather and soon to  be a great grandfather and they                                                               
have all  chosen to stay  in Alaska. He  likened this issue  to a                                                               
high stakes poker  game that we can ill afford  to lose. Fix ACES                                                               
now, he said,  or the state will be forced  into a recession like                                                               
nothing  we have  ever seen  before.  He thanked  them for  their                                                               
service to Alaskans  and for taking this important  matter up for                                                               
consideration.                                                                                                                  
                                                                                                                                
7:32:32 PM                                                                                                                    
STEVE  ROBUSTELLINI, representing  himself and  his family,  Port                                                               
Lions, AK, said  people are leaving Alaska and  this doesn't have                                                               
to  happen.  Alaska needs  to  have  a globally  competitive  tax                                                               
structure and to work in partnership with the oil companies.                                                                    
                                                                                                                                
MR.  ROBUSTELLINI  related   how  12  years  ago   he  came  from                                                               
California where  his family worked  in the timber  industry, but                                                               
it was a dying industry. His  work went from harvesting timber in                                                               
the forests  to moving from one  bankrupt mill to another  on the                                                               
verge of closing. He said oil  fuels the Alaska economy and he is                                                               
now seeing  a lot of  the same  things happen here.  His friends,                                                               
fellow  workers and  neighbors  are leaving  Alaska  for jobs  in                                                               
other  areas.  But  this  does  not have  to  happen.  Alaska  is                                                               
competing  globally  for  investment   dollars  and  it  needs  a                                                               
globally competitive  tax structure. More investment  will result                                                               
in  more production,  which equals  more oil  to tax  rather than                                                               
less oil to tax with higher  tax rates. He thanked them for their                                                               
efforts in addressing this issue.                                                                                               
                                                                                                                                
7:34:22 PM                                                                                                                    
MARK  BAGGETT, representing  himself, Anchorage,  AK, stated  oil                                                               
companies are in  business to make the most money.  He said he is                                                               
a  contractor from  Port  Arthur, Texas,  where  6,000 jobs  were                                                               
created through  incentives for  the refineries.  He said  one of                                                               
the oil companies  brought him up here to do  repairs, because he                                                               
was told it didn't have the  money for upgrades. He likes it here                                                               
and actually bought a place and  a car. He had $8,500 in receipts                                                               
with  him  and if  he  leaves  he would  take  it  with him.  Oil                                                               
companies  are  in  the  business  of  making  money;  they  have                                                               
shareholders  and  if they  don't  make  money, the  shareholders                                                               
aren't going to keep them.                                                                                                      
                                                                                                                                
7:35:40 PM                                                                                                                    
MIKE KENNY,  representing himself, Anchorage, AK,  said he trusts                                                               
what  the Senate  is  doing  with SB  192.  He  had been  living,                                                               
working and  raising his family in  Alaska for over 42  years; he                                                               
has worked in the oil fields  and in executive boardrooms and met                                                               
a lot of  fine oil company men in Alaska.  He recalled the recent                                                               
scandals  involving Veco  and the  Corrupt  Bastards Club  saying                                                               
there was  no trust  in anything  the oil  companies had  to say.                                                               
They heard the same arguments during  the PPT debates as they are                                                               
hearing now.                                                                                                                    
                                                                                                                                
MR. KENNY said  he spoke against the Bipartisan  Working Group in                                                               
2006 when he  thought it wouldn't work and would  just be more of                                                               
the same,  but he was wrong.  He trusts what they  are doing with                                                               
SB 192  and if  it needs  tweaking at  the higher  levels, that's                                                               
okay with  him. He said  the oil  companies had not  earned their                                                               
trust.                                                                                                                          
                                                                                                                                
