Legislature(2007 - 2008)HOUSE FINANCE 519

10/26/2007 02:00 PM House ECONOMIC DEV., TRADE, AND TOURISM


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02:06:00 PM Start
02:06:36 PM Alaska's Economy - Past, Present & Future
04:45:23 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Location Change --
+ Alaska's Economy - Past, Present & Future TELECONFERENCED
Presentations by:
2:00 - Neil Fried, Admin., Dept of Labor;
2:30 - Mike Black, Dep. Com. of Commerce;
3:00 - Sean Paul, 2008 Pres. Alaska
Assoc. of Realtors;
3:20 - Jim Jackson (on line), Pres. State
Home Builders Assoc.;
3:40 - Lance Miller, Juneau Economic
Development;
4:00 - Harry McDonald, Transportation -
Trucking;
4:20 - Bill Popp, Anchorage Economic
Development Corp.;
4:40 - Wayne Stevens, Pres. Alaska State
Chamber of Commerce
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT, INTERNATIONAL                                                                
                      TRADE AND TOURISM                                                                                       
                       October 26, 2007                                                                                         
                           2:06 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mark Neuman, Chair                                                                                               
Representative Carl Gatto                                                                                                       
Representative Wes Keller                                                                                                       
Representative Andrea Doll                                                                                                      
Representative Mike Doogan                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Kyle Johansen                                                                                                    
Representative Bob Lynn                                                                                                         
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Bob Buch                                                                                                         
Representative Anna Fairclough                                                                                                  
Representative Peggy Wilson                                                                                                     
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
ALASKA'S ECONOMY - PAST, PRESENT & FUTURE                                                                                       
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
See HEDT minutes dated 10/25/07                                                                                                 
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
NEAL FRIED, Economist                                                                                                           
Research and Analysis                                                                                                           
Department of Labor & Workforce Development                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented a report titled "Alaska's Economy                                                              
2007."                                                                                                                        
                                                                                                                              
MICHAEL BLACK, Deputy Commissioner                                                                                              
Office of the Commissioner                                                                                                      
Department of Commerce & Community Development                                                                                  
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Presented a report  titled "Alaska Economic                                                             
Performance Report 2006."                                                                                                       
                                                                                                                                
HARRY MCDONALD, President                                                                                                       
Carlile Transportation Systems                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Presented  information on the transportation                                                             
industry in Alaska.                                                                                                             
                                                                                                                                
BILL POPP, President; Chief Executive Officer                                                                                   
Anchorage Economic Development Corporation                                                                                      
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Presented   a  report  titled  "Anchorage                                                             
Economic Update."                                                                                                               
                                                                                                                                
JIM JACKSON, President                                                                                                          
Alaska Home Builders Association                                                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented information on  the home building                                                             
industry in Alaska.                                                                                                             
                                                                                                                                
WAYNE STEVENS, President; Chief Executive Officer                                                                               
Alaska State Chamber of Commerce                                                                                                
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:      Presented  information   on   economic                                                             
development.                                                                                                                    
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR MARK NEUMAN called the  House Special Committee on Economic                                                             
Development, International Trade and  Tourism meeting to order at                                                               
2:06:00  PM.   Representatives Neuman,  Gatto, Doll,  Doogan, and                                                             
Keller were  present at  the call  to order.   Also  present were                                                               
Representatives Buch, Fairclough, and Wilson.                                                                                   
                                                                                                                                
^ALASKA'S ECONOMY - PAST, PRESENT & FUTURE                                                                                    
                                                                                                                                
CHAIR   NEUMAN  announced   that  Neal   Fried  would   give  his                                                               
presentation to the committee.                                                                                                  
                                                                                                                                
2:06:36 PM                                                                                                                    
                                                                                                                                
NEAL  FRIED, Economist,  Research  and  Analysis Section,  Alaska                                                               
Department of  Labor & Workforce Development,  introduced himself                                                               
and told members  he would move quickly  through his presentation                                                               
and would answer questions afterward.  He began:                                                                                
                                                                                                                                
     ...  I have  I guess  you'd say  the history  of Alaska                                                                    
     since  Statehood and  that's  what sort  of this  first                                                                    
     slide - I could actually  spend the whole 20 minutes on                                                                    
     this slide very, very easily  because it is sort of our                                                                    
     economic history since  Statehood but I won't.   I just                                                                    
     want to point  out a few things on  this one particular                                                                    
     slide.   One  is employment  has grown  a lot  over the                                                                    
     long  run, generally  speaking,  much  faster than  the                                                                    
     rest  of the  nation and  much faster  than most  other                                                                    
     states.   And that's over the  long run.  We'll  talk a                                                                    
     little bit about more recent years.                                                                                        
                                                                                                                                
     We are very often referred  to as the boom-bust economy                                                                    
     and we really  only have had two  booms since Statehood                                                                    
     and one bust  and, in fact, that bust  up there, that's                                                                    
     in the  wrong spot.   The bust  should be where  the 20                                                                    
     years  of  growth begins,  right  in  that little  spot                                                                    
     there.   And  then, the  other thing  I just  wanted to                                                                    
     point out  is the  fact that we  have been  growing now                                                                    
                                               th                                                                               
     for 20  years.  We're finishing  up our 20   year right                                                                    
     now, which is  a pretty amazing run.   It's the longest                                                                    
     run we've ever  had.  It's one of the  longest runs any                                                                    
     other state  in this country  has had in  recent years.                                                                    
     So, in  that sense, it's  been a very  interesting time                                                                    
     and also  in some sense  sort of  a boring time  in our                                                                    
     economy  but we'll  look at  some of  the details  that                                                                    
     might make it a little more interesting.                                                                                   
                                                                                                                                
2:08:36 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued:                                                                                                            
                                                                                                                                
     This here  - and you  know the  only reason I  put this                                                                    
     slide on here  is because it's sort of  the opposite of                                                                    
     the other one.   If you look back and  forth on it, and                                                                    
     you  know if  you had  an  economist run  a model,  you                                                                    
     could almost probably correlate  the decline in oil and                                                                    
     economic  growth because  actually our  economy started                                                                    
     to grow  again the  year that  oil...production started                                                                    
     to decline.  I think it  was a pure coincidence and you                                                                    
     really could run statistical models  and prove that the                                                                    
     two  are related,  although I  don't think  there's any                                                                    
     relationship - well there is  a relationship but that's                                                                    
     not the relationship that exists.                                                                                          
                                                                                                                                
     What is amazing to me is  that our economy has grown as                                                                    
     much  as it  has  in  spite of  the  fact  that we  are                                                                    
     producing that  much less oil  than we were  during our                                                                    
     last bust.                                                                                                                 
                                                                                                                                
     This  here is  the other  sort of,  I think,  the other                                                                    
     important slide that I'm going  to share with you today                                                                    
     because  this  is the  slide  that  sort of  ultimately                                                                    
     determines the  standard of living that  our workforce,                                                                    
     our  population in  this state,  has or  enjoys because                                                                    
     most  income, probably  over 80  to 85  percent of  our                                                                    
     income,  comes from  jobs, the  earnings from  people's                                                                    
     jobs.   And  this  represents the  kinds  of jobs  that                                                                    
     exist in  Alaska's economy  today.   Let me  just point                                                                    
     out a  few that  aren't obvious  because some  of these                                                                    
     are sort  of confusing.   That trade up there,  that 12                                                                    
     percent,   represents   mostly    retail   trade,   not                                                                    
     construction  or  the  trades,  and  a  little  bit  of                                                                    
     wholesale is thrown in there.   Oil, I know some people                                                                    
     are wondering where  the heck is oil and  that is under                                                                    
     natural  resources.   Most of  that is  oil -  a little                                                                    
     timber, a little  mining in there.  Let me  just see if                                                                    
     any of  the other ones  need any explanation.   Leisure                                                                    
     and hospitality  is your  bars, your  restaurants, your                                                                    
     hotels,  sort of  a tourism  indicator.   Government is                                                                    
     federal, state,  local and includes the  University and                                                                    
     the school  districts.  Education  health is  the other                                                                    
     one  that  can  be  misleading.   That  is  almost  all                                                                    
     healthcare and social  services.  A little  bit of that                                                                    
     is  private education,  private  college and  secondary                                                                    
     and elementary education but most  of it is health care                                                                    
     and  social  services, probably  85  to  90 percent  of                                                                    
     that.                                                                                                                      
                                                                                                                                
     I  think most  of  the other  ones  are fairly  obvious                                                                    
     except for the  military.  What I mean by  that are the                                                                    
     folks that are in  uniform, the uniform military, which                                                                    
     is becoming a - we'll look  at that a little more as we                                                                    
     move along.                                                                                                                
                                                                                                                                
2:11:20 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN asked, "Mr. Fried ... look at education and health                                                                 
because you said a lot of that is social services and government                                                                
.... How much of those numbers could be added together?"                                                                        
                                                                                                                                
MR. FRIED  explained that number  pertains to  private education.                                                               
Public  education is  counted under  government,  both local  and                                                               
University  education.    School   districts  are  typically  the                                                               
largest  employer in  most  communities in  Alaska.   He  stated,                                                               
"This pie here,  this distribution of jobs, changes  a little bit                                                               
each year but over the long  run has seen some pretty significant                                                               
changes and we'll look at that a little bit."                                                                                   
                                                                                                                                
2:12:27 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued his presentation:                                                                                           
                                                                                                                                
     This here  is sort  of the,  in some  ways to  me, it's                                                                    
     almost -  I guess it's kind  of a miracle.   Every year                                                                    
     we've seen a net increase in  the number of new jobs in                                                                    
     Alaska's economy.  All this  is saying ... is that when                                                                    
     2007  is over,  there will  be 3,900  jobs in  Alaska's                                                                    
     labor force that did not  exist the year before.  These                                                                    
     are all  just the net  increase of  each year.   If you                                                                    
     added  them all  up,  that's the  cumulative number  of                                                                    
     jobs we  would have  experienced during that  period of                                                                    
     time.   This has been  happening since 1988.   It comes                                                                    
     obviously from  a mixture.   Some years  it may  be oil                                                                    
     that's driving it.   Some years it may  be health care.                                                                    
     Usually  it's   a  mixture  of   a  lot   of  different                                                                    
     industries.     The   complexion  changes   each  year,                                                                    
     sometimes a  little bit, sometimes  quite dramatically.                                                                    
     We'll talk about that as well.                                                                                             
                                                                                                                                
2:13:23 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN  noted  he  would   like  to  provide  members  the                                                               
opportunity to  ask questions  as Mr.  Fried continues  but asked                                                               
members to keep their questions short.                                                                                          
                                                                                                                                
2:13:37 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO asked if the  new jobs are low paying retail                                                               
jobs versus engineering jobs.                                                                                                   
                                                                                                                                
MR. FRIED  replied that job growth  is from a mixture  of sources                                                               
but during  the last four  years, very few  new jobs were  in the                                                               
retail industry.  Retail was largely  flat.  In 1996, the slowest                                                               
year on a percent growth basis, ARCO  and BP laid a lot of people                                                               
off, however a lot of large  stores opened in that year, creating                                                               
a net increase in jobs.                                                                                                         
                                                                                                                                
2:14:51 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued:                                                                                                            
                                                                                                                                
     This here  - the only  point I'd  like to make  on this                                                                    
     slide  ...  well  you  can  make  two  points,  one  is                                                                    
     historically  we have  grown much  faster than  we have                                                                    
     during the last 15 years  or basically since 1988.  You                                                                    
     can see  the 1970s, and  this is  true of the  1960s as                                                                    
     well, we were  growing at 5, 6 percent per  year.  That                                                                    
     was very impressive growth, about  twice as fast as the                                                                    
     rest of  the country.   Even in  the 1980s when  we had                                                                    
     our biggest  busts, our only  bust since  Statehood, we                                                                    
     still managed to grow significantly  faster than we are                                                                    
     today  and about  twice  as  fast as  the  rest of  the                                                                    
     nation.   In the '90s  we grew  about the same  rate as                                                                    
     the  rest of  the  nation and  in the  last  7 years  -                                                                    
     that's kind  of an  unfair comparison because  the U.S.                                                                    
     had a  recession in  there.  Right  now the  U.S. labor                                                                    
     market  and our  labor market  are probably  growing at                                                                    
     about the same rate, but  they had a recession in there                                                                    
     and we did not.                                                                                                            
                                                                                                                                
     This here is just another  one of those nice historical                                                                    
     graphs that ...  is one of those pictures  that I think                                                                    
     really is worth  a million words.  It  just talks about                                                                    
     our population.  The red  is natural increase, in other                                                                    
     words births minus deaths, and  we have lots of that up                                                                    
     here.   Then  the blue  is  migration -  the number  of                                                                    
     people moving  in minus the  number of  people leaving.                                                                    
     You  can  see during  some  of  the very  big  economic                                                                    
     events  in  this  state  we had  some  of  the  largest                                                                    
     increases in  our population  in history.  For example,                                                                    
     during the  1980s, during that boom,  where the largest                                                                    
     number  of, absolute  number of  people moving  through                                                                    
     the state  and, of course,  shortly after that,  we had                                                                    
     the largest decline in our  population, although I have                                                                    
     to  say that  after that  bust, our  economy was  still                                                                    
     significantly larger  than it was previous  to the bust                                                                    
     so  although we  lost  30 or  40,000  jobs during  that                                                                    
     period of time, we still had  a net increase in jobs at                                                                    
     the end of that than we did prior to the boom.                                                                             
                                                                                                                                
     ...  We look  at our  labor  market today,  we look  at                                                                    
     growth  in our  economy, we  look at  employment growth                                                                    
     [which]  has been  very moderate.   Well,  you can  see                                                                    
     that  by looking  at this,  changes  in our  population                                                                    
     have  also been  very moderate,  sort of  characterized                                                                    
     our economy during the last 15 years or so.                                                                                
                                                                                                                                
2:17:31 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued:                                                                                                            
                                                                                                                                
     This  here just  gets to  ... that  idea I  was talking                                                                    
     about  yesterday  about  how  that  pie  is  constantly                                                                    
     changing and  over the long run  changes significantly.                                                                    
     If I  had been  a prodigy  in talking  to this  body in                                                                    
     1970, and I definitely was  not a prodigy, but ... more                                                                    
     than  half of  our labor  force in  1960, and  that was                                                                    
     true in  1970 as  well in the  public sector  when half                                                                    
     the  public  jobs -  and  this  includes the  uniformed                                                                    
     military  where  you  can  see   how  that  has  slowly                                                                    
     declined  over time  and it's  not  because our  public                                                                    
     sector  has  necessarily  gotten  smaller  in  absolute                                                                    
     terms.  It's  just the rest of the economy  has grown a                                                                    
     lot faster.   Parts of our public  sector have actually                                                                    
     gotten smaller in  absolute terms.  One of  them is the                                                                    
     federal  government  in  the last  10  years  but  that                                                                    
     doesn't  mean  the  federal influence  has  gotten  any                                                                    
     smaller because  we know that's  grown but  the federal                                                                    
     workforce has gotten smaller.                                                                                              
                                                                                                                                
2:18:39 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued:                                                                                                            
                                                                                                                                
     Moving on  here, I heard Mr.  Bradner talking yesterday                                                                    
     about how  crowded the  North Slope  was.   Our numbers                                                                    
     certainly  bear  that  out and  actually  we've  shared                                                                    
     these  numbers with  Tim.   You can  see in  fact, with                                                                    
     Prudhoe Bay, and I'm just  going to find some slides of                                                                    
     where some industries are going  right now, Prudhoe Bay                                                                    
     is  the most  crowded that  we've seen  it since  we've                                                                    
     been  keeping numbers  as far  as number  of jobs  that                                                                    
     exist right now in Prudhoe Bay,  a very busy place.  It                                                                    
     started to climb in 2005  and just kept on climbing the                                                                    
     last  two years.    We believe  that  that number  will                                                                    
     probably  level off  and stay  there for  at least  the                                                                    
     next year.                                                                                                                 
                                                                                                                                
