Legislature(1997 - 1998)

04/23/1998 03:10 PM House ECD

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
  HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT                              
                   April 23, 1998                                              
                     3:10 p.m.                                                 
                                                                               
                                                                               
MEMBERS PRESENT                                                                
                                                                               
Representative Jerry Sanders, Chairman                                         
Representative Mark Hodgins                                                    
Representative Ivan Ivan                                                       
Representative William K. ("Bill") Williams                                    
Representative Alan Austerman                                                  
Representative J. Allen Kemplen                                                
Representative Ethan Berkowitz                                                 
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
All members present                                                            
                                                                               
OTHER HOUSE MEMBERS PRESENT                                                    
                                                                               
Representative Joe Ryan                                                        
Representative Vic Kohring                                                     
                                                                               
OTHER SENATE MEMBERS PRESENT                                                   
                                                                               
Senator Jerry Ward                                                             
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
PRESENTATION:  FUEL COSTS AND THE EFFECT ON THE ECONOMY                        
                                                                               
HOUSE BILL NO. 469                                                             
"An Act approving the sale of Prudhoe Bay Unit royalty oil by the              
State of Alaska to Mapco Alaska Petroleum, Inc.; and providing for             
an effective date."                                                            
                                                                               
     - HEARD AND HELD                                                          
                                                                               
(* First public hearing)                                                       
                                                                               
PREVIOUS ACTION                                                                
                                                                               
BILL: HB 469                                                                   
SHORT TITLE: APPROVE SALE ROYALTY OIL TO MAPCO                                 
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                   
                                                                               
Jrn-Date    Jrn-Page           Action                                          
 3/13/98      2620     (H)  READ THE FIRST TIME - REFERRAL(S)                  
 3/13/98      2621     (H)  O&G, ECD, FINANCE                                  
 3/13/98      2621     (H)  FISCAL NOTE (DNR)                                  
 3/13/98      2621     (H)  HOUSE AND SENATE JOURNAL SUPPLEMENT                
                            #16 CONTAINS FINDINGS, AGREEMENTS, &               
 3/13/98      2621     (H)  RESOLUTION REGARDING ROYALTY OIL SALE              
 3/13/98      2621     (H)  TO MAPCO                                           
 3/13/98      2621     (H)  GOVERNOR'S TRANSMITTAL LETTER                      
 3/31/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/31/98               (H)  MINUTE(O&G)                                        
 4/07/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 4/07/98               (H)  MINUTE(O&G)                                        
 4/07/98      2905     (H)  O&G RPT  4DP 1NR                                   
 4/07/98      2905     (H)  DP: ROKEBERG, BUNDE, BRICE, HODGINS;               
 4/07/98      2905     (H)  NR: RYAN                                           
 4/07/98      2905     (H)  FISCAL NOTE (DNR) 3/13/98                          
 4/07/98      2905     (H)  REFERRED TO ECD                                    
 4/09/98               (H)  ECD AT  5:00 PM CAPITOL 17                         
 4/09/98               (H)  MINUTE(ECD)                                        
 4/23/98               (H)  ECD AT  3:00 PM CAPITOL 17                         
                                                                               
WITNESS REGISTER                                                               
                                                                               
WILSON CONDON, Commissioner                                                    
Department of Revenue; Member, Royalty                                         
  Oil and Gas Development Advisory Board                                       
P.O. Box 110400                                                                
Juneau, Alaska 99811-0400                                                      
Telephone:  (907) 465-2300                                                     
POSITION STATEMENT:  Participated in presentation on Fuel                      
                     Costs and the Effect on the Economy.                      
                                                                               
CHARLIE COLE, Former Attorney General                                          
406 Cushman, Suite 2                                                           
Fairbanks, Alaska 99701                                                        
Telephone:  (907) 452-1124                                                     
POSITION STATEMENT:  Participated in presentation on Fuel                      
                     Costs and the Effect on the Economy.                      
                                                                               
KEVIN BANKS                                                                    
Division of Oil and Gas                                                        
Department of Natural Resources                                                
3601 "C" Street, Suite 1380                                                    
Anchorage, Alaska 99503                                                        
Telephone:  (907) 269-8781                                                     
POSITION STATEMENT:  Participated in presentation on Fuel                      
                     Costs and the Effect on the Economy.                      
                                                                               
GINNY FAY, Legislative Liaison                                                 
Department of Commerce and Economic Development                                
P.O. Box 110800                                                                
Juneau, Alaska 99811-0800                                                      
Telephone:  (Not provided)                                                     
POSITION STATEMENT:  Participated in presentation on Fuel                      
                     Costs and the Effect on the Economy.                      
                                                                               