7:37:40 PM                                                                                                                    
ALLEN  DOLYNNY, representing  himself,  Anchorage, AK,  supported                                                               
lowering the tax structure, creating  jobs in Alaska and creating                                                               
the profits for  the hundreds of companies that get  spent in our                                                               
state every  day. He said he's  an oil engineer and  president of                                                               
Nannawilli Parsons and that producing  oil is hard. Producing oil                                                               
is not equal  to taxes; investment is equal to  taxes. So, Alaska                                                               
needs  to  have  a  climate that  encourages  investment  in  new                                                               
production, like North Dakota and Alberta.                                                                                      
                                                                                                                                
7:39:02 PM                                                                                                                    
LYNN  JOHNSON, representing  himself,  Anchorage,  AK, said  ACES                                                               
needed  to  be changed  in  a  meaningful way,  particularly  the                                                               
progressivity; SB  192 is  too little  too late.  He said  he was                                                               
president   of   Dowland-Bach    Corporation,   a   37   year-old                                                               
manufacturing business. The environment  currently is not healthy                                                               
for  businesses  in  Alaska that  support  the  major  production                                                               
companies.  If things  don't change,  that  unhealthy trend  will                                                               
migrate  to  most  sectors of  Alaska's  economy  including  real                                                               
estate, hotels, restaurants and banking.                                                                                        
                                                                                                                                
He  said  Alaska's cost  structure  just  isn't competitive  with                                                               
other basins  in the Lower  48, like  North Dakota and  Texas. He                                                               
said  the weather  or distance  to  market can't  be changed  for                                                               
those firms producing  our oil, but we can and  should change the                                                               
tax regimes to compete favorably for capital investment dollars.                                                                
                                                                                                                                
7:41:03 PM                                                                                                                    
JIM  DUFFIELD, representing  himself and  his family,  Anchorage,                                                               
AK, said "No on  SB 192." He was a small  business owner in Kenai                                                               
and Soldotna,  chair of the Anchorage  Alaska Miners' Association                                                               
and on  a number  of resource development  groups. He  was "blown                                                               
away"  that they  would  even consider  something  like this.  He                                                               
chastised the  committee for  not listening to  a word  Pedro van                                                               
Meurs  said. He  laid out  an entire  plan with  a structure  and                                                               
rates  that could  be tweaked  for all  types of  production. Tax                                                               
dollars were spent paying for his advice.                                                                                       
                                                                                                                                
7:42:37 PM                                                                                                                    
VINCE  BELTRAMI, President,  Alaska AFLCIO,  Anchorage, AK,  said                                                               
the  Senate should  not  follow the  House and  pass  an oil  tax                                                               
rollback  without   determining  that  it  would   truly  make  a                                                               
difference and  lead to  more production.  He related  Linda Lake                                                               
polling information commissioned by  the Standup Alaska Coalition                                                               
made  with   505  voters  earlier   this  month.   The  following                                                               
statements were made to poll participants:                                                                                      
                                                                                                                                
     1. Some people say the reality  is that we need the oil                                                                    
     companies to  do business here  and we need  tax reform                                                                    
     that keeps us  competitive. But this bill  is the wrong                                                                    
     way  to  do  it,  because  it is  a  giveaway  with  no                                                                    
     guarantees.  We  can't  just  trust  oil  companies  to                                                                    
     invest here and  create good paying jobs  here. We have                                                                    
     to hold them  accountable. The job of  oil companies is                                                                    
     to make more  money; it is the job of  our laws to make                                                                    
     sure that  people of  Alaska get  our fair  share, that                                                                    
     the jobs are  created here and that we  just don't hand                                                                    
     a $2 billion windfall to oil companies.                                                                                    
                                                                                                                                
     2.  Others say  we  can't keep  overtaxing and  driving                                                                    
     away  oil producers.  Alaska has  some  of the  highest                                                                    
     production  costs  and  oil taxes  in  the  world.  Oil                                                                    
     companies  go  where they  can  be  profitable and  are                                                                    
     taking our  good paying  jobs with  them. Over  half of                                                                    
     Alaskan  jobs  are  related  to  oil  production.  This                                                                    
     reform  will create  Alaskan jobs  and put  oil in  the                                                                    
     pipeline by  reducing the tax burden  on production. If                                                                    
     the  oil  companies go  elsewhere,  we'll  have no  oil                                                                    
     revenues to share now or in the future.                                                                                    
                                                                                                                                