     This year is  sort of a relatively  new development and                                                                    
     I  think it's  sort of  a  nice lesson  that there  are                                                                    
     certain  industries in  our economy  that wax  and wane                                                                    
     over time.  This was an  industry that by the mid 1990s                                                                    
     we figured  we had  seen its  biggest influence  pass -                                                                    
     that  the military  would  permanently  have a  smaller                                                                    
     influence on  Alaska's economy.  Little  did we realize                                                                    
     that  two  or three  years  later,  the military  would                                                                    
     start growing  and its influence  in our  economy would                                                                    
     start growing.   Those numbers have  been growing quite                                                                    
     dramatically over the last three  or four years.  A lot                                                                    
     of people  look at  our military  numbers and  they see                                                                    
     low  wage jobs  and I  think  that's the  wrong way  of                                                                    
     looking  at it  nowadays.   Some of  you that  may have                                                                    
     served  in  the  military  20 or  30  years  ago,  they                                                                    
     probably were  low wage jobs.   That's changed  and the                                                                    
     pay in the military can  be very, very significant.  So                                                                    
     those  jobs can  have  a significant  influence on  our                                                                    
     economy.  These, again, are  just those that are in the                                                                    
     uniforms,  not the  civilians or  contractors that  are                                                                    
     also working for the military.                                                                                             
                                                                                                                                
     This here is  construction.  The real story  here is we                                                                    
     saw  steady  growth for  the  last  15 years  but  that                                                                    
     growth  appears  to  have  peaked  in  2005,  fell  off                                                                    
     slightly in  2006, appears to  continue to slow  off in                                                                    
     2007 and probably will continue  to slow down next year                                                                    
     as well.   I know in many of our  communities it's hard                                                                    
     to believe.   We see all of those cranes  out there but                                                                    
     there's a  lot of residential construction  and in some                                                                    
     other  parts  of  the state,  construction  has  slowed                                                                    
     down.   We don't expect  a dramatic change in  the next                                                                    
     year but  this is  no longer a  source of  growth, just                                                                    
     like federal dollars  are no longer a  source of growth                                                                    
     in   our  economy.     So   those  are   two  important                                                                    
     ingredients  that  have  helped  our  economy  grow  in                                                                    
     recent years that are not there today.                                                                                     
                                                                                                                                
2:21:41 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued:                                                                                                            
                                                                                                                                
     This  is just  that federal  dollar.   I know  you were                                                                    
     talking  a   lot  about   this  yesterday   when  Scott                                                                    
     presented  so I  don't  want to  spend  much time  with                                                                    
     this.  The weird thing is  that the most recent data we                                                                    
     have is  really for  2005.  They  don't even  have 2006                                                                    
     data  available.   We certainly  don't know  about 2007                                                                    
     but we do  know earmarks fell off  dramatically in 2007                                                                    
     and, because  of that, we  assume that  federal dollars                                                                    
     probably began  to at least  flatten out or  maybe even                                                                    
     decline slightly  in 2007 after  this nice long  run of                                                                    
     almost doubling in eight years  - well it did double in                                                                    
     eight  years and  that's  a lot  faster  than what  was                                                                    
     experienced in  the rest of  the country.  I  think the                                                                    
     rest  of  the country  saw  an  increase  of 55  to  60                                                                    
     percent and ours doubled.                                                                                                  
                                                                                                                                
     This here,  the only point  I'd like to make  with this                                                                    
     slide is yes, we've grown  for 20 years, the state has,                                                                    
     but not all parts of the  state have grown for 20 years                                                                    
     and not all  parts of the state have grown  at the same                                                                    
     rate.     There   have   been  different   experiences.                                                                    
     Southeast, for  example, if you  took Juneau  out would                                                                    
     probably be  negative.  The  Gulf Coast, which  is your                                                                    
     Valdez,  Cordova,  Kenai,   Cordova  region,  including                                                                    
     Kodiak,  has  grown very  little.    I mean  5  percent                                                                    
     growth  is  not  very  much   for  a  six-year  period.                                                                    
     Southwest  is  really  - some  rebound  in  the  salmon                                                                    
     industry and a  little bit of other  growth.  Northern,                                                                    
     which is  the Nome region  and the North  Slope Borough                                                                    
     and  the  Northwest  Arctic Borough,  almost  all  that                                                                    
     growth there  is Prudhoe  Bay.  If  I took  that growth                                                                    
     out, if I took Prudhoe out  of the northern part of the                                                                    
     state,   that  growth   would  be   significantly  more                                                                    
     moderate   but,  for   example,  for   some  of   those                                                                    
     communities like  Kotzebue or  Barrow, in fact  in some                                                                    
     of those places employment  may have actually declined.                                                                    
     So that's  really being affected  very much  by Prudhoe                                                                    
     Bay.                                                                                                                       
                                                                                                                                
2:23:41 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued:                                                                                                            
                                                                                                                                
     This here  is just  population and this  may even  be a                                                                    
     better  indicator  of  what  parts  of  the  state  are                                                                    
     growing  and what  aren't.   We  all know  Mat-Su is  a                                                                    
     stand-out  as far  as  growth.   It's  really the  only                                                                    
     place  in the  state  you can  describe  that has  been                                                                    
     booming in  recent years.  Southeast  has actually lost                                                                    
     population,  so has  the northern  part  of the  state.                                                                    
     Other parts have  grown very slowly.  I  mean 1 percent                                                                    
     growth over  a six-year period for  population is very,                                                                    
     very small and very moderate.                                                                                              
                                                                                                                                
     Now I'm  just going to  a different part of  the story,                                                                    
     the wage  story in this state.   The only point  I want                                                                    
     to make  here is  in 1994,  average earnings  in Alaska                                                                    
     were 22 percent above the  national average and now are                                                                    
     basically average for the rest  of the nation.  This is                                                                    
     probably  the reason,  this helps  explain it,  is that                                                                    
     pie  that we  looked at  earlier has  changed a  little                                                                    
     bit, it hasn't just changed  a little bit, it's changed                                                                    
     significantly  over  time.   We've  probably  had  more                                                                    
     growth  in  those industries  where  wages  tend to  be                                                                    
     lower or  below that red  line and less growth  in some                                                                    
     of the  other industries,  probably more on  the bottom                                                                    
     and  less in  the others.   That  affects that  overall                                                                    
     statewide average.  That average  has been going up but                                                                    
     it hasn't been  going up as rapidly as  it's been going                                                                    
     up elsewhere in the country.                                                                                               
                                                                                                                                
2:25:07 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN referred to the previous slide that said Alaska's                                                                  
wage advantage has disappeared and noted Alaska's cost of living                                                                
is higher.  He asked about that comparison.                                                                                     
                                                                                                                                
2:25:39 PM                                                                                                                    
                                                                                                                                
MR. FRIED replied:                                                                                                              
                                                                                                                                
     That's a good question.  If  we just looked at this the                                                                    
     story is  even less pretty  than this because  I would,                                                                    
     again,  what's  an  average  for  Alaska,  I  mean  the                                                                    
     difference  in the  cost of  living between  Alaska and                                                                    
     the rest of the country  definitely has narrowed but it                                                                    
     is  still there.   Urban  Alaska is  probably 10  or 15                                                                    
     percent; obviously in rural Alaska  it's much more than                                                                    
     that.   So, yea,  you can draw  an inference  from this                                                                    
     that, from  a wage  standpoint, we've  certainly become                                                                    
     less attractive relative to the rest of the country.                                                                       
                                                                                                                                
2:26:15 PM                                                                                                                    
                                                                                                                                
MR. FRIED said the biggest reason people move is for economic                                                                   
opportunities so Alaska is not as attractive as it used to be.                                                                  
                                                                                                                                
2:26:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO asked if the university and public school                                                                  
system fall under the government category on that slide.                                                                        
                                                                                                                                
MR. FRIED replied yes.                                                                                                          
                                                                                                                                
REPRESENTATIVE  GATTO  opined  that   those  entities  should  be                                                               
distinguished in that category  because school district employees                                                               
always speak of the need for a raise.                                                                                           
                                                                                                                                
2:27:13 PM                                                                                                                    
                                                                                                                                
MR.  FRIED  pointed  out  those  numbers  reflect  total  payroll                                                               
divided by  the total  number of  jobs.   He said  it is  a blunt                                                               
instrument but it does tell a story.                                                                                            
                                                                                                                                
2:27:27 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued his presentation:                                                                                           
                                                                                                                                
     This just  sort of  tells you that  wages, and  you can                                                                    
     see  this  is  why   that  pie  changed  significantly.                                                                    
     Between 1990 and '97 we  were losing some of those high                                                                    
     wage jobs,  we were gaining  a lot of lower  wage jobs.                                                                    
     After  you adjust  that for  inflation, wages  actually                                                                    
     declined during that period and  then basically sort of                                                                    
     flattened  out and  have increased  a  little bit  over                                                                    
     time over the last four or five years.                                                                                     
                                                                                                                                
2:27:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOLL asked, regarding  the average annual earnings                                                               
slide, how the  State of Washington's numbers would  look if they                                                               
were superimposed over Alaska's numbers.                                                                                        
                                                                                                                                
MR. FRIED said  he would have to guess,  but thought Washington's                                                               
annual  average would  be higher  than Alaska's,  particularly in                                                               
certain  industries.   For example,  Alaska has  had very  little                                                               
growth  in the  computer software  industry while  Washington has                                                               
had a lot.   The construction industry numbers  would probably be                                                               
fairly close  but Washington might  look more attractive  in most                                                               
cases if one just looked at the wages.                                                                                          
                                                                                                                                
2:29:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOLL  asked  if  that   has  a  lot  to  do  with                                                               
recruitment.                                                                                                                    
                                                                                                                                
MR. FRIED said it certainly could.                                                                                              
                                                                                                                                
2:29:16 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued:                                                                                                            
                                                                                                                                
     This here  is per  capita income.   This goes  way, way                                                                    
     back.   Of course  some people say  those years  in the                                                                    
     1970s were very  unusual.  We were  building a pipeline                                                                    
     where our  income was so  much higher that  that wasn't                                                                    
     sustainable.   But basically the  story there  with per                                                                    
     capita  income  is we're  flat  with  the rest  of  the                                                                    
     country - a little bit above the rest of the country.                                                                      
                                                                                                                                
     But then when we go to  household income, we look a lot                                                                    
     better.  There  are a number of reasons why  that is or                                                                    
     we  think that  is.    One is  we  don't  have a  large                                                                    
     population   of   over    65   because   income   falls                                                                    
     significantly  over   55.     So  we  have   a  smaller                                                                    
     proportion  of our  population in  that  category.   We                                                                    
     also have  more two-wage  earner families in  Alaska so                                                                    
     those are probably the two  big significant things that                                                                    
     keep our  household income relatively high  to the rest                                                                    
     of  the nation.  ...  There was  a  23 percent  premium                                                                    
     compared at  when we  looked at wages  or we  looked at                                                                    
     per capita  income.  So  there's a number  of different                                                                    
     ways you can  slice and dice this but, when  we look at                                                                    
     households  and their  total income,  Alaska comes  out                                                                    
     looking pretty good.  The  other part of the story this                                                                    
     doesn't tell  us is we have  relatively high disposable                                                                    
     income because our  tax burden is relatively  low so we                                                                    
     have more money to spend on  things.  So it's sort of a                                                                    
     mixed story there.                                                                                                         
                                                                                                                                
2:30:45 PM                                                                                                                    
                                                                                                                                
MR. FRIED continued:                                                                                                            
                                                                                                                                
     This is  our unemployment rate.   The nice  story about                                                                    
     the   unemployment   rate,   it's  been   coming   down                                                                    
     significantly and  we have a  very tight  labor market.                                                                    
     I  know  many of  you  hear  complaints from  employers                                                                    
     having  a difficult  time finding  workers.   This  ...                                                                    
     kind of  describes that problem.   This, of  course, to                                                                    
     some extent mirrors the rest of the nation.                                                                                
                                                                                                                                
     But this is  an additional reason, I  think, why that's                                                                    
     happened.   When we look  at the last 10  years, during                                                                    
     more years  than not, we've had  actually negative out-                                                                    
     migration  in Alaska  than in-migration.   Our  overall                                                                    
     population has grown  each one of these  years.  That's                                                                    
     because of  natural increase  but babies  don't compete                                                                    
     in the  labor market so  we have this  steadily growing                                                                    
     economy  or labor  market.   The number  of workers  is                                                                    
     growing more slowly  and, so in essence,  is creating a                                                                    
     tighter  and  tighter labor  market.    The blue  lines                                                                    
     there,  the reason  why  they're  probably blue  during                                                                    
     those  years is  because  those are  the  years of  the                                                                    
     national  recession  and  typically during  a  national                                                                    
     recession,  fewer Alaskans  leave  the  state and  more                                                                    
     people from outside  move to the state.   But those are                                                                    
     very  small numbers.    I mean  relative  to our  total                                                                    
     population of over  600,000, these are very  small.  If                                                                    
     we  remember that  old graph  - those  numbers were  as                                                                    
     high as 20, 30,000.   With a smaller population, again,                                                                    
     we're  talking about  small changes.    That's my  last                                                                    
     slide.                                                                                                                     
                                                                                                                                
2:32:19 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN  announced  that   committee  members  present  are                                                               
Representatives  Doll,  Gatto,  Neuman, Keller,  and  Doogan  and                                                               
Representative  Fairclough was  in attendance  also.   He related                                                               
his  observation  that a  trend  in  discussions lately  is  that                                                               
Alaska's  economy  is  flat.    He  said  Mr.  Fried's  chart  of                                                               
population  changes  shows  a  migratory  population  but  not  a                                                               
dramatic increase  in numbers.   He asked  if the  two situations                                                               
are connected.                                                                                                                  
                                                                                                                                
MR. FRIED  said he thinks they  are.  Almost all  indicators have                                                               
been very moderate.   He thought if Alaska's  economy was growing                                                               
at 4  percent per  year rather  than 1  percent, Alaska  would be                                                               
attracting more  workers.  The  other side  of the story  is that                                                               
the  national economy  is doing  quite well  so it  is harder  to                                                               
attract workers  than it was  in the  '70s and '80s.   Tremendous                                                               
in-migration  happened during  the boom  times in  Alaska because                                                               
the rest  of the country  was experiencing a very  deep recession                                                               
at the  same time.   He  pointed out that  another factor  may be                                                               
that  baby  boomers  are  aging  and are  less  likely  to  move.                                                               
Migration around the country has declined in general.                                                                           
                                                                                                                                
2:34:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN noted  Mr. Fried has used  net numbers but,                                                               
in the real world, a significant amount of churn occurs.                                                                        
                                                                                                                                
MR. FRIED said that number is about  30 to 40,000 per year in and                                                               
out.                                                                                                                            
                                                                                                                                
REPRESENTATIVE  DOOGAN  asked  whether   job  growth  equates  to                                                               
population  growth because  a certain  amount of  Alaskan workers                                                               
are not residents.                                                                                                              
                                                                                                                                
MR. FRIED said that is correct.                                                                                                 
                                                                                                                                
REPRESENTATIVE  DOOGAN  said  the  numbers look  "tidy"  but,  in                                                               
reality, a lot of changes are occurring within those numbers.                                                                   
                                                                                                                                
MR. FRIED  agreed and  said the number  of individuals  moving in                                                               
and out is much larger.   He pointed out the gross migration rate                                                               
of the number of people moving  in and out has declined over time                                                               
so more churning occurred in the '60s, '70s, and '80s.                                                                          
                                                                                                                                
2:36:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN  asked if  the population is  becoming more                                                               
stable and  whether the  job market  is becoming  less lucrative.                                                               
He  thought those  occurrences are  counter intuitive  because he                                                               
believes a person  who loses a good paying job  in Alaska is more                                                               
likely to  pursue a  good paying  job elsewhere  than take  a low                                                               
paying job in Alaska.                                                                                                           
                                                                                                                                
MR. FRIED responded that he thought some of that is occurring.                                                                  
                                                                                                                                
2:36:52 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN  stated that  85-90 percent  of revenue  coming into                                                               
Alaska comes from  oil and gas.  He surmised  that only 3 percent                                                               
of the jobs in Alaska are  in natural resources so only 3 percent                                                               
of the jobs provide 80-95 percent of the state's revenue.                                                                       
                                                                                                                                
MR. FRIED said in some sense  those numbers are misleading.  Less                                                               
than 3  percent of jobs are  direct oil industry jobs.   However,                                                               
the  oil industry  also employs  a lot  of construction  workers,                                                               
security workers,  food services  workers, etcetera  so obviously                                                               
the oil  industry employs more  people than the 3  percent shows.                                                               
He  added   the  expenditure  of   oil  revenues   requires  many                                                               
government  jobs, and  jobs in  other  sectors as  well from  the                                                               
multiplier  effect.     He  pointed  out  the   oil  industry  is                                                               
incredibly efficient  in the sense  that the number  of employees                                                               
in Alaska is very low because the oil fields are very large.                                                                    
                                                                                                                                