KARL HANNEMAN                                                                  
6226 Second Street, Suite 201                                                  
Fairbanks, Alaska 99701                                                        
Telephone:  (907) 452-6700                                                     
POSITION STATEMENT:  Participated in presentation on Fuel                      
                     Costs and the Effect on the Economy.                      
                                                                               
JEFF COOK, Vice President                                                      
External Affairs and Administration                                            
MAPCO Alaska Petroleum Incorporated                                            
1150 H&H Lane                                                                  
North Pole, Alaska 99705                                                       
Telephone:  (907) 488-2741                                                     
POSITION STATEMENT:  Participated in presentation on Fuel Costs                
                     and the Effect on the Economiy and Provided               
                     testimony in support of HB 469.                           
                                                                               
ACTION NARRATIVE                                                               
                                                                               
TAPE 98-4, SIDE A                                                              
Number 0001                                                                    
                                                                               
CHAIRMAN JERRY SANDERS called the House Special Committee on                   
Economic Development meeting to order at 3:10 p.m.  Members present            
at the call to order were Representatives Sander, Austerman, Ivan              
and Williams.  Representatives Kemplen, Berkowitz and Hodgins                  
arrived at 3:20 p.m., 4:20 p.m., and 4:40 p.m., respectively.                  
                                                                               
FUEL COSTS AND THE EFFECT ON THE ECONOMY                                       
                                                                               
SUMMARY OF INFORMATION                                                         
                                                                               
CHAIRMAN SANDERS stated that what he wanted to do at this meeting              
was to invite different parts of the administration and discuss the            
situation of the high price of fuel and what might possibly done               
about it.                                                                      
                                                                               
Number 1297                                                                    
                                                                               
WILSON CONDON, Commissioner, Department of Revenue; Member, Royalty            
Oil and Gas Development Advisory Board, explained that the state               
has a right under its oil and gas leases to take royalty oil and               
gas in value or in kind.  When asked by Chairman Sanders if their              
was anything that could be changed in the statute that would give              
the board or the Department of Natural Resources some authority to             
demand benefits for the citizens of the state of Alaska,                       
Commissioner Condon stated that he would not recommend it because              
it would be an administrative nightmare and it would be getting                
into the price controlling business.                                           
                                                                               
CHAIRMAN SANDERS also asked if Commissioner Condon could see any               
problem with the state taking a set amount of fuel and having it               
processed by MAPCO at cost plus a small margin, then the state                 
could distribute it to Western Alaska among the school districts.              
This would allow the schools more money for their budget.                      
                                                                               
COMMISSIONER CONDON responded that conceptually he did not have a              
problem with that but was skeptical about the capability of                    
government department's ability to do that efficiently and                     
effectively.                                                                   
                                                                               
TAPE 98-4, SIDE B                                                              
Number 0048                                                                    
                                                                               
FORMER ATTORNEY GENERAL CHARLIE COLE stated that something is wrong            
when MAPCO and other producers and distributors can sell gasoline              
for a $1.00 a gallon down in Seattle and Alaskans are paying $1.22             
in Fairbanks.  He further stated that people in Fairbanks were                 
outraged at these high prices.                                                 
                                                                               
Number 0542                                                                    
                                                                               
KEVIN BANKS, Division of Oil and Gas, Department of Natural                    
Resources, stated that Commissioner Shively extends his regrets for            
not being able to attend.  Mr. Banks remarked that good government             
has only a limited role in the market place and should be cautious             
about expanding that role.  He said trying to control prices                   
creates other kinds of market.                                                 
                                                                               
REPRESENTATIVE IVAN IVAN asked Mr. Banks if he was telling the                 
legislature to stay out of this business.  He stated he certainly              
could understand that it is a very complicated issue.                          
                                                                               
MR. BANKS responded that, that's not what he is saying.                        
                                                                               
REPRESENTATIVE ALAN AUSTERMAN asked if Mr. Banks was involved in               
the writing of the contract.                                                   
                                                                               
MR. BANKS answered that yes, that he had negotiated with MAPCO.                
                                                                               
REPRESENTATIVE AUSTERMAN asked Mr. Banks about how the 15 cents per            
barrel was arrived at.                                                         
                                                                               
MR. BANKS responded that there were two things in mind when the                
Department of Natural Resources entered into this agreement and                
established the price.  The first is the fact that the department              
is compelled to choose a price, which is higher than Royalty is and            
in value.  The contract is negotiated it is not awarded.  He stated            
that part of the reason that it's 15 cents per barrel is because in            
the negotiations MAPCO didn't offer to pay more.                               
                                                                               