He  summarized  that 63  percent  of  those polled  thought  that                                                               
statement 1  was closer to  their view  and only 27  percent said                                                               
statement 2  was closer to their  view. The bottom line  was that                                                               
HB  110  was the  first  offer  from  the  governor and  the  oil                                                               
companies,  and any  professional  negotiator knows  that on  one                                                               
ever takes  the first offer,  ever. The Senate should  not follow                                                               
the House and  pass an oil tax rollback  without determining that                                                               
it will truly  make a difference and lead to  more production. He                                                               
concluded with the slogan: no reduction without more production.                                                                
                                                                                                                                
7:44:38 PM                                                                                                                    
GEOFFREY  HUMPHREYS, representing  himself,  Anchorage, AK,  said                                                               
"As a state we are stuck  with the risks involved in operating in                                                               
Alaska  and we  should bear  them  in direct  first order  linear                                                               
proportion  to the  rewards we  expect."  For the  past year  the                                                               
general trend  in oil consumption  in the U.S. has  been downward                                                               
as  natural gas  production and  gas production  expand.   At the                                                               
same time, oil exports have  been increasing, but the increase in                                                               
exports has not kept pace with the reduction in consumption.                                                                    
                                                                                                                                
7:45:28 PM                                                                                                                    
RADA KHADJINOVA,  representing herself,  Anchorage, AK,  said she                                                               
was  from  Russia   and  attending  UAA  while   working  for  an                                                               
engineering company. She had no  doubt that incentives would make                                                               
Alaska more  competitive in terms  of increasing  new production.                                                               
She said Russia  did it and built a gas  pipeline in her hometown                                                               
of Sakhalin.                                                                                                                    
                                                                                                                                
7:47:02 PM                                                                                                                    
DAVID  FLIPPO, representing  himself, Anchorage,  AK, said  there                                                               
needs  to be  significant legislative  change. He  was a  retired                                                               
military  officer  out  of  Eielson  Air  Force  Base  and  after                                                               
deciding  to stay  here, he  got hired  by BP.  But one  son, who                                                               
graduated magna  cum laude  from UAA,  could not get  a job  as a                                                               
process technology operator and has taken  a job in the Lower 48.                                                               
His  other  son, a  seven-time  state  curling champion  who  has                                                               
represented the  state in U.S.  nationals is  currently attending                                                               
UAA and looking for a job, but  can't find one either. He has had                                                               
interviews in North  Dakota and will probably go  there, too. His                                                               
sons  are gone  and he  is trying  to convince  his wife  to stay                                                               
here, but it won't happen. Things need to be changed.                                                                           
                                                                                                                                
7:48:28 PM                                                                                                                    
EMILY CROSS,  representing herself, Anchorage, AK,  said Alaska's                                                               
tax policy  does have an effect  on the oil and  gas industry and                                                               
Alaska's  just isn't  competitive.  She related  that  she is  an                                                               
Inupiat Eskimo and a Nenana  Regional shareholder. Currently, she                                                               
is the community  relations manager for CH2M HILL  in Alaskan. It                                                               
is employee  owned and one  of the  top private employers  of the                                                               
state with over 2,500 employees. One  of their main focuses is to                                                               
train  Alaskans  from throughout  the  state  in future  resource                                                               
jobs. It takes  many years to train and develop  people for these                                                               
future work opportunities with private  employers like CH2M HILL;                                                               
it can only happen if the opportunities exist.                                                                                  
                                                                                                                                
Local businesses are not the only  ones that benefit from the oil                                                               
and  gas  resources  of  Alaska  she  said.  Major  Alaskan-based                                                               
nonprofits' largest  source of funds comes  from private industry                                                               
like  oil and  gas.  Without future  development, the  charities,                                                               
volunteerism  and  advocacy  will   suffer  greatly  and  thereby                                                               
affecting those Alaskans who need it the most.                                                                                  
                                                                                                                                