2:39:42 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN said he sees that pictorially as spokes from a hub.                                                                
                                                                                                                                
MR.  FRIED agreed  but said  some spokes  are less  dominant than                                                               
others and  that the economy is  much more diverse today  than it                                                               
was 20 years ago.                                                                                                               
                                                                                                                                
2:40:13 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN thanked Mr. Fried for his fascinating presentation.                                                                
                                                                                                                                
The committee took an at-ease from 2:40:39 PM to 2:41:25 PM.                                                                
                                                                                                                                
CHAIR  NEUMAN called  the meeting  back  to order  and asked  Mr.                                                               
Black to begin his presentation.                                                                                                
                                                                                                                                
2:41:30 PM                                                                                                                    
                                                                                                                              
MR. MICHAEL  BLACK, Deputy Commissioner, Department  of Commerce,                                                               
Community & Economic Development  (DCCED), called the committee's                                                               
attention  to a  document entitled  "Alaska Economic  Performance                                                               
Report 2006."   He  acknowledged that the  Department of  Labor &                                                               
Workforce  Development  is  the  gatherer and  developer  of  the                                                               
statistics that  are used in economic  development reports issued                                                               
by  the DCCED.    He  related that  his  experience  is 28  years                                                               
working  for  the  state,  primarily  in  communities  and  rural                                                               
communities.   Mr. Black,  the deputy  commissioner in  charge of                                                               
community development, economic development,  and the Division of                                                               
Investments,  offered to  discuss  how the  economy is  affecting                                                               
communities.                                                                                                                    
                                                                                                                                
CHAIR NEUMAN concurred.                                                                                                         
                                                                                                                                
2:43:06 PM                                                                                                                    
                                                                                                                                
MR. BLACK  pointed out  that the report  indicates a  modest, but                                                               
steady, increase in  economic growth.  In 2006,  the state ranked                                                               
48th  in  growth  among  the  50  states.    Payroll  growth  was                                                               
strongest in  the natural  resource and mining  areas;   in fact,                                                               
for first  time Alaska exports  exceeded 10 percent of  its gross                                                               
product.   Personal income  growth in Alaska  was ranked  at 16th                                                               
among  other  states and  climbed  4.8  percent.     Furthermore,                                                               
Alaska  is  ranked  sixth  among all  states  by  Gross  Domestic                                                               
Product  (GDP),  and  is  the highest  ranking  of  the  resource                                                               
development  states.    Additionally,  there  has  been  economic                                                               
diversification as indicated by  the increase in professional and                                                               
technical services and information technology  of 41 percent.  He                                                               
opined that growth in the  professional element of the economy is                                                               
a change from earlier years.                                                                                                    
                                                                                                                                
2:46:26 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN asked whether there has  been a change over the last                                                               
five years  in the  84 percent  contributed by oil  and gas.   He                                                               
further asked for Mr. Black's estimate  of any change in the next                                                               
five years.                                                                                                                     
                                                                                                                                
2:46:47 PM                                                                                                                    
                                                                                                                                
MR. BLACK  stated his belief that  there has been more  growth in                                                               
other sectors  besides oil and  gas.   Further, in the  next five                                                               
years, he opined  that the trend would continue, due  to the fact                                                               
that other industries are projected to  grow at the same rate, or                                                               
greater, than the oil and gas industry.                                                                                         
                                                                                                                                
2:47:40 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN  observed that  the  state  is  rated the  48th  in                                                               
growth;  however, the  GDP has  risen significantly,  but salary,                                                               
wage, and population have not shown much growth.                                                                                
                                                                                                                                
2:48:06 PM                                                                                                                    
                                                                                                                                
MR. BLACK remarked:                                                                                                             
                                                                                                                                
     ...  it   does  seem   that  the  economy   is  growing                                                                    
     significantly, but maybe wage  income is not keeping up                                                                    
     with the  growth that we  see.  And, of  course, growth                                                                    
     in the  sense of  the amount  of revenue  being derived                                                                    
     from  the  various  industries,   itself,  seem  to  be                                                                    
     growing at greater  than the wage, ...  or personal ...                                                                    
     household income levels are.                                                                                               
                                                                                                                                
2:48:35 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN   asked  whether  that   was  because   of  service                                                               
industries or jobs at big box stores [that pay] $24,000.                                                                        
                                                                                                                                
2:48:52 PM                                                                                                                    
                                                                                                                                
MR. BLACK  stated that  he was  not an expert  in that  area, but                                                               
encouraged the committee  to look further at the  statistics.  He                                                               
then  explained that  the fortunes  of  resource development  are                                                               
improving, yet  the improvement  may not  have been  reflected in                                                               
household incomes or  employment yet.  He stressed  that there is                                                               
a very improved picture for mining  due to the demand in Asia for                                                               
minerals, coal, and other materials needed for manufacturing.                                                                   
                                                                                                                                
2:49:50 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN recalled  testimony  by  former governor  Sheffield                                                               
that there are  no large mines on state lands.   Thus, the Pebble                                                               
Mine would increase the contribution of mining in the future.                                                                   
                                                                                                                                
2:50:23 PM                                                                                                                    
                                                                                                                                
MR. BLACK  stated his agreement.   He added that there  are mines                                                               
being  developed around  the state,  some of  which are  on state                                                               
land.   In fact,  the DLWD  anticipates a demand  for labor.   He                                                               
directed the committee's  attention to page 23 of  the report and                                                               
pointed out that  the most dominant mine in the  state is the Red                                                               
Dog Mine, which is also the richest  zinc mine in the world.  The                                                               
Red  Dog produces  the largest  amount of  income and  employment                                                               
from  mining.   Furthermore, mining  statewide production  values                                                               
between 2004 and 2006 have more  than doubled, and Mr. Black said                                                               
that  he expects  that  growth to  continue  for the  foreseeable                                                               
future.                                                                                                                         
                                                                                                                                
2:52:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOOGAN referred  to  page 23  of  the report  and                                                               
asked whether selling gravel is  still the most profitable mining                                                               
venture in the state.                                                                                                           
                                                                                                                                
2:52:46 PM                                                                                                                    
                                                                                                                                
MR. BLACK said that is correct.                                                                                                 
                                                                                                                                
REPRESENTATIVE   DOOGAN  surmised   that  gravel   production  is                                                               
supported   by  building   roads   and  airports,   and  by   the                                                               
construction industry.                                                                                                          
                                                                                                                                
MR. BLACK said that is correct.                                                                                                 
                                                                                                                                
2:53:01 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN opined  that less federal money  for federal highway                                                               
projects will result in a reduction of that industry.                                                                           
                                                                                                                                
2:53:17 PM                                                                                                                    
                                                                                                                                
MR.  BLACK stated  that that  could  be true  depending upon  the                                                               
demand  by private  industry for  road construction.   He  agreed                                                               
that  a lot  of  demand for  sand and  gravel  comes from  public                                                               
projects,  especially in  the  areas of  the  state dealing  with                                                               
permafrost  conditions.    He   continued  the  presentation  and                                                               
stressed the  importance of the  production of zinc ore  from the                                                               
Red Dog  Mine that  comprises 27  percent of  the total  value of                                                               
Alaska metals.  Mr. Black advised  that the general theme is that                                                               
by industry  there is  growth, and that  future growth  is almost                                                               
certain in mining.   Also, there are improvements  in the fishing                                                               
and  seafood industry,  as  well  as obvious  growth  in the  oil                                                               
industry.    An industry  that  is  doing  less well  is  timber.                                                               
However, tourism is still showing significant growth, statewide.                                                                
                                                                                                                              
2:54:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO referred  to  page 23,  of  the report  and                                                               
asked what are included in "Alaska Metals."                                                                                     
                                                                                                                                
2:55:10 PM                                                                                                                    
                                                                                                                                
MR. BLACK explained  that Alaska metals include  coal and gravel,                                                               
as  well as  metals such  as gold,  silver, zinc,  and lead.   He                                                               
encouraged  the  committee  to review  the  economic  performance                                                               
report and cautioned  that the averages are statewide  and do not                                                               
reflect regions of the state.   For example, the Northwest Arctic                                                               
region,  along   with  Anchorage  and  the   Mat-Su  valley,  are                                                               
benefitting  from  the Red  Dog  project.   His  experience  with                                                               
remote and rural  communities is that the problems  they face are                                                               
related to  the high cost of  energy.  The dependency  of certain                                                               
portions of the  state on diesel fuel  for generating electricity                                                               
and for heating  has resulted in a severe impact  on areas of the                                                               
state.    In  fact,  the  price of  energy  may  be  the  biggest                                                               
challenge  facing  the  state,   despite  the  fact  that  Alaska                                                               
produces hydrocarbons.   Regional  centers in Western  Alaska are                                                               
highly  dependent on  diesel fuel  and the  cost is  a threat  to                                                               
rural  economies.   In addition,  retailers and  small businesses                                                               
are having  a   difficult time competing  with Internet  and mail                                                           
order  sales  because  of  energy  costs  as  well.    Mr.  Black                                                               
continued to  explain that municipalities and  tribal entities in                                                               
the  public sector  are  also  suffering from  the  high cost  of                                                               
providing water, sewer, and electricity.                                                                                        
                                                                                                                                
2:59:12 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN recalled  previous testimony  that rural  Alaska is                                                               
feeling a  greater impact of  energy costs than are  urban areas,                                                               
although there is an increased growth in lower wage jobs.                                                                       
                                                                                                                                
2:59:54 PM                                                                                                                    
                                                                                                                                
MR. FRIED   stated that  he would  like to provide  statistics on                                                               
the  percentage  of  household  income that  is  being  used  for                                                               
lights,  heat,   and  transportation,  compared  with   the  same                                                               
expenses five years  ago.  He opined that  more disposable income                                                               
is  going into  those costs  in rural  and urban  Alaska, to  the                                                               
point  of  imperiling  some  communities.     He  emphasized  the                                                               
importance  of   revenue  sharing   from  the  state   to  enable                                                               
communities to provide public services.                                                                                         
                                                                                                                                
3:01:09 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN expressed his belief  that the rapid increase in the                                                               
capital  budget has  somehow superheated  the  economy; there  is                                                               
more  money  flowing  out  in capital  projects  than  there  are                                                               
Alaskans to  do the jobs.   He reported on the  overinflated cost                                                               
of housing in the Mat-Su valley.                                                                                                
                                                                                                                                
3:01:58 PM                                                                                                                    
                                                                                                                                
MR. BLACK said  that that is an interesting point.   In Fairbanks                                                               
the  construction trades  and the  mining industry  are suffering                                                               
from a  shortage of  available trained labor.   In  addition, the                                                               
capital budget is a reflection  of the building of buildings, but                                                               
not the heat and light that keep the building functional.                                                                       
                                                                                                                                
3:03:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOLL  asked Mr. Black  to explain  the information                                                               
provided  [regarding  International  Trade]  on page  39  of  the                                                               
report and to speak to the prospects for the future.                                                                            
                                                                                                                                
3:03:25 PM                                                                                                                    
                                                                                                                                
MR. BLACK explained  that in exports, such  as natural resources,                                                               
there is  nothing but growth  in demand, primarily from  Asia and                                                               
China,  in  terms  of  the  resources they  need  to  keep  their                                                               
manufacturing competitive.   The  latest example  of that  is the                                                               
agreement with Chinese  companies for coal resources  in the Cook                                                               
Inlet area.   Further, the export  of zinc from the  Red Dog will                                                               
end up in Asian manufacturing, as well.                                                                                         
                                                                                                                                
CHAIR NEUMAN asked  Mr. Black for his opinion  on Alaska's status                                                               
five years from now.                                                                                                            
                                                                                                                                
3:04:50 PM                                                                                                                    
                                                                                                                                
MR.  BLACK said  that he  sees a  very bright  future for  Alaska                                                               
barring a  worldwide catastrophe  or recession.   Alaska  will be                                                               
looked to  by other  countries for  resource development.   There                                                               
are concerns  to be  addressed by the  legislative body,  but the                                                               
demand is there and growing.                                                                                                    
                                                                                                                                
3:05:34 PM                                                                                                                    
                                                                                                                              
REPRESENTATIVE DOLL  expressed her  interest in  increasing trade                                                               
with the  western states  and asked whether  Alaska is  "taking a                                                               
bigger piece of that pie."                                                                                                      
                                                                                                                                
3:05:59 PM                                                                                                                    
                                                                                                                                
MR.  BLACK responded  that Alaska  continues  to import  finished                                                               
goods from the Lower 48.  At  the same time, it has increased its                                                               
exports  to the  Lower 48,  especially in  the seafood  industry.                                                               
The  challenge is  how to  derive more  benefit from  value added                                                               
manufacturing  instead  of  selling  the raw  products  to  other                                                               
countries  and  other  states  where  the  manufacturing  occurs,                                                               
thereby improving Alaska's employment and wage picture.                                                                         
                                                                                                                                
3:07:37 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN invited testimony from Harry McDonald.                                                                             
                                                                                                                                
3:08:11 PM                                                                                                                    
                                                                                                                                
HARRY  MCDONALD,   President,  Carlile   Transportation  Systems,                                                               
informed the  committee that  he was  the President  and majority                                                               
stockholder  of  Carlile  Transportation   Systems  which  is  an                                                               
Alaskan-owned trucking company.                                                                                                 
                                                                                                                                
3:08:23 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN  asked Mr. McDonald  to discuss the recent  past and                                                               
future growth of the transportation industry.                                                                                   
                                                                                                                                
3:08:39 PM                                                                                                                    
                                                                                                                              
MR. MCDONALD  advised that the transportation  industry has grown                                                               
in excess of  5 percent per year, which is  more than the economy                                                               
in general.   Part of that  is not due  to more work, but  due to                                                               
the increase  in the  fuel surcharge.   He  opined that  the next                                                               
five years  has a  bright outlook if  the legislature  makes some                                                               
good decisions this session.  There  is a lot of growth potential                                                               
on the  North Slope and  his personal  opinion is that  we should                                                               
not make  changes until 2011,  or not for  at least the  next two                                                               
years.                                                                                                                          
                                                                                                                                
3:10:00 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN  assumed  that  Carlile  Trucking  does  a  lot  of                                                               
business in Prudhoe Bay.                                                                                                        
                                                                                                                                
3:10:07 PM                                                                                                                    
                                                                                                                                
MR. MCDONALD stated that his  company has 500 employees in Alaska                                                               
and  150 outside  of  Alaska,  that serve  Alaska.   Further,  40                                                               
percent of  its revenue is  directly billed to oil  companies and                                                               
oil  service  companies.    There  are  150  employees  based  in                                                               
Fairbanks and 40  trucks run exclusively to the North  Slope.  In                                                               
addition, Carlile Trucking picks up  freight all over the country                                                               
for  Alyeska  Pipeline  Service Company,  ConocoPhillips  Alaska,                                                               
Inc.,  BP  of  Alaska,  Consolidated  Oil  Corporation,  and  the                                                               
general economy.  Most of the freight comes by barge.                                                                           
                                                                                                                                
3:11:18 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN  asked for  a  description  of  change, as  far  as                                                               
trucking up the highway compared to the use of barge lines.                                                                     
                                                                                                                                
3:11:31 PM                                                                                                                    
                                                                                                                                
MR. MCDONALD  said that there  is a bigger percentage  of freight                                                               
coming up  the highway than  10 years ago,  as now the  roads and                                                               
the  trucks are  better.   The rates  are competitive  for higher                                                               
priced  commodities; however,  anything  that is  heavy comes  by                                                               
water.                                                                                                                          
                                                                                                                                
3:12:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOLL asked whether a  railroad line or more barges                                                               
would facilitate transportation.                                                                                                
                                                                                                                                
3:12:25 PM                                                                                                                    
                                                                                                                                
MR. MCDONALD  stated his preference for  use of the highway.   He                                                               
said that  he did  not support  a government  owned railway.   He                                                               
responded  to a  further  question from  Representative Doll  and                                                               
explained that his company  uses "multi-mobile;" nevertheless, it                                                               
is not feasible to put in  a rail link overland, as compared with                                                               
the efficiency of the existing rail link to water.                                                                              
                                                                                                                                
3:13:17 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN asked  Mr.  McDonald for  his  opinion on  Alaska's                                                               
economy.                                                                                                                        
                                                                                                                                