CHAIRMAN SANDERS asked Mr. Banks if he knew of anything in the                 
Alaska Statutes that could be changed or what could be done to help            
negotiate a better contract for the citizens of the state.                     
                                                                               
MR. BANKS responded that more work would have to be done and did               
not have an answer to that yet.                                                
                                                                               
TAPE 98-5, SIDE A                                                              
Number 0954                                                                    
                                                                               
GINNY FAY, Legislative Liaison, Department of Commerce and Economic            
Development, stated that Commissioner Sedwick sends her regrets for            
not being able to attend.  When asked about high fuel prices in                
Western Alaska she responded that prices in Western Alaska are                 
higher because they have only one supplier (No competition).  She              
stated that having MAPCO and TESORO as refiners in Alaska provides             
a considerable amount of economic benefits to people in Alaska.                
                                                                               
Number 1333                                                                    
                                                                               
CARL HANNEMAN, resident of Fairbanks Alaska, summarized a letter               
that he had written to Chairman Sanders.  He spoke about jet fuel              
and MAPCO'S expansion to increase jet fuel production.  He                     
suggested the Department of Revenue add comparative jet fuel and               
gasoline wholesale prices to a web site that already tracks fuel               
prices.                                                                        
                                                                               
Number 1886                                                                    
                                                                               
JEFF COOK, Vice President, External Affairs, MAPCO Alaska                      
Petroleum, stated that he was here today in support of HB 469 and              
asked that it be passed out of committee so that it may go on to               
the Senate.  He further stated that this bill is about confirming              
the message that Alaska is open for business and Economic                      
Development.                                                                   
                                                                               
REPRESENTATIVE AUSTERMAN stated that the cost of fuel in the state             
of Alaska is not directly related to the renewal of this contract              
(HB 469).  If the state wants to solve some of these problems                  
dealing with the price of gasoline we should do it through a tax               
system.  He further stated that this contract is important enough              
to the state of Alaska so he wants to make sure that it gets passed            
this year and that it is time to get it through the system.                    
                                                                               
COMMITTEE ACTION                                                               
                                                                               
The committee took no action.                                                  
                                                                               
NOTE:                                                                          
                                                                               
The meeting was recorded and handwritten log notes were taken.  A              
copy of the tapes and log notes my be obtained by contacting the               
House Records Office at 130 Seward Street, Suite 211, Juneau Alaska            
99801-1182, (907) 465-2214, and after adjournment of the second                
session of the Twentieth Alaska State Legislature, in the                      
Legislative Reference Library.                                                 
                                                                               
HB 469 - APPROVE SALE ROYALTY OIL TO MAPCO                                     
                                                                               
TAPE 98-5, SIDE A                                                              
Number 1849                                                                    
                                                                               
CHAIRMAN SANDERS announced the next order of business was HB 469,              
"An Act approving the sale of Prudhoe Bay Unit royalty oil by the              
State of Alaska to Mapco Alaska Petroleum, Inc.; and providing for             
an effective date."                                                            
                                                                               
CHAIRMAN SANDERS noted it is not his intent to move the bill out of            
the committee today, but he also realizes that holding the bill                
will not solve the problem.                                                    
                                                                               
CHAIRMAN SANDERS called on Jeff Cook from MAPCO Alaska Petroleum               
Incorporated (MAPCO).                                                          
                                                                               