7:50:07 PM                                                                                                                    
JANET PLATT,  representing herself,  Anchorage, AK, said  the tax                                                               
regime  has  to  have  meaningful  reform. She  said  she  is  an                                                               
environmental scientist and  has worked for BP for  29 years, but                                                               
that  was not  why she  was  testifying. She  has four  children;                                                               
three in college  as engineering students and they  would like to                                                               
come back to Alaska to work.  She was speaking, because she wants                                                               
them to  have jobs in  the future  and that won't  happen without                                                               
meaningful tax reform.                                                                                                          
                                                                                                                                
She said  Alaska is blessed  with a  large known resource  on the                                                               
North Slope, but the remaining  resource is viscous and heavy oil                                                               
that is incredibly  costly to develop and get out  of the ground.                                                               
Future development has  potential, but it won't  become a reality                                                               
unless it  can be profitable  and compete for capital  with other                                                               
world class  projects. She urged  them to look beyond  high short                                                               
term  revenue  grabs to  a  longer  more sustainable  development                                                               
future that benefits all Alaskans.                                                                                              
                                                                                                                                
7:51:52 PM                                                                                                                    
ANDY ROGERS, representing himself  and his family, Anchorage, AK,                                                               
congratulated the committee for  recognizing the problem with the                                                               
current  tax structure  and proposing  a solution,  but he  was a                                                               
little disappointed in SB 192 as  well as the array of amendments                                                               
that  may  or may  not  be  incorporated.  He watched  them  take                                                               
testimony  from industry  stalwarts  like Pedro  van Meurs,  Dave                                                               
Cruise  and  Doug  Smith,  and  it  gave  him  hope  to  see  the                                                               
legislature  "perk   up"  and  "lean  forward"   and  ask  really                                                               
intelligent  questions, but  he  was baffled  that the  testimony                                                               
that interested  them so much  didn't make  it into the  bill. He                                                               
thanked them for their dedicated service to the state.                                                                          
                                                                                                                                
7:53:46 PM                                                                                                                    
PEGGY SPITTLER,  representing herself, Anchorage, AK,  opposed SB                                                               
192. She  said her husband had  been working in the  industry for                                                               
38 years and helped build TAPS;  they both love Alaska. Right now                                                               
they  just  talk  about  selling their  home,  because  they  are                                                               
concerned  about the  future.  They are  perplexed  that many  of                                                               
their elected  representatives seem to  not listen to  them. They                                                               
want to  spend more, fund more  projects, but where is  the money                                                               
going to  come from?  Little effort is  made to  collaborate with                                                               
the  industry  that pays  our  bills,  underwrites the  arts  and                                                               
supports so  many programs and other  projects throughout Alaska.                                                               
She  said,  "The  industry  is  me; it's  my  husband;  it's  our                                                               
friends.  We're not  big,  bad evil  people;  we're hard  working                                                               
people and  we're your  neighbors." They  both supported  HB 110,                                                               
but she  said "CSSB 192  is a slap in  the face," and  the status                                                               
quo is certain death for Alaska's economy.                                                                                      
                                                                                                                                
7:55:22 PM                                                                                                                    
CRIS  OSOWSKI,  representing  himself, Anchorage,  AK,  supported                                                               
adopting a tax  policy that encourages investment. He  said he is                                                               
an  employee  of  ConocoPhillips  and that  he  appreciated  them                                                               
taking  up  this  issue. Adopting  tax  policies  that  encourage                                                               
development is a  crucial investment to make  in their children's                                                               
future. His  family was here  well before the pipeline  was built                                                               
and he recalled clearly the difference it made in their lives.                                                                  
                                                                                                                                