MR. MCDONALD said that the  housing construction industry is down                                                               
somewhat  although there  are large  commercial projects  coming.                                                               
His company hauls  a lot of fresh fish southbound  to Boston, the                                                               
Midwest, and Seattle,  but overall, 2007 has  been "pretty flat."                                                               
He remarked, "We're not taxed, by  any means, as we were a couple                                                               
of years ago."                                                                                                                  
                                                                                                                                
3:14:33 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN asked for comments from truckers about government.                                                                 
                                                                                                                                
3:14:38 PM                                                                                                                    
                                                                                                                                
MR.  MCDONALD said  that  they want  more  and better  maintained                                                               
roads.                                                                                                                          
                                                                                                                                
REPRESENTATIVE DOOGAN asked whether  Mr. McDonald's company was a                                                               
big trucking company by Alaska's standards.                                                                                     
                                                                                                                                
MR.  MCDONALD  indicated  that  his  company  was  "significant."                                                               
Carlile  and Lyndon  Transport are  the two  largest Alaska-owned                                                               
transportation companies in Alaska.                                                                                             
                                                                                                                                
3:16:17 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN informed  the committee that Mr.  McDonald came here                                                               
on  his own  dime  because  he is  concerned  about  Alaska.   He                                                               
expressed appreciation for his testimony.                                                                                       
                                                                                                                                
3:17:02 PM                                                                                                                    
                                                                                                                                
MR.   MCDONALD,  speaking   for   himself   and  his   employees,                                                               
recommended that the legislature not make any rash decisions.                                                                   
                                                                                                                                
3:17:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON  asked, "What do  you think will  happen, I                                                               
mean literally,  if we went ahead and did a 25 percent tax?"                                                                    
                                                                                                                                
3:17:52 PM                                                                                                                    
                                                                                                                                
MR. MCDONALD remarked:                                                                                                          
                                                                                                                                
     I know  there's projects being discussed  now, not one,                                                                    
     but a number of them,  that, you know, are marginal ...                                                                    
     they waver  back and forth.   And some of them  have to                                                                    
     get partners  to sign  off, and  one partner  thinks it                                                                    
     won't  work, and  one does,  so it  doesn't happen.   I                                                                    
     know there's  an ultra-low sulfur  diesel plant  that I                                                                    
     happen to have about 50 or  60 loads of steel stored in                                                                    
     my yard  that was ...  they thought they were  going to                                                                    
     build it and there were some partner issues ....                                                                           
                                                                                                                                
The committee took an at-ease from 3:24 p.m. to 3:26 p.m.                                                                       
                                                                                                                                
3:26:16 PM.                                                                                                                   
                                                                                                                                
CHAIR NEWMAN called the meeting back  to order and asked Mr. Popp                                                               
to begin his presentation.                                                                                                      
                                                                                                                                
3:26:20 PM                                                                                                                    
                                                                                                                                
BILL   POPP,   President/CEO,  Anchorage   Economic   Development                                                               
Corporation [AEDC], thanked members  for the opportunity to speak                                                               
to committee  members on the  status of the economy  in Anchorage                                                               
and Southcentral Alaska.  He  told members AEDC, a not-for-profit                                                               
corporation,  was founded  in 1987  with  a mission  to grow  and                                                               
diversify the  Anchorage economy  and economies  of Alaska.   The                                                               
AEDC  acts as  a  resource for  local  businesses and  businesses                                                               
interested  in  Alaska  and  seeks  to  be  a  catalyst  for  new                                                               
companies to  find opportunities  in Alaska.   The  membership of                                                               
AEDC  is  comprised  of  more than  180  investor  companies,  he                                                               
related.  He began his PowerPoint presentation, as follows:                                                                     
                                                                                                                                
3:27:41 PM                                                                                                                    
                                                                                                                                
                                         th                                                                                     
     So Anchorage is  currently in its 19   consecutive year                                                                    
     of job  growth.  We've enjoyed  modest, steady economic                                                                    
     growth - 1 or 2 percent  per year, partially due to the                                                                    
     fact   that  our   economy  is   becoming  increasingly                                                                    
     diversified, following  many of the trends  that you've                                                                    
     heard discussed  earlier today.   Our  primary economic                                                                    
     sectors   include    construction,   government,   oil,                                                                    
     business   and  professional   services,  leisure   and                                                                    
     hospitality,  trade,  air   transportation  and  health                                                                    
     care.    In  2006  Anchorage  saw  stronger  employment                                                                    
     growth  than AEDC  had  forecasted.   We  do an  annual                                                                    
     forecast every  January.  We  predicted 1,900  new jobs                                                                    
     and  actual  growth in  2006  was  2,600 new  jobs,  an                                                                    
     increase of 1.8  percent of 2005.  Most  of that growth                                                                    
     was  in  the  leisure  and  hospitality  industry,  air                                                                    
     transportation and the trades, retail and wholesale.                                                                       
                                                                                                                                
     In  January  2007,  using   research  services  of  the                                                                    
     McDowell  Group,  AEDC  forecasted that  the  Anchorage                                                                    
     economy  would  add  2,500  new   jobs  this  year,  an                                                                    
     increase of 1.7 percent over  2006.  Based on the first                                                                    
     five  months of  the year,  employment is  up by  1,940                                                                    
     jobs, an increase  of 1.3 percent compared  to the same                                                                    
     time period in 2006.                                                                                                       
                                                                                                                                
3:29:06 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     Sectors  experiencing  the  largest  increases  in  job                                                                    
     growth  in their  first five  months  of 2007  included                                                                    
     business and  professional services,  the architectural                                                                    
     trades, accounting, legal practices  with 460 new jobs.                                                                    
     The leisure and hospitality  trades, tourism in effect,                                                                    
     restaurants, hotels,  etcetera -  360 new jobs,  and in                                                                    
     health care - 340 new jobs.                                                                                                
                                                                                                                                
     It's important to note  that uniform military personnel                                                                    
     are not  included in the  jobs forecast;  however troop                                                                    
     levels  at  Ft.  [Richardson] are  expected  to  remain                                                                    
     about  the same  in 2007.   Self  employed workers  are                                                                    
     also  not  included  in  the  forecast.    One  of  the                                                                    
     contributors to this job growth  in Anchorage is a more                                                                    
     competitive  cost of  living  than  in previous  years.                                                                    
     The cost-of-living index for  the first quarter of 2007                                                                    
     revealed  that Anchorage's  cost of  living ranks  near                                                                    
     those of other West Coast  cities.  Anchorage is ranked                                                                    
     126.1  overall, with  the national  overall ranking  of                                                                    
     100.  Other cities  scoring similarly include Portland,                                                                    
     Oregon,  with  a  121.7,  Fresno,  California,  with  a                                                                    
     122.3.   The most expensive  city in the  United States                                                                    
     is  New  York,  New  York,   at  213.7  and  the  least                                                                    
     expensive  city  in the  U.S.  is  Joplin, Missouri  at                                                                    
     81.6.                                                                                                                      
                                                                                                                                
     Now let's  dig into  the details  on the  different sectors.                                                               
     AEDC predicted  an increase of  400 jobs in the  health care                                                               
     sector in 2007 and that prediction  is on track with 340 new                                                               
     jobs in  the first five months  of 2007, an increase  of 2.4                                                               
     percent  compared  to  the  same   period  in  2006.    This                                                               
     continued  growth   is  the  result  of   increased  federal                                                               
     spending,  increasing   health  care  needs  of   the  aging                                                               
     population,  and an  overall increase  in the  population in                                                               
     Anchorage  and statewide.      Anchorage Regional  Hospital,                                                               
     Alaska   Native  Tribal   Health  Consortium,   Southcentral                                                               
     Foundation and  Providence Hospital make up  the majority of                                                               
     health  care employment  in Anchorage.   Additionally  a new                                                               
     long  term  acute  care hospital  cancer  center  opened  in                                                               
     Anchorage  at the  end  of 2006  and  Anchorage remains  the                                                               
     primary center  of health care  services for  most Alaskans.                                                               
     The health  care statistics presented  from 2003 to  2006 is                                                               
     the  time period,  because prior  to 2003,  health care  was                                                               
     combined with social services.                                                                                             
                                                                                                                                
3:31:33 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     AEDC  predicted  that  the  business  and  professional                                                                    
     services sector would add 400  new jobs in 2007 and, in                                                                    
     the first  five months  of the  year, the  business and                                                                    
     professional  services sector  added 460  new jobs,  an                                                                    
     increase of 2.8  percent.  Now with  the expectation of                                                                    
     several   future  mining   developments,  as   well  as                                                                    
     construction  and  oil  development around  the  state,                                                                    
     more  businesses and  professional services  employment                                                                    
     growth is taking place to  meet a growing demand.  This                                                                    
     is  especially  true  with the  strong  gains  seen  in                                                                    
     engineering,   architectural   and   related   services                                                                    
     created  by this  increased demand.    Growth in  other                                                                    
     parts of  the sector,  such as  consulting, accounting,                                                                    
     computer and  legal services, have been  more modest in                                                                    
     2007.   These  and other  professional services  should                                                                    
     continue to grow gradually.                                                                                                
                                                                                                                                
     AEDC predicted that the  leisure and hospitality sector                                                                    
     would   add  another   300  jobs   in  2007,   bringing                                                                    
     Anchorage's  total  to  approximately  15,700  workers.                                                                    
     This prediction  is on track,  with 360 new  jobs added                                                                    
     to  the sector  so  far  in 2007,  an  increase of  2.4                                                                    
     percent.   The  leisure and  hospitality sector,  which                                                                    
     includes    accommodations,   food    services,   arts,                                                                    
     entertainment and  recreation, is  once again  seeing a                                                                    
     boost from visitor activity.                                                                                               
                                                                                                                                
3:32:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOOGAN asked if the numbers reflect full-time                                                                    
jobs.                                                                                                                           
                                                                                                                                
MR. POPP said they are.                                                                                                         
                                                                                                                                
3:32:56 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     The total  Alaska cruise visitation  in 2007  is likely                                                                    
     to be around 990,000 due  to an increase in capacity of                                                                    
     approximately  30,000   passengers  from  2006.     The                                                                    
     construction of  a new Embassy Suites  hotel in midtown                                                                    
     began in  late 2006  and is expected  to open  in early                                                                    
     2008.    At least  one  and  possibly two  other  major                                                                    
     hotels are  planned to begin  construction in  the next                                                                    
     two  years but,  because none  of the  new hotels  will                                                                    
     open before 2008, their employment  impacts will not be                                                                    
     seen until  2009.  Hotel reservations  in Anchorage for                                                                    
     the summer  months were  higher in  2007 than  in 2006,                                                                    
     and we  also had  several new  restaurants open  in the                                                                    
     area.                                                                                                                      
                                                                                                                                
3:33:37 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     AEDC predicted 150  new government jobs in  2007.  This                                                                    
     prediction  is on  track with  200 new  government jobs                                                                    
     through the  first five months  of the  year, primarily                                                                    
     the result  of increasing state  government employment.                                                                    
     As a result of oil  revenue surpluses, state government                                                                    
     employment  will  continue  to  grow  modestly  in  the                                                                    
     second half of 2007.                                                                                                       
                                                                                                                                
     Federal  employment is  falling in  2007, continuing  a                                                                    
     three-year  trend   of  decreasing  employment.     The                                                                    
     Municipality  of Anchorage  employment  is expected  to                                                                    
     remain  relatively  stable  in  2007.    The  Anchorage                                                                    
     School  District's  enrollment  fell slightly  for  the                                                                    
     2006, 2007 school year and  enrollments could also fall                                                                    
     in 2008, based  on recent media reports.   However, the                                                                    
     district's  employment is  unlikely  to  change and  is                                                                    
     expected to remain stable in 2007.                                                                                         
                                                                                                                                
     The  dips  that we  see  in  1994  are due  to  federal                                                                    
     cutbacks.   Federal government  jobs in  Anchorage have                                                                    
     remained relatively stable since  then.  The growth you                                                                    
     see is  due mainly to  increased jobs at the  state and                                                                    
     city levels  over the last  period of  time represented                                                                    
     in the graph.                                                                                                              
                                                                                                                                
     Turning to  the oil  industry, employment  in Anchorage                                                                    
     was also  expected to increase  in 2007.   Through May,                                                                    
     employment was  up by about  80 jobs, an increase  of 4                                                                    
     percent in direct employment based  in Anchorage.  This                                                                    
     is exclusive  of employees who  travel to and  from the                                                                    
     Slope  or  elsewhere  in  the  state  on  oil  and  gas                                                                    
     employment.                                                                                                                
                                                                                                                                
3:34:58 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN asked if those numbers pertain only to oil industry                                                                
jobs in Anchorage.                                                                                                              
                                                                                                                                
3:35:00 PM                                                                                                                    
                                                                                                                                
MR. POPP said that is correct.  He continued:                                                                                   
                                                                                                                                
     While Anchorage has not  yet achieved direct employment                                                                    
     growth  to the  levels AEDC  predicted in  January, oil                                                                    
     industry  employment in  Alaska  overall  has grown  by                                                                    
     1,500 jobs over  the past year and 2,600  jobs over the                                                                    
     past  two years.   A  large number  of those  employees                                                                    
     reside in  Anchorage and bring those  paychecks back to                                                                    
     our local economy.                                                                                                         
                                                                                                                                
     As  measured  by land  and  cargo  weight, Ted  Stevens                                                                    
     Anchorage  International Airport  (TSAIA) is  the third                                                                    
     busiest cargo  airport in the  world, just  behind Hong                                                                    
     Kong and Memphis.   Ted Stevens Anchorage International                                                                    
     Airport accounts  for one in  eight jobs  in Anchorage,                                                                    
     according to a recent study  by the Institute of Social                                                                    
     and  Economic  Research   [ISER]  commissioned  by  the                                                                    
     airport.   Employment  at the  airport is  estimated at                                                                    
     10,222  annual,  average   full-time  equivalent  jobs.                                                                    
     Adding   the  off-site   jobs   generated  by   airport                                                                    
     businesses,  the  total  economic significance  of  the                                                                    
     airport  is  18,434,  according  to  the  ISER  report.                                                                    
     This is up from the  last ISER study completed in 2004,                                                                    
     which showed the TSAIA accounted  for one in nine jobs,                                                                    
     as opposed to the one in  eight we now see, and a total                                                                    
     of  9,792 and  total  economic  significance of  15,766                                                                    
     jobs in  2004.   That's a 16.8  percent growth  rate in                                                                    
     three years.                                                                                                               
                                                                                                                                
     The   key  driver   of  growth   at  TSAIA   is  cargo,                                                                    
     specifically  in the  Asia  to  North American  market,                                                                    
     where  the  rate  of  growth  for  international  cargo                                                                    
     operations  is  forecasted   to  increase  5.2  percent                                                                    
     annually.   In  2006,  more than  5 million  passengers                                                                    
     passed through  the Anchorage airport and,  on a weekly                                                                    
     basis, an  average of 650  wide-bodied cargo  jets land                                                                    
     there, making  Anchorage the number one  airport in the                                                                    
     United States  for landed weight of  cargo aircraft and                                                                    
     number three  in the  world for  cargo throughput.   In                                                                    
     the first  five months of  the year, transit  cargo has                                                                    
     increased by  1.7 percent compared  to the  same period                                                                    
     in 2006.                                                                                                                   
                                                                                                                                
     Federal Express, UPS, Northwest  Airlines and other air                                                                    
     cargo carriers  continue to add significant  numbers of                                                                    
     parking spaces for planes  to accommodate their growing                                                                    
     fleets and UPS  plans to base 80 or more  of its pilots                                                                    
     in Anchorage,  which could mean  more of  the company's                                                                    
     high wage pilots will relocate to the city.                                                                                
                                                                                                                                
3:37:19 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     As predicted,  the construction  sector is  stable with                                                                    
     about  40  new  jobs,  half a  percent  increase.    An                                                                    
     increase  in  commercial   construction  is  apparently                                                                    
     being  offset  by  a   slight  decline  in  residential                                                                    
     construction.   Construction of a $100  million mall in                                                                    
     Anchorage's  Mountain  View  area  is  expected  to  be                                                                    
     completed by the  end of 2007, while  construction of a                                                                    
     second  $100  million   shopping  center,  including  a                                                                    
     Target store,  has recently  commenced and  is expected                                                                    
     to be completed by the end of 2008.                                                                                        
                                                                                                                                