Number 1886                                                                    
                                                                               
JEFF COOK, Vice President, External Affairs and Administration,                
MAPCO Alaska Petroleum Incorporated, testified in Juneau.  He is               
hear to support HB 469 and to ask that it be passed out of the                 
committee today.  There are a number of other committee referrals              
in the House and it still needs to go on to the Senate.  It is very            
appropriate to talk about the bill in the House Special Committee              
on Economic Development because it is a bill about economic                    
development and jobs for the city of North Pole, the Fairbanks                 
North Star Borough, the Municipality of Anchorage, and the state of            
Alaska.  It is about confirming the message that Alaska is open for            
business and economic development.  It is about encouraging                    
existing businesses in Alaska to expand.  He cited two companies in            
Fairbanks expanding because of the expansion of the MAPCO refinery             
in North Pole.  The bill is about encouraging one of the few value-            
added industries in Alaska to expand and export products to                    
international air carriers and to bring money back to Alaska.  The             
expansion will add 14 thousand barrels a day of jet fuel production            
and 3 thousand barrels a day of diesel fuel.  The 14 thousand                  
barrels a day of jet fuel will off set what is now being imported              
from outside.  The bill is about supporting a business that spent              
$90 million more with all vendors in 1998 than what it took in                 
through gross sales due to capital and construction projects.  The             
bill is about supporting a $70-million refinery for crude now under            
construction.  The bill is about adding 19 new permanent MAPCO                 
employees in Anchorage and Fairbanks, and another 300 employees in             
MAPCO express stores.  It is about supporting 375 construction                 
workers at its peak this summer.  Right now, there are over 100                
workers on site.  It is about supporting a business that spent $465            
million last year with 729 Alaskan vendors, educational                        
institutions, and charitable organizations.  It is about expanding             
the $8,351,962 spent with Golden Valley Electric by another $2                 
million per year to help stabilize electrical rates for commercial             
and residential consumers in the Interior and Fairbanks.  There                
will be about another 25 railroad cars per day going south from                
North Pole to Anchorage on the railroad increasing the Alaska                  
Railroad Corporation's revenue by over $10 million a year, adding              
20 new employees and new locomotives.  It will also increase                   
property taxes to the Fairbanks North Star Borough and city of                 
North Pole.  But all of these benefits can only happen if MAPCO has            
the additional crude oil allowing it to complete and operate its               
expansion.                                                                     
                                                                               
MR. COOK further stated the city of North Pole, the Fairbanks North            
Star Borough, and the Fairbanks Chamber of Commerce have all passed            
resolutions endorsing HB 469.  He as attended all of the public                
meetings and not one person has testified against the bill.  This              
bill is also about a commitment made a year ago between MAPCO and              
the legislature.  As the jet fuel tax was passed last year, MAPCO              
promised it would expand its refinery and bring economic benefits              
to Alaska.  MAPCO is moving ahead with that promise and now needs              
the royalty oil contract to complete the commitment.  He urged the             
committee members to send a strong message about economic                      
development in Alaska by passing HB 469 out of the committee today.            
                                                                               
CHAIRMAN SANDERS called for an at ease.                                        
                                                                               
CHAIRMAN SANDER called the meeting back to order.                              
                                                                               
Number 2120                                                                    
                                                                               
REPRESENTATIVE ALAN AUSTERMAN stated that he doesn't see the cost              
of fuel directly related to the contract.  He wondered whether a               
tax system could solve some of the problems with the price of gas-             
o-line in Fairbanks, Anchorage, and around the state.  It seems                
that the contract is important enough to the state to get it passed            
this year.                                                                     
                                                                               
Number 2149                                                                    
                                                                               
CHAIRMAN SANDERS stated he thinks that the bill will pass out of               
the committee the first part of next week.  There is plenty of time            
because soon there will be the one-day notice for scheduling                   
committee meetings.  He suggested to Representative Austerman that             
he talk to the other body to get it to move its version forward in             
order that the two versions can come together quicker.                         
                                                                               
REPRESENTATIVE AUSTERMAN asked Chairman Sanders whether he has                 
scheduled the bill for next week yet.                                          
                                                                               
CHAIRMAN SANDERS replied he has scheduled it for Thursday.                     
                                                                               
REPRESENTATIVE AUSTERMAN responded that is one week from today.                
                                                                               
REPRESENTATIVE IVAN M. IVAN stated he is also concerned about the              
bill's scheduling, especially in regards to a conference committee.            
                                                                               
REPRESENTATIVE AUSTERMAN stated a conference committee could be a              
good week away too because of the work being done in the Senate.               
                                                                               
CHAIRMAN SANDERS stated he will talk to the House Finance Committee            
for scheduling as well.                                                        
                                                                               
REPRESENTATIVE MARK HODGINS asked Chairman Sanders whether the                 
earliest the bill could be moved out of the committee is one week              
from today.                                                                    
                                                                               
CHAIRMAN SANDERS replied, "Yes."                                               
                                                                               
REPRESENTATIVE AUSTERMAN stated it is further than that because of             
the deadline for scheduling committee hearings.                                
                                                                               
CHAIRMAN SANDERS stated there could be a meeting on Tuesday.                   
                                                                               
REPRESENTATIVE AUSTERMAN noted it is already passed the scheduling             
deadline.                                                                      
                                                                               
CHAIRMAN SANDERS asked his staff to see what could be done about               
the scheduling.  He reiterated it is not his intention to move the             
bill out of the committee today.                                               
                                                                               
ADJOURNMENT                                                                    
                                                                               
Number 2247                                                                    
                                                                               
CHAIRMAN SANDERS adjourned the House Special Committee on Economic             
Development at 5:20 p.m.                                                       

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