He said  ACES has proven that  tax incentives do work.  They have                                                               
brought new  companies to  Alaska that  are exploring  all across                                                               
the  North Slope,  but the  progressivity piece  has stymied  his                                                               
company and  the producers. The  producers need to be  allowed to                                                               
participate in  bringing new  production on  line similar  to the                                                               
way  the other  companies  were incentivized.  He  asked them  to                                                               
remember that  the new  companies wouldn't have  a chance  on the                                                               
Slope he first came to or have  even tried to make their way here                                                               
without the infrastructure the producers  have invested in for so                                                               
many  years. He  said he  appreciated  them looking  out for  the                                                               
state's interests on all sides of the equation.                                                                                 
                                                                                                                                
7:58:06 PM                                                                                                                    
TIMOTHY  TREUER, representing  himself, Anchorage,  AK, supported                                                               
SB 192, whereas  he said HB 110  was a giveaway. He said  is he a                                                               
life-long Alaskan and grew up  in Anchorage. This past January he                                                               
was a  delegate for  the Conference of  Young Alaskans  in Juneau                                                               
where 55  people between the ages  of 16 and 25  came together to                                                               
discussion their  vision for the  state. They talked a  lot about                                                               
oil taxation,  but in the end  they voted 96 percent  in favor of                                                               
not changing the  current oil tax structure except  in minor ways                                                               
based on good  research and knowledge. He  supported the Senate's                                                               
approach of  only acting  when the facts  show something  must be                                                               
done.                                                                                                                           
                                                                                                                                
7:59:55 PM                                                                                                                    
BARBARA GAZAWAY,  representing herself,  Anchorage, AK,  said she                                                               
was  against HB  110. She  thanked  the members  of the  majority                                                               
coalition for  waiting to get all  the facts and standing  up for                                                               
Alaskans. She  related an  anecdotal story  about how  she banded                                                               
together with schoolmates  to take back a  school playground from                                                               
bullies.                                                                                                                        
                                                                                                                                
8:02:46 PM                                                                                                                    
GREGORY  KUCERA, representing  himself, Anchorage,  AK, supported                                                               
SB 192 saying HB 110 gives  too much away. Basically, he said the                                                               
idea  behind   SB  192   is  "show   me  first:   production  and                                                               
exploration." He said he was  a member of the Alaskan Ironworkers                                                               
and complimented the Senate on gathering this testimony.                                                                        
                                                                                                                                
GRANT  JOHNSON,  representing  himself and  his  three  children,                                                               
Anchorage, AK, stated SB 192 is  not the solution. Alaska must be                                                               
competitive with  other oil regions  around the world or  the oil                                                               
will  stay  in the  ground.  He  said,  "If our  government  take                                                               
continues to  be so high that  it inhibits us from  providing for                                                               
tomorrow, then ours  will be the first generation  in the history                                                               
of  this state  to leave  our  children and  grandchildren in  an                                                               
Alaska that is worse off than the one that was handed to us."                                                                   
                                                                                                                                
8:06:15 PM                                                                                                                    
DEBORAH  WILLIAMS, representing  herself,  Anchorage, AK,  stated                                                               
that the  lessons the  state learned from  the Amerada  Hess case                                                               
strongly support rejecting HB 110  and support pursuing SB 192. A                                                               
number of  decision makers, including  Senator Gary  Stevens, had                                                               
pointed to the  Amerada Hess litigation, in which  the state sued                                                               
the producers for  underreporting royalty, in the  context of the                                                               
current  oil  and  gas  debates.  As one  of  the  attorneys  who                                                               
represented the  State of  Alaska in that  case, she  agreed that                                                               
this  lengthy  historic  litigation provides  numerous  important                                                               
insights into  the action  and decision  making processes  of the                                                               
oil  and gas  industry and  the needed  actions of  the State  of                                                               
Alaska going forward. The lessons  the state learned from Amerada                                                               
Hess strongly  support rejecting HB  110 and support  pursuing SB                                                               
192.                                                                                                                            
                                                                                                                                