     Pending  projects  include  construction  of  a  second                                                                    
     Target and a super Wal-Mart.   Both projects are in the                                                                    
     planning  processes  and  completion  is  not  expected                                                                    
     until  2009.    Residential construction  has  declined                                                                    
     slightly  in  the first  five  months  of 2007  and  is                                                                    
     expected  to   continue  that  decline.     Residential                                                                    
     construction has not been a  factor in the expansion of                                                                    
     Anchorage's  construction  industry since  homebuilding                                                                    
     activity peaked in 2003.                                                                                                   
                                                                                                                                
     Increasing  building material  costs  and  the lack  of                                                                    
     available  land   for  development  will   continue  to                                                                    
     constrain  growth. AEDC  expects  to  see a  continuing                                                                    
     trend towards more multi-family structure projects.                                                                        
                                                                                                                                
     Employment  increases are  also occurring  in a  mix of                                                                    
     sectors,  including   transportation  other   than  air                                                                    
     transportation.    Manufacturing, education  and  other                                                                    
     miscellaneous  services, these  sectors combined  added                                                                    
     approximately 440 jobs to the  Anchorage economy in the                                                                    
     first five months of 2007.                                                                                                 
                                                                                                                                
3:38:44 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     Now  the  economic  forces  and  issues  that  will  be                                                                    
     affecting the  Anchorage economy  in the next  year and                                                                    
     in the coming  decade will include many  of the typical                                                                    
     resource based  developments we have seen  in the past.                                                                    
     Those  include   several  major   capital  construction                                                                    
     projects in Anchorage  and Alaska, increased investment                                                                    
     in  oil  and  gas exploration  and  development,  major                                                                    
     investments in  several mining projects  across Alaska,                                                                    
     and significant expansion of the retail base.                                                                              
                                                                                                                                
     I'd now like to turn  to the Railbelt energy situation.                                                                    
     With all this potential  investment and economic growth                                                                    
     looming in the next decade,  energy will be a key issue                                                                    
     to  the successful  development  of  these billions  of                                                                    
     dollars in projects.                                                                                                       
                                                                                                                                
     In  the last  few  years, the  natural  gas supply  and                                                                    
     deliverability  situation   in  Cook  Inlet   has  been                                                                    
     receiving  quite a  bit of  attention, and  rightly so.                                                                    
     But our  future economic growth rests  heavily on other                                                                    
     key  energy sources,  specifically  crude oil  supplies                                                                    
     for  our  refineries  and  the  increasing  demand  for                                                                    
     refined petroleum products.                                                                                                
                                                                                                                                
     I'd now like  to examine in brief the  current state of                                                                    
     the   Southcentral   energy    supplies   and   several                                                                    
     challenges  Alaska will  face regarding  these supplies                                                                    
     in  the   coming  decade.    Cook   Inlet  natural  gas                                                                    
     continues   to  be   a  growing   concern.     Reserves                                                                    
     replacement   continues  to   lag  behind   demand  and                                                                    
     deliverability    has   reached    a   crisis    point.                                                                    
     Interruptible  price natural  gas  basically no  longer                                                                    
     exists as  a component  of the  supply picture  in Cook                                                                    
     Inlet.  While  prices appear to be leveling  off at the                                                                    
     home  level   and  at  the  commercial   level,  demand                                                                    
     destruction  has begun  to take  place.   The  clearest                                                                    
     example of  that demand destruction  is the  closure of                                                                    
     the Agrium nitrogen plant with  a corresponding loss of                                                                    
     nearly 300 direct  high paying jobs over  the last four                                                                    
     years in the slow motion  process of closing the plant.                                                                    
     In  addition,  Aurora  Gas unexpectedly  cancelled  its                                                                    
     supply contracts last fall  with several major business                                                                    
     customers,  as  well  as   the  Fairbanks  natural  gas                                                                    
     utility, creating  several ripple effects on  price and                                                                    
     supply in  the local gas  markets.  Tesoro,  faced with                                                                    
     curtailment   of   their   interruptible   gas   supply                                                                    
     contracts for  plant power generation last  winter, was                                                                    
     forced  to fuel  switch to  propane.   This created  an                                                                    
     unexpected shortage  of propane in Alaska  markets with                                                                    
     a corresponding price spike.                                                                                               
                                                                                                                                
3:41:00 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     Based  on  recent  conversations  with  industry,  this                                                                    
     winter is  not looking  any better and  if we  infer an                                                                    
     extended peak  demand period  of extreme  cold weather,                                                                    
     there   are  serious   concerns   about  the   possible                                                                    
     consequences.                                                                                                              
                                                                                                                                
     Here's  a  graphic  visualization of  the  natural  gas                                                                    
     supply demand outlook.   This is an  updated graph that                                                                    
     was presented at  the 2006 Energy Forum,  hosted by the                                                                    
     Alaska  Oil and  Gas Conservation  Commission.   Though                                                                    
     slightly dated  and subject to further  refinement, the                                                                    
     graph  provides   several  points   for  consideration.                                                                    
     Utilities  will  be  facing  severe  supply  challenges                                                                    
     within the  next eight years  given the  current supply                                                                    
     situation.   Utilities are actively seeking  new supply                                                                    
     contracts  with  producers,  but  the  situation  still                                                                    
     remains  unclear.    Exacerbating  the  current  supply                                                                    
     demand problems are future increases  in demand.  As an                                                                    
     example,  if the  Pebble Mine  project goes  forward as                                                                    
     planned,  it  could  create   a  significant  spike  in                                                                    
     electricity  demand from  the  Railbelt  power grid  as                                                                    
     represented  by this  graphic in  2015.   Add in  other                                                                    
     projects, such  as the Chulitna coal  project, or other                                                                    
     mining projects  in the Railbelt region,  and you begin                                                                    
     to see  the future problem.   If we cannot  provide the                                                                    
     necessary energy  sources to  generate enough  power to                                                                    
     meet future  large project  demand, those  projects may                                                                    
     not go forward.                                                                                                            
                                                                                                                                
3:42:17 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN interjected  to say the chart is  quite powerful and                                                               
shows a  huge spike in 2014.   He asked  Mr. Popp if he  said the                                                               
gas  reserves  in  Cook  Inlet  are  inadequate  to  provide  for                                                               
industry expansion in Alaska.                                                                                                   
                                                                                                                                
3:42:52 PM                                                                                                                    
                                                                                                                                
MR. POPP  replied that  he is  saying that  based on  the current                                                               
reserves  replacement rate,  over the  last six  years two  years                                                               
worth of  reserves have been  replaced based on  industry effort,                                                               
market demand  and other  factors.  If  that trend  continues, it                                                               
will be difficult  for the utilities to deliver power  at a price                                                               
that projects along the Railbelt can use.    He said he is trying                                                               
to  raise  a big  question  mark  because  the situation  can  be                                                               
addressed in a timely manner,  but that time period grows shorter                                                               
with  each passing  year.   He noted  he is  speaking to  several                                                               
projects that could be affected.  He pointed out:                                                                               
                                                                                                                                
     ... The utilities,  at this point, are  still trying to                                                                    
     work  with industry,  based on  the conversations  that                                                                    
     I've  been having  with several  industry players,  and                                                                    
     industry is  a little bit  perplexed as to  how they're                                                                    
     going to approach the situation  based on what happened                                                                    
     to the  marathon Enstar contract  this last fall.   The                                                                    
     previous price  signal from the  State of  Alaska given                                                                    
     through the  Regulatory Commission  of Alaska  with the                                                                    
     Henry Hub  connection was  basically repudiated  by the                                                                    
     Regulatory  Commission  of  Alaska  [RCA]  but  no  new                                                                    
     signal was  provided to  replace it.   So  industry has                                                                    
     kind of got  their head up in the air  trying to figure                                                                    
     out which way the wind  is blowing and what they should                                                                    
     invest in  and they don't  have clear guidance  on that                                                                    
     so  that's an  issue that  needs  to be  resolved in  a                                                                    
     fairly timely  manner.   I know  that industry  is very                                                                    
     hesitant to go  before the RCA again anytime  soon.  At                                                                    
     least  that's  the  opinion I'm  getting  from  several                                                                    
     industry players.                                                                                                          
                                                                                                                                
3:44:55 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN thanked Mr. Popp for the response and noted the                                                                    
importance of that information.                                                                                                 
                                                                                                                                
3:45:14 PM                                                                                                                    
                                                                                                                                
MR. POPP continued his presentation:                                                                                            
                                                                                                                                
     Equally  important ...  though  mostly  ignored in  the                                                                    
     face  of the  natural gas  crisis is  Cook Inlet  crude                                                                    
     oil.  Cook  Inlet used to produce a huge  amount of oil                                                                    
     in  the 1970s  but not  anymore.   Cook Inlet  produced                                                                    
     246,000 barrels  a day in  1972.  This year  Cook Inlet                                                                    
     will be lucky to average  14,000 barrels per day.  This                                                                    
     decline  has  tremendous  implications for  the  future                                                                    
     energy  security of  Southcentral and  Alaska that  has                                                                    
     been largely overlooked in the  face of the natural gas                                                                    
     supply  crisis.    Today the  total  Cook  Inlet  crude                                                                    
     production  is   just  a  shadow   of  its   past  peak                                                                    
     production, even though estimates  exist that there are                                                                    
     billions  of  barrels  of  oil   in  place  yet  to  be                                                                    
     discovered  or  developed  through new  exploration  or                                                                    
     developed  in existing  fields using  new enhanced  oil                                                                    
     recovery  technologies.     This  raises  an  important                                                                    
     question:  How  are  we meeting  today's  refined  fuel                                                                    
     demands in Alaska?  The answer may surprise you.                                                                           
                                                                                                                                
     As  you can  see by  this graph,  the bulk  of Alaska's                                                                    
     crude  oil consumed  by  the  in-state refineries  that                                                                    
     serve the  commercial and  military markets  comes from                                                                    
     the North Slope.   What is not  readily recognizable is                                                                    
     the  fact  that  three  out of  four  of  the  in-state                                                                    
     refineries  are 100  percent dependent  on North  Slope                                                                    
     crude oil with  no other option for  crude oil supplies                                                                    
     from other sources.  Today  18 percent of the crude oil                                                                    
     supply  to  Alaska's   refineries  comes  from  foreign                                                                    
     sources.  Unless  steps are taken soon  to increase in-                                                                    
     state  production,  particularly  in  Cook  Inlet,  the                                                                    
     percentage will only grow  and Alaska's energy security                                                                    
     will continue  to erode and become  more susceptible to                                                                    
     the  whims and  calamities  that affect  world oil  and                                                                    
     refined fuels markets and prices.                                                                                          
                                                                                                                                
     Our energy  security that we  Alaskans are so  proud of                                                                    
     is eroding  rapidly.  Energy  security, in the  form of                                                                    
     crude  oil  supplies that  our  refineries  rely on  to                                                                    
     produce  the  fuels,  we must  have  to  keep  Alaska's                                                                    
     economy moving,  and I  mean that  in the  most literal                                                                    
     sense.  As a first  example, the Tesoro Refinery, a key                                                                    
     source of  jet fuel,  heating fuel, gasoline  and fuels                                                                    
     for  power  generation,  is   now  reliant  on  sources                                                                    
     outside  the Cook  Inlet for  78 percent  of its  crude                                                                    
     supply.    More  importantly, 40  percent  of  Tesoro's                                                                    
     crude  oil  now  comes  from foreign  sources  such  as                                                                    
     Indonesia, Australia,  Norway and  Africa.   While this                                                                    
     mix   of  crude   source  has   saved   our  bacon   in                                                                    
     Southcentral  Alaska when  Prudhoe  Bay  was shut  down                                                                    
     last  year,  it  has  become  glaringly  apparent  that                                                                    
     Alaska's growing less and  less energy independent with                                                                    
     each passing year.                                                                                                         
                                                                                                                                
3:47:40 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     Consider  the  fact  that  Alaska  is  a  net  importer                                                                    
     annually of nearly  11 million barrels of  jet fuel and                                                                    
     7.6  million barrels  of distillate,  or diesel  fuels,                                                                    
     for transportation, heat and  power generation in 2005.                                                                    
     Alaska is the  fourth largest consumer of  jet fuel out                                                                    
     of the  50 states and  the seventh largest  consumer of                                                                    
     aviation  gasoline in  the United  States.   Inversely,                                                                    
                       th                                                                                                       
     Alaska   ranks  50    in   the   nation  for   gasoline                                                                    
     consumption,  though  we  did   beat  the  District  of                                                                    
     Columbia  and exported  2 million  barrels of  gasoline                                                                    
     and related products in 2005.   The three refineries in                                                                    
     Fairbanks and  Valdez, which are 100  percent dependent                                                                    
     on ANS  crude, consume  54 percent  of the  total crude                                                                    
     used by refineries serving  the commercial and military                                                                    
     markets of  Alaska and  play an  important role  in our                                                                    
     energy  security.   How will  these refineries  operate                                                                    
     safely, profitably,  and continue  to produce  the same                                                                    
     volumes  of  the  important   fuels  they  produce  for                                                                    
     Alaska's economy if  the TAPS system is  forced to ship                                                                    
     crude in batches, perhaps within the next five years?                                                                      
                                                                                                                                
     I'm sure  the refiners  are looking at  these questions                                                                    
     very  closely  and  will  be  making  some  very  tough                                                                    
     decisions  if   the  decline   in  ANS   crude  volumes                                                                    
     continues.                                                                                                                 
                                                                                                                                
     If our  in-state production  capacity is  curtailed for                                                                    
     any  reason, our  options for  replacing these  refined                                                                    
     fuels  are limited.   In  2004, for  example, the  West                                                                    
     Coast   refinery  system   had  an   excess  production                                                                    
     capacity   of  approximately   9  million   barrels  of                                                                    
     distillate  fuels.     When  you  look   at  jet  fuels                                                                    
     production, the  West Coast region was  a net importer,                                                                    
     over 3.6 million barrels in  2004.  This difference was                                                                    
     made up through foreign refinery imports.                                                                                  
                                                                                                                                
     With the tight nature  of refinery output capacities on                                                                    
     the West Coast region for  these fuels, what happens if                                                                    
     our 100  percent North Slope dependent  refineries lose                                                                    
     their  crude  supply for  whatever  reason?   Is  there                                                                    
     enough surplus  capacity in the world  of refined fuels                                                                    
     markets to make up any  lost production?  What will the                                                                    
     pricing impacts  be if we have  to import significantly                                                                    
     increased volumes  of these fuels for  Alaska consumers                                                                    
     and businesses?   The answers  aren't clear.   We don't                                                                    
     have a clear answer on that situation.                                                                                     
                                                                                                                                
3:49:52 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN asked if the price of fuel is so high in Alaska                                                                    
because a lot of it is coming from "outside."                                                                                   
                                                                                                                                
3:50:20 PM                                                                                                                    
                                                                                                                                
MR. POPP said Alaska is a net  exporter of gasoline.  He said the                                                               
problem in Alaska is caused by the  economy of scale.  Gas in the                                                               
Kenai  Peninsula tends  to  be  15 or  20  cents  higher than  in                                                               
Anchorage. A  large chunk of  that cost is  due to sales  tax and                                                               
the cost goes down in the summertime because of tourist traffic.                                                                
                                                                                                                                
3:51:24 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN said his constituents want an answer.                                                                              
                                                                                                                                
MR. POPP said that is not an answer they like to hear.                                                                          
                                                                                                                                
3:51:33 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     So, let's  set aside the issue  of refining capacities.                                                                    
     There is still the question  is there more crude oil to                                                                    
     be  found in  Cook Inlet  and I  believe the  answer is                                                                    
     yes.    In  September  2006, the  Alaska  Oil  and  Gas                                                                    
     Conservation  Commission held  the Southcentral  Energy                                                                    
     Forum  in Anchorage.   This  two-day conference  took a                                                                    
     comprehensive  look  at  the current  state  of  energy                                                                    
     supplies in  Southcentral Alaska.   In  three different                                                                    
     presentations,  it  was  estimated  there  is  combined                                                                    
     potential  for an  additional  2.6  billion barrels  of                                                                    
     yet-to-be  discovered or  recovered  Cook Inlet  crude.                                                                    
     Ten years ago these  estimates were considered unlikely                                                                    
     at  best  but,  with  new research,  the  potential  of                                                                    
     enhanced  oil  recovery  technology and  with  the  new                                                                    
     world price  realities, these reserve  estimates appear                                                                    
     to  have merit.   The  real challenge  though is  cost.                                                                    
     These  oil  reserves  will  not be  cheap  to  find  or                                                                    
     develop.  Billions of dollars  will need to be invested                                                                    
     in the next 20 to 30  years to make these potential oil                                                                    
     reserves a reality.                                                                                                        
                                                                                                                                