MS.  WILLIAMS explained  that shortly  after production  began in                                                               
1977, the State  of Alaska sued all of the  oil and gas producers                                                               
on  the North  Slope for  significant underreporting  of royalty.                                                               
The case  was exhaustive, expensive  and enlightening  and lasted                                                               
from 1977 to 1992. Ultimately,  understanding the strength of the                                                               
state's case, all of the  oil companies paid the state meaningful                                                               
sums,  hundreds  of  millions  of  dollars,  in  overdue  royalty                                                               
payments.   The    bottom   line   is   that    "under   numerous                                                               
administrations,  both   Republican  and  Democratic,   we  stood                                                               
strong,  prevailed and  benefited  Alaskans by  insisting on  our                                                               
fair share,"  she said. The  state cannot  afford to be  naïve or                                                               
rely  on "trustfulness"  at this  time.  "Above all,  we need  to                                                               
insist   upon  fair   payment  for   our   resources  under   our                                                               
constitution and not play high  risk giveaway games with industry                                                               
and with our future..."                                                                                                         
                                                                                                                                
MS. WILLIAMS  concluded by  saying the only  thing that  has made                                                               
her mad  in the testimony  today is  the suggestion that  they as                                                               
Senators had  done anything other  than protect the  state's best                                                               
interests.  They   have  worked  hard  and   diligently  and  she                                                               
encouraged them to continue.                                                                                                    
                                                                                                                                
8:08:54 PM                                                                                                                    
MATT FENNEL,  representing himself,  Anchorage, AK,  supported SB                                                               
192 and opposed HB 110. He  said we need to continue investing in                                                               
Alaska's future  and that doesn't  mean big tax giveaways  to the                                                               
oil companies.                                                                                                                  
                                                                                                                                
8:09:32 PM                                                                                                                    
BRIAN  HOVE,  representing  himself, Anchorage,  AK,  stated  the                                                               
future of the state is based on  oil and it's not that bright. SB                                                               
192 is  a distraction and  HB 110  should move forward.  He first                                                               
acknowledged  that  he  "has a  sizeable  financial  conflict  of                                                               
interest  here,"  adding  that  since  1982  he  had  received  a                                                               
dividend from  the state and  also doesn't pay state  income tax.                                                               
He  also pointed  out that  in  calendar year  end 2010,  620,000                                                               
barrels a  day were being pumped  through TAPS and now  it's down                                                               
to 583,000 barrels. A year from  now it will be less than 550,000                                                               
barrels. He  said these are  mathematical facts. Another  fact is                                                               
that  public tax  policy does  impact  private sector  investment                                                               
decisions.                                                                                                                      
                                                                                                                                
8:11:22 PM                                                                                                                    
PATRICK FLATLEY,  representing himself,  Anchorage, AK,  said his                                                               
testimony today  would pose questions knowing  that their answers                                                               
will  come at  a later  date. When  referring to  the decline  of                                                               
crude  oil, he  said, everyone  often refers  to the  pipeline as                                                               
being half  or one-third full  and that is misleading.  A 48-inch                                                               
pipe needs to  be full in order  move the oil. It's  the speed at                                                               
which the oil travels that  determines how much crude oil arrives                                                               
in Valdez  each day. He  has been told  the oil has  abrasives in                                                               
it, which raises his questions:                                                                                                 
1. Is  the miles per hour  of oil flow  a factor in seeing  to it                                                               
that the pipeline lasts as long as possible?                                                                                    
2. Have our oil engineers told  us what that optimum speed is and                                                               
is there any  chance to that 600,000 barrels a  day is where they                                                               
want it to be today?                                                                                                            
                                                                                                                                
8:13:22 PM                                                                                                                    
DAVE METHENY,  representing himself,, Anchorage, AK,  stated that                                                               
HB 110  is very bad,  SB 192 is better  and the current  ACES tax                                                               
structure  is  the  best.  He calculated  that  dividing  the  $8                                                               
billion tax  reduction in HB  110 and  by the 2010  Alaska census                                                               
figure results  in $11,268 per  person. He  said each one  of the                                                               
representatives who voted  to pass HB 110 gave  away $200 million                                                               
of  their  constituents' money  and  he  hoped they  asked  those                                                               
people if  it was okay  to do that.  He summarized that  it's our                                                               
oil and it's our money.                                                                                                         
                                                                                                                                
8:14:36 PM                                                                                                                    
DEBORAH BROLLINI, representing  herself, Anchorage, AK, supported                                                               
building upon the  "shelved" legislation in the  Senate Labor and                                                               
Commerce  Committee. She  said Alaska  has  the highest  taxation                                                               
rate of any  oil region in North America and  many of her friends                                                               
are moving equipment and personnel  to other regions. She grew up                                                               
with oil and  lived through Alaska's economic crash  of 1986 when                                                               
she was laid off along with  800 other employees in one day. Home                                                               
foreclosures  happened for  five years.  She said  her circle  of                                                               
friends  who are  running Alaska's  largest companies  are scared                                                               
and they are not interested  in reliving another painful economic                                                               
downturn with their children.                                                                                                   
                                                                                                                                
8:15:48 PM                                                                                                                    
PAUL  HOLLEY,  representing  himself,  Anchorage,  AK,  supported                                                               
Governor Parnell  and providing  incentives for  investment here.                                                               
He said  he worked in the  Alaska oil industry for  over 30 years                                                               
and is  a partner in  a small  business. He complimented  them on                                                               
their  "stewardship" and  all the  work  they had  been doing  on                                                               
solving  this  issue,  but  really the  issue  is  the  declining                                                               
throughput in  TAPS. Without  increased investment,  that decline                                                               
won't stop.  He thought  having the best  tax structure  would be                                                               
the greatest incentive for companies  to come here and invest. If                                                               
that doesn't work, they can go back to ACES.                                                                                    
                                                                                                                                
8:17:39 PM                                                                                                                    
RAY  METCALF, representing  himself, Anchorage,  AK, suggested  a                                                               
President  Reagan slogan  "trust but  verify." He  explained that                                                               
there are 30 billion barrels of  heavy oil on the North Slope; it                                                               
has  the consistency  of  peanut  butter full  of  sand. The  oil                                                               
companies have been  producing the "sweet spot oil"  for 30 years                                                               
without touching the heavy oil,  but the Oil and Gas Conservation                                                               
Commission should have never let  that happen. Heavy oil needs to                                                               
be produced  while there is  still enough  light oil to  flush it                                                               
down the  pipeline he reasoned.  He suggested  offering producers                                                               
$10 per  barrel to start  producing the  heavy oil, but  pay them                                                               
after they have  done it and not before. When  they reach 550,000                                                               
barrels a day more than they  are producing now, that would equal                                                               
Governor Parnell's $2 billion. A guarantee is the way to do it.                                                                 
                                                                                                                                
8:19:22 PM                                                                                                                    
BRENT  SENETTE,  representing   himself,  Anchorage,  AK,  stated                                                               
support  for  meaningful  and   significant  oil  production  tax                                                               
reform. That means  they need to abandon work on  SB 192 and move                                                               
HB  110 forward.  He said  he is  a 25-year  Alaska resident  and                                                               
works for CH2M HILL. Right now,  state and federal taxes create a                                                               
combined oil tax  rate of greater than 80 percent  at today's oil                                                               
and  gas prices.  The  majority  of that  is  state mandated.  He                                                               
asked, "If you wanted to start  a business and 80 percent of what                                                               
you  made was  going to  go to  somebody else,  would that  be an                                                               
incentive to you?"                                                                                                              
                                                                                                                                
8:21:19 PM                                                                                                                    
MAYNARD GATES,  President and CEO,  Alaska Steel,  Anchorage, AK,                                                               
stated support  for HB 110,  not SB 192.  He urged them  to trust                                                               
the  business leaders  when they  say the  current tax  structure                                                               
isn't working.                                                                                                                  
                                                                                                                                
CO-CHAIR  PASKVAN closed  public testimony  saying the  committee                                                               
had  heard from  more than  80  people this  evening. He  thanked                                                               
everyone for taking the time.                                                                                                   

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