     Can we attract this kind  of new industry investment to                                                                    
     Cook  Inlet?    There  are  some  positive  signs  that                                                                    
     industry  is  interested.     Several  hundred  million                                                                    
     dollars in new  investments over the next  four to five                                                                    
     years  is under  consideration  by industry.   We  must                                                                    
     watch  this  crude  oil supply  issue  closely  and  be                                                                    
     prepared to  consider how to jump  start this important                                                                    
     investment if they are not forthcoming.                                                                                    
                                                                                                                                
3:52:51 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     Last topic -  turning now to a related  subject, I want                                                                    
     to  offer a  perspective  on  workforce development  in                                                                    
     Alaska.  I  don't have time to go into  all the aspects                                                                    
     of this looming workforce crunch,  so I'll focus on the                                                                    
     roots of the looming challenge,  the oil and gas mining                                                                    
     industries.                                                                                                                
                                                                                                                                
     For AEDC, workforce development is  a key issue for the                                                                    
     Alaska  economy.   All business  sectors in  Alaska are                                                                    
     feeling the pinch of tighter  labor markets in one form                                                                    
     or   another;  professional   services,  health   care,                                                                    
     logistics, tourism,  oil and  gas, and mining  are just                                                                    
     some of  the industries  facing workforce  shortages of                                                                    
     one form or other.   In the coming decade, Alaska could                                                                    
     see huge  investments in resource  development projects                                                                    
     across the state,  the likes of which we  have not seen                                                                    
     in decades.  Oil and  gas and mining projects large and                                                                    
     small  could  combine  to create  a  perfect  storm  of                                                                    
     projects.  These  projects, if they reach  the point of                                                                    
     sanction  and   commence  construction,  will   have  a                                                                    
     significant  ripple effect  through the  Alaska economy                                                                    
     and no business sector will likely be unaffected.                                                                          
                                                                                                                                
     If you want  a clear example of what I  mean, just take                                                                    
     a look at Alaska's history  and the impacts of the TAPS                                                                    
     project on  the cost ...  and availability of  labor in                                                                    
     the 1970s.                                                                                                                 
                                                                                                                                
     I would  offer that  there's a  clear analysis  of this                                                                    
     history compiled  in the  Stranded Gas  Development Act                                                                    
     Municipal Impact  Analysis that  was authored  in 2004.                                                                    
     The  study,  put together  with  the  help of  all  the                                                                    
     municipalities   that  were   indirectly  or   directly                                                                    
     affected by  the potential  gas pipeline  contract that                                                                    
     was    being    developed     under    the    Murkowski                                                                    
     Administration,    offers    a   concise,    historical                                                                    
     perspective of what we may face in the coming decade.                                                                      
                                                                                                                                
3:54:32 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     So,  in my  previous life  as  oil and  gas and  mining                                                                    
     liaison for  the Kenai  Peninsula Borough,  I developed                                                                    
     this representation of the  possible future of projects                                                                    
     on the horizon for Alaska.                                                                                                 
                                                                                                                                
     Using  accounts in  the media  and direct  dialogs with                                                                    
     the oil and  gas and mining industries, as  well as the                                                                    
     training  industry,  I compiled  a  list  of likely  or                                                                    
     reasonably possible  projects and stacked them  in this                                                                    
     timeline  to  try   and  represent  an  understandable,                                                                    
     though   admittedly   simplistic,    picture   of   the                                                                    
     challenges  Alaska faces  in meeting  its future  labor                                                                    
     needs.   This is not  a complete list of  projects with                                                                    
     several additional projects  under development that are                                                                    
     not listed  here.  If,  and I  repeat if, all  of these                                                                    
     projects were to go forward  as planned, they represent                                                                    
     just  over  49,000  positions  that  will  need  to  be                                                                    
     filled.  Now of course in  a lot of cases, workers will                                                                    
     move from project  to project but look  closely and you                                                                    
     will   see   several   projects   slated   to   overlap                                                                    
     chronologically.                                                                                                           
                                                                                                                                
3:55:30 PM                                                                                                                    
                                                                                                                                
     So,  basically, looking  at this  graph, these  are the                                                                    
     timelines  represented  for  the  different  issues  or                                                                    
     projects  and the  timeframe  they  represented at  the                                                                    
     time that  this graph was developed,  which was updated                                                                    
     in February earlier this year  and then, of course, the                                                                    
     different  column years.    You can  start  to see  the                                                                    
     density get  pretty thick out  here in the  middle part                                                                    
     of  the next  decade.    Keep that  in  mind  as we  go                                                                    
     through this  last part of the  presentation and you'll                                                                    
     see why it's going to become a real challenge for us.                                                                      
                                                                                                                                
     AEDC  is  doing  what  it can  to  bring  together  and                                                                    
     attention to this challenge and  to seek and facilitate                                                                    
     cooperation between  industry, educators,  and training                                                                    
     providers to make  assured we will need  a large number                                                                    
     of  out-of-state  workers  if   we  are  to  see  these                                                                    
     projects develop successfully.   That has ramifications                                                                    
     for the general  economy.  We must  begin to understand                                                                    
     and  prepare  if  we  are to  avoid  the  mistakes  and                                                                    
     growing pains  of the past  and reap  the opportunities                                                                    
     in the future.                                                                                                             
                                                                                                                                
3:56:22 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     The point of this part  of my presentation today is the                                                                    
     challenge that  Alaska faces if  we are going  to bring                                                                    
     off any and all of these  future mining and oil and gas                                                                    
     projects.   That  challenge  is  finding or  developing                                                                    
     enough  workers  with  the   skill  sets  necessary  to                                                                    
     successfully  construct  and  operate  these  projects.                                                                    
     That is the real  challenge given the growing shortages                                                                    
     across   North  America   and  for   practically  every                                                                    
     category of  skilled workers needed for  the mining and                                                                    
     oil and gas industry  combined with the dramatic growth                                                                    
     and investment  being seen in several  energy producing                                                                    
     regions in North  America.  There is no  sign that that                                                                    
     continent-wide shortage  will ease any time  soon.  One                                                                    
     clear example  of the competitive challenge  we face in                                                                    
     obtaining  enough qualified  workers for  future Alaska                                                                    
     projects is the energy and mining sector in Alberta.                                                                       
                                                                                                                                
     I  want  to  offer   the  following  information  using                                                                    
     several parts  of a  PowerPoint provided  to me  by the                                                                    
     Alberta  Provincial Government  as  a  snapshot of  the                                                                    
     massive  development  that   is  currently  ongoing  in                                                                    
     Alberta, as  well as  a look  forward on  the potential                                                                    
     impacts  that development  will have  on Alaska  in the                                                                    
     coming decade.   I recently toured the  oil industry in                                                                    
     Alberta in  September for the  second time in  the last                                                                    
     three years and I can  tell you the level of investment                                                                    
     and the scope of the  current development plans for oil                                                                    
     sands  is  stunning,  even  just  in  the  growth  that                                                                    
     they've seen in the last three years.                                                                                      
                                                                                                                                
     First let me give you a  little recap of what oil sands                                                                    
     are  and how  they  are currently  being developed  and                                                                    
     then I'll discuss what the  future holds for developing                                                                    
     this massive resource.                                                                                                     
                                                                                                                                
     Oil sands  are just  that -  sand saturated  with heavy                                                                    
     oil or  bitumen, 14 API  to be  exact for those  of you                                                                    
     familiar with  weights of oil.   Alberta  currently has                                                                    
     an estimated  1.7 trillion  barrel equivalent  in place                                                                    
     in the  oil sands  regions of  the province,  with just                                                                    
     over 175  billion barrels in proven  reserves.  Alberta                                                                    
     is  soon expected  to surpass  Saudi  Arabia in  proven                                                                    
     reserves and  is arguably  one of  the largest,  if not                                                                    
     the  largest,   foreign  supplier   of  crude   oil  or                                                                    
     equivalence to the United States.                                                                                          
                                                                                                                                
     This graphic demonstrates the oil  sands on a number of                                                                    
     levels.   Currently  most efforts  are  focused on  the                                                                    
     mining of bitumen to depths  of approximately 200 feet.                                                                    
     This  represents  about  20 percent  of  the  resource.                                                                    
     That's what their current focus is on.                                                                                     
                                                                                                                                
     The bigger prize  is the remaining 80  percent lying at                                                                    
     depths  of up  to  3,000 feet  that  must be  developed                                                                    
     using enhanced  oil recovery drilling  techniques, such                                                                    
     as SAGD,  or steam assisted  gravity drainage.   All of                                                                    
     these methods are labor and capital intensive.                                                                             
                                                                                                                                
3:58:51 PM                                                                                                                    
                                                                                                                                
     Just  to  put the  reserves  in  perspective, here's  a                                                                    
     graph demonstrating  eight other of the  largest proven                                                                    
     reserves by  country when compared  to Alberta.   Saudi                                                                    
     Arabia is the largest.  Iran  is the third.  We're down                                                                    
     at number eight.                                                                                                           
                                                                                                                                
     With over  60 billion  invested in  Alberta in  each of                                                                    
     the last  two years,  strong GDP and  population growth                                                                    
     and  a very  favorable  taxing regime,  Alberta is  the                                                                    
     economic powerhouse of  Canada.  I would  note that the                                                                    
     taxation  figures   were  provided   to  me   prior  to                                                                    
     yesterdays  announced provincial  tax increase  of 1.45                                                                    
     billion by the Albertan government.                                                                                        
                                                                                                                                
     These are  the oil sands  regions of Alberta  and these                                                                    
     are  the projected  production  levels Alberta  expects                                                                    
     over  the next  two decades  based on  current industry                                                                    
     sanctioned project  plans.  With  over $100  billion in                                                                    
     new  oil  sands,  mining and  extraction  projects  and                                                                    
     another  $100 billion  plus  in  upgraded and  pipeline                                                                    
     projects in  various stages of development,  Alberta is                                                                    
     seeing massive  investments to  "capture the  window of                                                                    
     opportunity."    This   is  the  Albertan  government's                                                                    
     current catch  phrase for encouraging  this development                                                                    
     in  the next  decade to  become the  United States  key                                                                    
     energy provider of liquid petroleum products.                                                                              
                                                                                                                                
4:00:10 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     This graphic describes the broader  picture of how that                                                                    
     strategy will  be implemented in the  delivery of those                                                                    
     liquids  to   market  via  existing   or  significantly                                                                    
     expanded  pipeline  infrastructures  to the  U.S.  East                                                                    
     Coast, Gulf  Coast, Midwest,  Southwest and  West Coast                                                                    
     markets;  again,  billions  of  dollars  worth  of  new                                                                    
     infrastructure  projects  in  the next  decade  with  a                                                                    
     corresponding  demand  for skilled  workers,  equipment                                                                    
     and resources.                                                                                                             
                                                                                                                                
     The final view of these  investments is this graph that                                                                    
     describes  the recent  massive  increase in  investment                                                                    
     compared to the previous decade  and the huge levels of                                                                    
     investment  planned   for  the   future  in   just  the                                                                    
     extraction of bitumen in the  ... oil sands.  This does                                                                    
     not  include "upgrader"  or  pipeline  projects.   This                                                                    
     strictly  represents the  production of  bitumen.   The                                                                    
     checkerboard  pattern bars  are  the stated  investment                                                                    
     plans of  industry through the  next two decades.   The                                                                    
     green bar represents the more  conservative view of the                                                                    
     Alberta government  on what  is likely  to happen.   As                                                                    
     you  can  see,  either  model  represents  hundreds  of                                                                    
     billions  of   dollars  in   new  investment   for  the                                                                    
     foreseeable future for Alberta.                                                                                            
                                                                                                                                
     With  this investment  come  huge  demands for  skilled                                                                    
     workers  in  mining,  oil and  gas,  and  petrochemical                                                                    
     industries.   Each of these  three industries  is often                                                                    
     competing for the same workers  with similar skill sets                                                                    
     that are  in short  supply in North  America.   This is                                                                    
     leading to  a significant  increase in labor  costs and                                                                    
     the  cost  of living  in  Alberta.   During  my  recent                                                                    
     visit, workforce  recruitment was  the top  priority of                                                                    
     nearly  every sector  of the  Alberta  economy.   Every                                                                    
     other  radio ad  was a  recruitment ad  of one  kind of                                                                    
     another for  different businesses.   Every  fifth booth                                                                    
     at the heavy oil conference  I attended was an employee                                                                    
     recruitment exhibit.  McDonalds  was paying $12 an hour                                                                    
     for  their night  shift  workers.   To  really put  the                                                                    
     Alberta labor  shortage into perspective, let  me share                                                                    
     with you the following graphic.                                                                                            
                                                                                                                                
4:02:03 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     This  is  the outlook  just  through  the end  of  this                                                                    
     decade  for industrial  construction workforce  demands                                                                    
     in Alberta.   In early 2010, that demand  peaks at over                                                                    
     36,000 workers  for projects that have  been sanctioned                                                                    
     and  are  either  already  under  construction  or  are                                                                    
     mobilizing  for construction.   The  Alberta government                                                                    
     official  who provided  this  projection  made it  very                                                                    
     clear  that anyone  viewing this  slide  should not  be                                                                    
     fooled  by  the  fact  that worker  demand  trails  off                                                                    
     towards  the end  of the  graph.   The  graph does  not                                                                    
     include future  projects that have been  sanctioned for                                                                    
     start up beyond 2010.   The officials stated the demand                                                                    
     will continue  to rise beyond  these current  levels of                                                                    
     demand well  into the next  decade.  I would  also note                                                                    
     that  at  a recent  presentation  in  Anchorage at  the                                                                    
     Pacific  Northwest  Economic   Region  conference  last                                                                    
     August,  another  Alberta  government  official  stated                                                                    
     that by the end of  the next decade, Alberta projects a                                                                    
     109,000  overall  worker  shortage  in  their  economy.                                                                    
     That same official proceeded to  hold up some paperwork                                                                    
     in the air and said,  "And I have immigration paperwork                                                                    
     here with  me today and if  I can get one  of you folks                                                                    
     in this room  to fill out this paperwork,  I've done my                                                                    
     job."  This was a  roomful of government officials from                                                                    
     other provinces and other states.                                                                                          
                                                                                                                                
4:03:25 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN  asserted  the  cost  of  labor  will  increase  in                                                               
proportion to the inability to find qualified workers.                                                                          
                                                                                                                                
4:03:35 PM                                                                                                                    
                                                                                                                                
MR. POPP said  one of the newest oil  sands development projects,                                                               
Albee and  Sands, is  offering a  hiring bonus  of 15  percent of                                                               
one's base  wage within 30  days, a $15,000 housing  allowance, a                                                               
$380 per  month transportation allowance, contributions  to three                                                               
different  retirement accounts  varying  from a  2  to 6  percent                                                               
employer match,  an increased health care  package, $12,000 worth                                                               
of  continuing  education credits  for  any  family member  in  a                                                               
career field  that will  benefit the conditions  in Alberta.   He                                                               
stated  inversely,  a  double-wide  trailer on  a  city  lot  was                                                               
selling for almost $400,000.                                                                                                    
                                                                                                                                
4:04:45 PM                                                                                                                    
                                                                                                                                
MR. POPP continued:                                                                                                             
                                                                                                                                
     Why is  the situation  in Alberta  so important  to the                                                                    
     future  of   Alaska's  ability   to  develop   its  own                                                                    
     projects?  Several reasons.   There's a shortage across                                                                    
     North  America for  skilled  workers  important to  the                                                                    
     mining,   oil,  and   gas   and  construction   related                                                                    
     industries.    Alaska must  compete  with  the rest  of                                                                    
     North America for these workers  in regions such as the                                                                    
     Gulf of  Mexico, Nova Scotia,  western states,  such as                                                                    
     Wyoming,  Montana,  Colorado  and  Utah,  Alberta,  and                                                                    
     British Columbia  are all seeing  significant increases                                                                    
     in demands for these  increasingly scarce workers.  Now                                                                    
     with the Canadian dollar enjoying  an equal or stronger                                                                    
     value  to the  U.S.  dollar, we  are  seeing a  greater                                                                    
     interest  by  U.S.  and,   yes,  Alaskan  companies  in                                                                    
     getting  in  on the  action  in  Alberta.   This  could                                                                    
     create an  even greater challenge for  Alaska's ability                                                                    
     to provide  enough workers for  future oil and  gas and                                                                    
     mining projects in our state.   While Alaska has come a                                                                    
     long   way  in   providing  worker   training  programs                                                                    
     compared  to  where we  started,  AEDC  believes it  is                                                                    
     important that  we take our policies  and strategies to                                                                    
     an even higher level  of coordination between industry,                                                                    
     government,  training and  education providers  to make                                                                    
     sure we  are offering the most  efficient and effective                                                                    
     training  programs   possible  to   maximize  Alaskans'                                                                    
     opportunities in  the coming decade in  all sections of                                                                    
     our economy.                                                                                                               
                                                                                                                                
4:06:01 PM                                                                                                                    
                                                                                                                                
     While  the  Southcentral  economy is  healthy,  as  are                                                                    
     other  regions of  Alaska, we  cannot be  complacent on                                                                    
     the issues I  presented today.  Energy  security with a                                                                    
     corresponding need for an  energy policy that addresses                                                                    
     our  future   planning  and   investments  in   a  more                                                                    
     diversified,  stable  energy  mix is  key  to  Alaska's                                                                    
     future economic growth.   To successfully develop those                                                                    
     new  energy   resources  as  well  as   supporting  the                                                                    
     newfound growth  and expansion of  our oil and  gas and                                                                    
     minerals extraction industries,  Alaska must make every                                                                    
     effort to  elevate the level of  coordination and focus                                                                    
     in our future worker  training and recruitment efforts.                                                                    
     This effort  will require  an even  closer relationship                                                                    
     between  industry and  training  providers to  maximize                                                                    
     the value of our training  investments and focus on key                                                                    
     job  skills training  Alaska will  need in  the future,                                                                    
     otherwise we  may see  projects curtailed  or cancelled                                                                    
     due  to spiraling  labor costs  or the  simple lack  of                                                                    
     enough workers to do the job.                                                                                              
                                                                                                                                
     I want to thank you  for the opportunity to share these                                                                    
     views with you  today and, as you can tell,  I could go                                                                    
     on probably  quite a bit  more but  I won't.   The time                                                                    
     won't  allow me  so  without any  further  ado, I'd  be                                                                    
     happy  to  answer any  questions  from  members of  the                                                                    
     committee.                                                                                                                 
                                                                                                                                
4:07:18 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN thanked Mr. Popp and noted the numbers he presented                                                                
are stunning.                                                                                                                   
                                                                                                                                
4:07:31 PM                                                                                                                    
                                                                                                                                
MR.  POPP noted  when he  first plotted  the number  of jobs  for                                                               
Alaska  on the  graph  four years  ago; people  did  not want  to                                                               
believe  the numbers.   However,  he  has been  working with  the                                                               
Putting  Alaska's Resources  to  Work Coalition,  which has  been                                                               
working with the Alaska Process  Industry Careers Consortium, and                                                               
pushed the graph through a  recent peer review of primarily human                                                               
resources directors in different industries.   He was told to add                                                               
another  2,000  jobs.    The demand  for  Alaska's  resources  is                                                               
growing rapidly.   If  those resources  can be  developed, Alaska                                                               
may see the  next great immigration wave and a  decade or more of                                                               
significant investment.                                                                                                         
                                                                                                                                
4:09:13 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN  thought all members agree  that developing Alaska's                                                               
resources is  a priority.   He  asked Mr.  Jackson of  the Alaska                                                               
Homebuilders   Association,  to   begin   his  presentation   via                                                               
teleconference.                                                                                                                 
                                                                                                                                
4:09:36 PM                                                                                                                    
                                                                                                                                
JIM JACKSON,  President, Alaska  Home Builders  Association, told                                                               
the  committee  the building  industry  in  Alaska represents  25                                                               
percent of  its economy.   The building industry  employed 14,000                                                               
people  across the  state and  7,800 in  the Anchorage  area last                                                               
year.   He said construction is  down by 35 percent  or more this                                                               
year.                                                                                                                           
                                                                                                                                
4:10:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOLL  noted that 35 percent  in one year is  not a                                                               
gradual decrease.                                                                                                               
                                                                                                                                
CHAIR  NEUMAN asked  Mr. Jackson  what he  sees happening  in the                                                               
next two or three years.                                                                                                        
                                                                                                                                
MR. JACKSON said that depends on  what the economy does as far as                                                               
oil  and  gas development.    If  nothing  is developed  in  that                                                               
industry, he  does not  know whether the  military will  bring in                                                               
more personnel to  buy homes, or whether FedEx is  going to bring                                                               
its pilots to  Alaska.  He said many factors  are involved but it                                                               
depends  on whether  people  are going  to be  out  there to  buy                                                               
homes.   People seem to  be very  cautious right now  even though                                                               
interest  rates are  still  at an  all-time low.    He said  some                                                               
builders in  the Anchorage  and Mat-Su  areas have  reduced their                                                               
profits down to  zero just to move their inventory.   He said the                                                               
situation is very devastating.                                                                                                  
                                                                                                                                
4:11:55 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN asked  how  many  jobs have  been  affected by  the                                                               
downturn.                                                                                                                       
                                                                                                                                
MR.  JACKSON  said  he  didn't  have any  current  numbers.    He                                                               
believed the  Alaska Homebuilders  Association is down  35 Mat-Su                                                               
members and 17 Anchorage members.   He said the number of workers                                                               
affected  depends on  how  many employees  each  builder had  but                                                               
construction  employment  is way  down.    He said  builders  and                                                               
people in  the industry  are cutting  back on  everything because                                                               
this is a very difficult time.                                                                                                  
                                                                                                                                
4:12:49 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN  recalled  that an  earlier  testifier  showed  the                                                               
construction  industry  as paying  the  third  or fourth  highest                                                               
wages  in the  state.   He  asked if  those wages  are likely  to                                                               
decline.                                                                                                                        
                                                                                                                                
MR.  JACKSON  said  new  construction  is  down  35  percent  and                                                               
approaching 50 percent.   He said the inventory of  new houses is                                                               
large; once bankers  start foreclosing on the  builders that have                                                               
not  sold  the homes,  the  banks  will  sell  those homes  at  a                                                               
discount, which will make it  even more difficult for builders to                                                               
sell  their  existing  inventory.    If the  average  wage  of  a                                                               
construction worker  was $54,000, his/her annual  income would be                                                               
way down this next year, he predicted.                                                                                          
                                                                                                                                
4:14:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   FAIRCLOUGH   said   Chair  Neuman   has   wisely                                                               
recognized that  the sectors of Alaska's  economy are interlinked                                                               
so  any oil  and gas  tax  decisions the  legislature makes  will                                                               
affect other  industries.  She asked  Mr. Jackson if he  can draw                                                               
any  conclusions  or  relationships   between  the  oil  and  gas                                                               
industry as it affects the housing market.                                                                                      
                                                                                                                                
MR. JACKSON said he has been  in Alaska 57 years and watched many                                                               
price declines.   In the  mid-1980s, the  price of oil  was below                                                               
$10 a barrel.   Right now the  price is at a record  high of $92.                                                               
He believes that buyers lack  confidence in what Alaska's economy                                                               
is going to  do in the near future because  the ads on television                                                               
say the pipeline  is only one-third full and  oil sales represent                                                               
80 percent  of Alaska's revenue.   They are reluctant  to upgrade                                                               
and are waiting to see what will happen.                                                                                        
                                                                                                                                
4:18:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FAIRCLOUGH  said even though  the price of  oil is                                                               
at  an  all-time  high,  because production  is  low  people  are                                                               
holding back  from making  any major  financial moves  until they                                                               
know what the economy is going to do.                                                                                           
                                                                                                                                
MR. JACKSON said he believes that is correct.                                                                                   
                                                                                                                                
REPRESENTATIVE  FAIRCLOUGH repeated  that  she appreciates  Chair                                                               
Neuman's  desire to  look  at  the impacts  of  the  oil and  tax                                                               
decision on other sectors of the economy.                                                                                       
                                                                                                                                
4:18:56 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN asked  Mr. Jackson  what  advice he  would give  to                                                               
legislators regarding the housing situation.                                                                                    
                                                                                                                                
MR.  JACKSON said  he didn't  want  to give  advice and  believes                                                               
legislators know what they are  doing.  He just hoped legislators                                                               
keep  the interests  of their  constituents in  mind and  instill                                                               
confidence about the economy moving forward.                                                                                    
                                                                                                                                
4:19:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOLL asked if the  Anchorage and Mat-Su areas have                                                               
been overbuilt at this time.                                                                                                    
                                                                                                                                
MR.  JACKSON said  yes,  but more  so  in the  Mat-Su  area.   In                                                               
addition, the  price of lots  skyrocketed so the prices  of homes                                                               
jumped  to  $350,000  to  $400,000.   Anchorage  has  a  34-month                                                               
inventory of $1 million plus homes right now.                                                                                   
                                                                                                                                
4:21:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOLL asked if the  builders who are trying to sell                                                               
these homes are paying property taxes  as well as interest on the                                                               
home loans.                                                                                                                     
                                                                                                                                
MR. JACKSON said they are paying  property taxes on the homes for                                                               
which  they hold  ownership.    He noted  the  interest  on a  $1                                                               
million home is about $8,000 per month.                                                                                         
                                                                                                                                
4:21:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DOLL asked what impact the property tax payments                                                                 
have on those businesses.                                                                                                       
                                                                                                                                
MR. JACKSON said he is paying  property taxes on his home, valued                                                               
at over $2 million a year, which  equals a lot of money.  He said                                                               
he has  no children  living at  home so  he and  his wife  do not                                                               
impact the economy like other families do.                                                                                      
                                                                                                                                
4:22:22 PM                                                                                                                    
                                                                                                                                
CHAIR NEUMAN thanked Mr. Jackson for joining the committee.  He                                                                 
then asked Mr. Stevens to begin his presentation.                                                                               
                                                                                                                                
4:22:36 PM                                                                                                                    
                                                                                                                                
MR. WAYNE STEVENS, President and CEO, Alaska State Chamber of                                                                   
Commerce, gave the following testimony.                                                                                         
                                                                                                                                
     Good afternoon  - Wayne Stevens,  President and  CEO of                                                                    
     the Alaska State  Chamber of Commerce.   Thank you, Mr.                                                                    
     Chairman  and   members  of  the  committee,   for  the                                                                    
     invitation.     I  have   some  thoughts   on  economic                                                                    
     development I wanted to share.   You've heard certainly                                                                    
     from lots  of resident experts  and lots of  charts and                                                                    
     graphs and I will leave that to those experts.                                                                             
                                                                                                                                
     The  Alaska State  Chamber of  Commerce  is a  business                                                                    
     advocacy  organization   whose  mission  is   to  drive                                                                    
     positive change  for Alaska's business  environment and                                                                    
     to  improve  our   member  organizations  by  providing                                                                    
     leadership,  advocacy, connectivity  and  support.   As                                                                    
     such,  we do  not gather  or collate  specific economic                                                                    
     indicators.   We use readily  available data  and offer                                                                    
     our thoughts on those data points.                                                                                         
                                                                                                                                
     I'd  like  to take  this  opportunity  to suggest  that                                                                    
     perhaps  we need  to stop  for  a moment,  take a  deep                                                                    
     breath,  and ask  ourselves what  it is  we really  are                                                                    
     trying  to   accomplish  when  we  speak   of  economic                                                                    
     development.   We all want  a healthy  economy, vibrant                                                                    
     and thriving  communities, industry that  is successful                                                                    
     and a government that supports  those goals.  But if we                                                                    
     stop to  take a  careful look  at what  we have,  it is                                                                    
     disappointing at best.                                                                                                     
                                                                                                                                
4:23:59 PM                                                                                                                    
                                                                                                                                
MR. STEVENS continued:                                                                                                          
                                                                                                                                
     We have communities that are  threatened with a loss of                                                                    
     their  local government  services.    We have  industry                                                                    
     that  is under  attack on  many fronts,  whether it  be                                                                    
     over    local,   state,    federal   tax    structures,                                                                    
     environmental issues, a  regulatory environment that is                                                                    
     not conducive to business, or  the rising cost of doing                                                                    
     business, including  insurance, fuel, labor  and taxes.                                                                    
     We  have   a  plethora   of  government   programs  all                                                                    
     competing to  help us  but with what  appears to  be no                                                                    
     clear  vision  of  who  is doing  what  to  help  whom.                                                                    
     Additionally there  is great debate in  our state about                                                                    
     what some call the urban-rural  divide.  How do we make                                                                    
     sure that  rural communities  survive into  the future?                                                                    
     It  is almost  enough to  make one  hang their  head in                                                                    
     defeat  and give  up efforts  to make  Alaska the  best                                                                    
     place on earth to live, work and play.                                                                                     
                                                                                                                                
4:24:56 PM                                                                                                                    
                                                                                                                                
     I  personally   believe  that  we  have   a  tremendous                                                                    
     opportunity ahead of us.   We have high oil prices, the                                                                    
     potential  to finally  build a  gas line  to bring  our                                                                    
     great  gas resources  to  market.   We  have a  growing                                                                    
     mining industry  and a demand for  a construction labor                                                                    
     force  that is  projected  to outstrip  our ability  to                                                                    
     fill those jobs with Alaskans.                                                                                             
                                                                                                                                
     The   fishing   industry    has   gone   through   much                                                                    
     consolidation  and  our  fish  products are  now  of  a                                                                    
     higher quality and prices for  that higher quality fish                                                                    
     are  increasing as  well.   Our  position  as a  global                                                                    
     competitor  in the  airfreight transportation  business                                                                    
     is creating great growth.                                                                                                  
                                                                                                                                
4:25:28 PM                                                                                                                    
                                                                                                                                
MR. STEVENS continued:                                                                                                          
                                                                                                                                
     So  which is  it,  you say  - bleak  or  rosy, rosy  or                                                                    
     bleak?   I  would say  it's both  and it  will only  be                                                                    
     determined by  our willingness to  roll up  our sleeves                                                                    
     and work together.   Opportunity is all in  how each of                                                                    
     you  perceives  the  same situation.    I  submit  that                                                                    
     opportunity abounds in  the state of Alaska  but how do                                                                    
     you perceive that  this is so?  Are those  rocks in the                                                                    
     road or  nuggets of opportunity?   I believe it  is how                                                                    
     you view the big picture.                                                                                                  
                                                                                                                                
     Here's  a  simple tale  that  I  think illustrates  how                                                                    
     perception  can affect  your outlook.   A  shoe company                                                                    
     sends two salesmen  into the far reaches  of the Amazon                                                                    
     jungle.    After  a  week  in  the  jungle,  the  first                                                                    
     salesman calls in  to the home office  and laments that                                                                    
     what an uphill  struggle this is going to be  as no one                                                                    
     wears   shoes.      Shortly   thereafter   the   second                                                                    
     salesperson reported  in.  He  went on at  great length                                                                    
     about  what a  wonderful  opportunity  he had  stumbled                                                                    
     upon as  no one owned  any shoes.  Your  perspective on                                                                    
     the situation clearly dictates your outlook.                                                                               
                                                                                                                                
4:26:36 PM                                                                                                                    
                                                                                                                                
MR. STEVENS continued:                                                                                                          
                                                                                                                                
     I believe that all regions  of Alaska, urban and rural,                                                                    
     need   to   have   better  communication,   focus   and                                                                    
     collaboration.   There  appears to  be duplication  and                                                                    
     sometimes  confusion  among government  and  non-profit                                                                    
     organizations that deliver services  to both areas.  In                                                                    
     the economic  development arena,  I would  suggest that                                                                    
     we inventory our existing  programs and services before                                                                    
     we  start   anything  new.    Each   organization  that                                                                    
     delivers services needs to focus  on their mission.  As                                                                    
     mission drift occurs, the  organization loses focus and                                                                    
     confusion sets  in for everyone  involved.  We  need to                                                                    
     determine who brings  what to the table,  for whom, and                                                                    
     where is  the overlap.  Sometimes  overlap is necessary                                                                    
     but  I suspect  that  there could  be consolidation  of                                                                    
     programs  and services.   I  believe  there's too  much                                                                    
     confusion over areas  of coverage and responsibilities.                                                                    
     We need to  reassess who was doing what  for whom, how,                                                                    
     and   when.     None   of  this   can  happen   without                                                                    
     communication  and  no  one  is  going  to  communicate                                                                    
     unless they trust each other.                                                                                              
                                                                                                                                
4:27:41 PM                                                                                                                    
                                                                                                                                
     So how do we accomplish that  review?  Many years ago I                                                                    
     took over  a newspaper  route in my  hometown as  I was                                                                    
     growing up as a kid.   I delivered 27 newspapers to all                                                                    
     four  quadrants of  that old  New England  town, north,                                                                    
     south, east  and west  along the  route structure.   It                                                                    
     took me over 2.5 hours to  deliver those 27 papers.  My                                                                    
     dad,  a mail  carrier, wondered  why there  were others                                                                    
     delivering newspapers  in our very neighborhood  when I                                                                    
     was off traipsing  around somebody else's neighborhood.                                                                    
     After a period  of me arriving home late  for dinner or                                                                    
     whatever  I was  supposed to  be doing,  he called  the                                                                    
     newspaper circulation  manager and volunteered  to help                                                                    
     the newspaper  review who was delivering  newspapers to                                                                    
     whom and  where.  In a  matter of a few  evenings, they                                                                    
     were  able  to sort  out  those  customers, divide  the                                                                    
     customer base up equitably among  all carriers and what                                                                    
     once  took  me  2.5  hours  to  deliver  could  now  be                                                                    
     accomplished in a  little under 30 minutes.   Now I had                                                                    
     the opportunity  to grow my  business by  asking others                                                                    
     in the  neighborhood if they  wanted home delivery.   I                                                                    
     was now  able to grow  those 27 newspapers to  over 150                                                                    
     papers  delivered and  still able  to  deliver them  in                                                                    
     under an  hour.   By collaborating,  communicating, and                                                                    
     review, I gave up old  customers, took on new customers                                                                    
     and grew my business by over 500 percent.                                                                                  
                                                                                                                                
4:29:01 PM                                                                                                                    
                                                                                                                                
MR. STEVENS continued:                                                                                                          
                                                                                                                                
     I  encourage you  to ask  the  Department of  Commerce,                                                                    
     Community and Economic Development  to undertake such a                                                                    
     review.  Create  a listing of all  agencies involved in                                                                    
     economic  development in  our  state, including  state,                                                                    
     federal  and local  programs.   List the  many programs                                                                    
     and  expected outcomes.   List  the constituencies  for                                                                    
     each of  those programs and  see if, indeed,  there are                                                                    
     opportunities      to     shed      programs,     shift                                                                    
     responsibilities,  and make  each program  stronger and                                                                    
     more  responsive to  the needs  of those  constituents.                                                                    
     There  might   even  be,  in  some   instances  if  the                                                                    
     evaluation  so warrants,  that we  decide to  eliminate                                                                    
     duplicate  and overlapping  efforts and  programs.   We                                                                    
     need to  see and know what  others are doing.   We need                                                                    
     to be  willing to  pass off projects  or issues  to the                                                                    
     appropriate agency.  We shouldn't  worry about who gets                                                                    
     credit for doing  or accomplishing a project.   We need                                                                    
     to worry  more about who  will do  it and are  they the                                                                    
     right agency or organization to accomplish it.                                                                             
                                                                                                                                
     A  presenter at  a recent  conference, in  his prepared                                                                    
     remarks,  suggested that  such a  review might  include                                                                    
     asking the  question:  If  it isn't  accomplishing what                                                                    
     we believe it should be,  why do we keep spending money                                                                    
     on it?  With a  clearer focus, fewer competing agencies                                                                    
     and programs,  we can begin  the process of  working to                                                                    
     make  sure  the  communities  can be  viable  into  the                                                                    
     future.   The  evaluations  can  make programs  better,                                                                    
     more effective and perhaps even  more responsive to the                                                                    
     different  needs of  individual communities.   I'm  not                                                                    
     here to  suggest that this  evaluation is a  panacea to                                                                    
     all that  ails small  communities, but perhaps  it will                                                                    
     bring  a sharper  focus to  what  is good  and what  is                                                                    
     worth saving in our communities.                                                                                           
                                                                                                                                
     Conversely, it may mean that,  like when the interstate                                                                    
     commerce system went in across  the Lower 48, not every                                                                    
     community  got access  to the  on-ramp to  the highway.                                                                    
     Over time, many of  those communities were absorbed and                                                                    
     consolidated  into   neighboring  communities.     Some                                                                    
     communities may  go away.  The  communities that remain                                                                    
     may  become  stronger,  more economically  viable,  and                                                                    
     able to  provide the infrastructure for  business to be                                                                    
     successful   in  their   community.     There  are   no                                                                    
     guarantees in  life or business  but hard  work, strong                                                                    
     plans, and  enthusiasm for  the future  will go  a long                                                                    
     way to make us successful.                                                                                                 
                                                                                                                                
     To those of  you from larger or  more urban communities                                                                    
     who think to themselves why  should I care what happens                                                                    
     to  these  small  communities?   I  say  rest  assured.                                                                    
     There's  a bigger  community upstream  saying the  same                                                                    
     thing about  your community.  It's  not about providing                                                                    
     a hand  out; it's about providing  a hand up.   We need                                                                    
     to  help   each  other   to  succeed.     We   need  to                                                                    
     collaborate.   A recent Anchorage  Economic Development                                                                    
     Corporation study shows that  roughly one in eight jobs                                                                    
     in  Alaska  depends on  rural  Alaska.   In  2004,  the                                                                    
     Southwest Alaska  Municipal Conference  contracted with                                                                    
     Northern  Economics to  conduct  an economic  geography                                                                    
     study.   Their report  shows that  each year  more than                                                                    
     $350   million   flowed   from  Southwest   Alaska   to                                                                    
     Southcentral  Alaska.   Should rural  Alaska shrink  in                                                                    
     size or stature, or go  away, will those Anchorage jobs                                                                    
     still  be as  important or  needed?   Will the  freight                                                                    
     forwarder, the  shipping clerk,  the airline  pilot and                                                                    
     support personnel  still have jobs  or will they  go by                                                                    
     the wayside as  well?  We are dependent  on one another                                                                    
     and need to look out for each other's best interests.                                                                      
                                                                                                                                
4:32:41 PM                                                                                                                    
                                                                                                                                
MR. STEVENS continued:                                                                                                          
                                                                                                                                
     Rural  Alaska  frequently   sees  development  projects                                                                    
     stymied by urban protagonists who,  on one hand, say we                                                                    
     need to create  an economy in rural Alaska  but, when a                                                                    
     project is  being development,  they quickly  point out                                                                    
     that the economic development project  as it is impacts                                                                    
     their recreational use  of rural lands.   We can't have                                                                    
     it  both   ways.    An   evaluation  of   our  economic                                                                    
     development  programs is  necessary and  will serve  to                                                                    
     help  make  us  a  stronger,  more  focused  place  for                                                                    
     business to do  business.  The challenge  is to improve                                                                    
     the productivity  of Alaska's economy and  the need for                                                                    
     state  government  to  work  with  municipalities,  the                                                                    
     private sector,  labor groups, and Alaskans  as a whole                                                                    
     to ensure  that our  state remains prosperous  in years                                                                    
     to come.                                                                                                                   
                                                                                                                                
     This is about greater  opportunity and a better quality                                                                    
     of life  for Alaskans and,  as such, is a  worthy topic                                                                    
     of an  open and vigorous public  discussion.  Certainly                                                                    
     this committee is to be  commended for undertaking such                                                                    
     a  beginning process.   We  talk of  the importance  of                                                                    
     education  but not  much changes.   We  ask the  school                                                                    
     system to do more each year  but give them no more time                                                                    
     in which to accomplish it.                                                                                                 
                                                                                                                                
4:33:56 PM                                                                                                                    
                                                                                                                                
     We still have  school days and a school  year too short                                                                    
     to accomplish all that is  being asked of our education                                                                    
     system.   We  add  programs  but add  no  more time  to                                                                    
     impart  the additional  knowledge.    According to  the                                                                    
     National   Center   for   Public  Policy   and   Higher                                                                    
     Education,  for  every  100 ninth  grade  students,  61                                                                    
     graduate  four years  later.   Of  the  61 high  school                                                                    
     graduates, 30 immediately enter  college.  Of those 30,                                                                    
     12 go  on to  graduate within 150  percent of  the time                                                                    
     with either  an Associate's  degree within  three years                                                                    
     or a Bachelor's  degree within six years.   What are we                                                                    
     doing for  the 88 who  dropped out, graduated,  and did                                                                    
     not  go to  college or  did  not finish  college?   Our                                                                    
     vocational  education  programs  must  be  improved  to                                                                    
     prepare  students for  work  opportunities beyond  high                                                                    
     school.                                                                                                                    
                                                                                                                                
4:34:50 PM                                                                                                                    
                                                                                                                                
MR. STEVENS continued:                                                                                                          
                                                                                                                                
     As  we prepare  to build  a gas  line project,  we must                                                                    
     ensure  that  we have  Alaskans  trained  and ready  to                                                                    
     enter   the  workforce.      We   must  establish,   in                                                                    
     collaboration with private  sector employers, a clearly                                                                    
     articulated  career  and  technical  education  program                                                                    
     that:                                                                                                                      
                                                                                                                                
     Is funded over the long term,                                                                                              
     Utilizes  existing  education  facilities  more  fully,                                                                    
     including evenings, weekends and summers,                                                                                  
     Uses  a  broad  range   of  educational  resources  not                                                                    
     limited to only the University of Alaska and                                                                               
     Includes   a   broad   range   of   options   including                                                                    
     apprenticeship,  internship,  and  private  career  and                                                                    
     technical education programs,                                                                                              
     Specifically targets  rural Alaskans  and out-of-school                                                                    
     youth,                                                                                                                     
     Uses distance learning capabilities where available.                                                                       
                                                                                                                                
     The  state  chamber has  advocated  for  decades for  a                                                                    
     state fiscal  plan.  We  applaud the  identification of                                                                    
     the fiscal dilemma our state  faces and the willingness                                                                    
     of many to  check spending.  A clear  plan, however, is                                                                    
     not  guiding  spending  or revenue  collection  or  the                                                                    
     question of  how the state  can invest new  revenues in                                                                    
     projects that will  render a return on  investment.  We                                                                    
     believe the  development of  a statewide  business plan                                                                    
     that  incorporates the  fundamentals of  a fiscal  plan                                                                    
     would   provide   guidance   and   direction   to   the                                                                    
     Legislature,    the   Administration,    the   business                                                                    
     community  and  citizens alike.    It  would provide  a                                                                    
     roadmap  for all  to use  as we  work to  diversify and                                                                    
     move our economy forward.                                                                                                  
                                                                                                                                
     As  government looks  at how  to sustain  and grow  our                                                                    
     economy,  it  becomes  more   important  than  ever  to                                                                    
     develop  a business  plan.   We believe  a well-written                                                                    
     business   plan  is   an   invaluable   tool  for   any                                                                    
     organization,  for both  internal and  external issues,                                                                    
     internal  management,   external  funding.     Business                                                                    
     planning  looks at  both the  mission  and the  revenue                                                                    
     bottom line.   A well-written business  plan provides a                                                                    
     strategic  vision, initiatives,  operating assumptions,                                                                    
     and  measurements.   We  can all  use  the document  to                                                                    
     measure future requests for support and funding.                                                                           
                                                                                                                                
4:37:02 PM                                                                                                                    
                                                                                                                                
MR. STEVENS continued:                                                                                                          
                                                                                                                                
     Our economy  is changing.   Our workforce  is changing.                                                                    
     Technology  is changing  the way  we work  and interact                                                                    
     and  we must  change the  way we  plan for  the future.                                                                    
     Government should  lay the  foundation for  the private                                                                    
     sector to succeed.   We can no longer just  look at our                                                                    
     small corner  of the world.   We are an  important part                                                                    
     of  the global  economy.   What  happens  in the  world                                                                    
     impacts  what  happens  to   Alaska  and  its  economic                                                                    
     future.  In  this changing world, we must  find ways to                                                                    
     encourage investment in our state.   We need to look at                                                                    
     what makes  a good  climate for investment:  stable tax                                                                    
     rates,  a  trained  workforce,  good  infrastructure  -                                                                    
     roads, ports, communication systems.   We need to level                                                                    
     the  playing   field  and   make  rules   to  encourage                                                                    
     investment in our state, not discourage it.                                                                                
                                                                                                                                
     We must have a stable  regulatory environment, a stable                                                                    
     investment  climate.    Stability is  critical  to  any                                                                    
     company   looking  to   relocate  in   our  state   and                                                                    
     communities who are looking to  invest in the future of                                                                    
     our  economy.    We  must   work  to  ensure  that  our                                                                    
     infrastructure  is  in  good  condition  and  ready  to                                                                    
     expand  its  carrying  capacity, whether  that  be  our                                                                    
     roads,  our ports,  our sewer  and  water systems,  our                                                                    
     electrical  systems.   They  must  be  ready to  accept                                                                    
     additional capacity.                                                                                                       
                                                                                                                                
     We must  work to ensure  that our education  system and                                                                    
     our health  care systems are  top notch.  We  must work                                                                    
     to improve  our telecommunications system  to encourage                                                                    
     new technology businesses  to locate in our  state.  We                                                                    
     have the components to attract  new investment into our                                                                    
     state.   We have an  unequaled opportunity to  sell our                                                                    
     state as  a great  place to  do business.   We  have an                                                                    
     obligation to portray our communities  and state in the                                                                    
     best possible  light.  We  need to acknowledge  that we                                                                    
      have challenges but we must not let these challenges                                                                      
     overwhelm us.  Thank you.                                                                                                  
                                                                                                                                
4:38:59 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN thanked  Mr.  Stevens and  opened  the meeting  for                                                               
questions.                                                                                                                      
                                                                                                                                
4:39:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOLL observed  that when  talking about  business                                                               
incentives, particularly to start  businesses, she can't think of                                                               
a greater  disincentive than  bringing in box  stores.   She said                                                               
she was  not sure what has  been done to encourage  box stores to                                                               
open in Alaska.                                                                                                                 
                                                                                                                                
MR. STEVENS  said he  cannot comment  other than  to say  that at                                                               
some  point   there  is  this   magical  line  between   being  a                                                               
successful,  locally   owned  business  that  has   expanded  and                                                               
becoming a "box" store.  He  thought a person with a good, viable                                                               
idea  should  be  encouraged   because  those  businesses  create                                                               
employment opportunities and investor returns.                                                                                  
                                                                                                                                
4:40:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DOLL responded,  "I  guess, just  a follow-up  to                                                               
that, would certainly be  encouraging vocational training because                                                               
where people  have something  where they're  skilled in  then can                                                               
work in that skill and get a  higher wage.  That would be another                                                               
way of doing that."                                                                                                             
                                                                                                                                
MR.  STEVENS  said he  grew  up  in  an educational  system  that                                                               
determined he was college prep  material although his inclination                                                               
was to  work with his hands  and be involved in  industrial arts.                                                               
He said  he doesn't think  [the education system] does  enough to                                                               
recognize that not everyone needs to  go to college.  Some people                                                               
are far better  suited and more excited about  working with their                                                               
hands.   He  said  the  numbers [of  college  bound students]  he                                                               
quoted  show  that  something  is  not  working  and  that  those                                                               
students who do not fit into  the narrow band of opportunity fall                                                               
to the wayside.                                                                                                                 
                                                                                                                                
4:42:42 PM                                                                                                                    
                                                                                                                                
CHAIR  NEUMAN  asked   Mr.  Stevens  to  leave  a   copy  of  his                                                               
presentation and  then commented that the  discussion among House                                                               
Oil  and  Gas  Committee  members   always  reverts  to  industry                                                               
stability, and that the speakers during the past two days have                                                                  
all told the committee that everything is connected.  He said:                                                                  
                                                                                                                                
     I  just hope  legislators take  out of  this discussion                                                                    
     what  I have.    Talking  to all  of  these leaders  of                                                                    
     industry, all  of these  economists, what  they've told                                                                    
     us, and again, it goes  back to the instability, trying                                                                    
     to make  sure that we show  the world Alaska is  a good                                                                    
     place  to work.   Alaska  is a  good place  to start  a                                                                    
     business.   It's a good  place to  live.  I  don't know                                                                    
     how we're  going to  go about doing  that and  the best                                                                    
     way -  I know that we  all have our own  objectives and                                                                    
     we all  have our own  ideas of  how we're going  to get                                                                    
     there.   There's going to  be a  lot of changes  in the                                                                    
     future of Alaska.  I can  feel that...in my blood.  You                                                                    
     know I've been here for  not that long but long enough.                                                                    
     With  that,  any  other comments  from  the  committee?                                                                    
     Thank you and that will close the hearing.  Thank you.                                                                     
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Special Committee on Economic Development, International Trade                                                                  
and Tourism meeting was adjourned at 4:45:23 PM.                                                                              

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