Legislature(2013 - 2014)HOUSE FINANCE 519
04/18/2014 06:00 PM House FINANCE
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| Sb 138 Fiscal Note Discussion | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
April 18, 2014
5:19 p.m.
5:19:59 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 5:19 p.m.
MEMBERS PRESENT
Representative Alan Austerman, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Mark Neuman, Vice-Chair
Representative Mia Costello
Representative Bryce Edgmon
Representative Les Gara
Representative David Guttenberg
Representative Lindsey Holmes
Representative Cathy Munoz
Representative Steve Thompson
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Joe Balash, Commissioner, Department of Natural Resources;
Daniel Fauske, President, Alaska Gasline Development
Corporation; Michael Pawlowski, Deputy Commissioner,
Strategic Finance, Department of Revenue.
SUMMARY
CSSB 64(FIN)
OMNIBUS CRIME/CORRECTIONS/RECIDIVISM BILL
CSSB 64(FIN) was SCHEDULED but not HEARD.
CSSB 138(FIN) am
GAS PIPELINE; AGDC; OIL & GAS PROD. TAX
HCS CSSB 138(FIN) was REPORTED out of committee
with a "do pass" recommendation and with one new
fiscal note from the Department of Commerce,
Community and Economic Development, one new
fiscal note from the Department of Transportation
and Public Facilities, one new fiscal note from
the House Finance Committee, two new fiscal notes
from the Department of Revenue, one new fiscal
note from the Department of Natural Resources and
one previously published fiscal note: (CED).
CSSB 140(FIN)
AIDEA: ARCTIC DEVELOPMENT PROGRAM/FUND
CSSB 140(FIN) was SCHEDULED but not HEARD.
CS FOR SENATE BILL NO. 138(FIN) am
"An Act relating to the purposes, powers, and duties
of the Alaska Gasline Development Corporation;
relating to an in-state natural gas pipeline, an
Alaska liquefied natural gas project, and associated
funds; requiring state agencies and other entities to
expedite reviews and actions related to natural gas
pipelines and projects; relating to the authorities
and duties of the commissioner of natural resources
relating to a North Slope natural gas project, oil and
gas and gas only leases, and royalty gas and other gas
received by the state including gas received as
payment for the production tax on gas; relating to the
tax on oil and gas production, on oil production, and
on gas production; relating to the duties of the
commissioner of revenue relating to a North Slope
natural gas project and gas received as payment for
tax; relating to confidential information and public
record status of information provided to or in the
custody of the Department of Natural Resources and the
Department of Revenue; relating to apportionment
factors of the Alaska Net Income Tax Act; amending the
definition of gross value at the 'point of production'
for gas for purposes of the oil and gas production
tax; clarifying that the exploration incentive credit,
the oil or gas producer education credit, and the film
production tax credit may not be taken against the gas
production tax paid in gas; relating to the oil or gas
producer education credit; requesting the governor to
establish an interim advisory board to advise the
governor on municipal involvement in a North Slope
natural gas project; relating to the development of a
plan by the Alaska Energy Authority for developing
infrastructure to deliver affordable energy to areas
of the state that will not have direct access to a
North Slope natural gas pipeline and a recommendation
of a funding source for energy infrastructure
development; establishing the Alaska affordable energy
fund; requiring the commissioner of revenue to develop
a plan and suggest legislation for municipalities,
regional corporations, and residents of the state to
acquire ownership interests in a North Slope natural
gas pipeline project; making conforming amendments;
and providing for an effective date."
^SB 138 FISCAL NOTE DISCUSSION
5:19:59 PM
JOE BALASH, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES
reviewed the fiscal notes attached to SB 138. The first
fiscal note showed an operating cost of approximately $3
million for FY 15. He pointed out the estimated
supplemental cost resulting from the immediate effective
dates. Some costs would be incurred before the fiscal year
closed out.
5:21:15 PM
DANIEL FAUSKE, PRESIDENT, ALASKA GASLINE DEVELOPMENT
CORPORATION, introduced himself.
Commissioner Balash discussed the first fiscal note
including the expected operating costs associated with the
AGDC's participation in Alaska Liquefied Natural Gas
(AKLNG). Included in the costs were personnel and travel
expenses for various expected meetings. The fiscal note
requested funding for a one-time capital outlay for build-
out of necessary facilities to support the staffing on
AKLNG. The fund source was the AKLNG fund. The fund was
established as part of SB 138. An additional amount was
included to capitalize the fund over the pre-FEED process.
5:22:41 PM
Commissioner Balash discussed the next fiscal note, number
16 Alaska Industrial Development and Export Authority
(AIDEA), Alaska Energy Authority (AEA) fiscal note. He
stated that the director of AEA was available in the
committee room for questions. The fiscal note showed no
operating expenditures. The estimated capital expenditure
for FY 15 was projected at approximately $2 million to
complete the studies requested in the uncodified section of
the bill.
5:24:01 PM
Commissioner Balash continued with the note from the
Department of Natural Resources including the expenditures
expected for FY 17, which were converted into a one-time
item. He noted that the one-time item included the
personnel cost for six new individuals hired for marketing
in exempt positions. He noted that the exempt positions
were marketing-oriented personnel to assist in determining
the best practice for marketing the state's LNG. The fiscal
note had a significant travel item associated. The new
personnel would travel overseas to communicate with the
buyers of LNG with a travel cost of $102 thousand for the
next fiscal year. The large line item was $7,115,000 to
procure personal services to support the development of
contracts.
5:26:45 PM
Vice-Chair Neuman asked about page 3 of the fiscal note and
the $350 thousand and $325 thousand charged for expert
analysis. He wondered why the cost of the service was so
expensive.
Commissioner Balash replied that the department
investigated the option of hiring a person with current
expertise in LNG marketing with the Division of Oil and
Gas. He stated that the experience in the market commanded
an annual salary in the range of $250 thousand. The
additional funds were associated with their benefits. The
other four marketing analysts would be compensated at a
range of $200 thousand annually. The final position was a
standard range 20.
5:29:04 PM
Representative Wilson asked about contracting for the
positions.
Commissioner Balash replied that the flexibility to use a
contract was included in the procurement code for
professional and technical services.
5:29:37 PM
Commissioner Balash discussed the next fiscal note from the
Department of Revenue for $750 thousand to support
enhancements of the tax revenue management system and the
accompanying regulations.
5:30:34 PM
MICHAEL PAWLOWSKI, DEPUTY COMMISSIONER, STRATEGIC FINANCE,
DEPARTMENT OF REVENUE pointed out an additional notation on
page 2 of the fiscal note recognizing the expansion of the
educational credit for the broad vocational and donations
of equipment under the production tax. He added a comment
about the Department of Revenue's fiscal note. The Division
of Oil and Gas shared services with the Department of
Natural Resources, who took the lead on position requests.
5:31:40 PM
Mr. Pawlowski discussed another fiscal note from Department
of Revenue for $2.5 million from the AKLNG fund. The
request would fund a financing studies investment for
Alaskans, communities and regional corporations. The
financial analysis would occur prior to the firm
transportation services agreement with TransCanada.
Representative Gara discussed his concern regarding the
transfer of $2 million. He asked if the alternative
pipeline would not spend $2 million in the same year.
5:32:54 PM
Mr. Pawlowski replied that the funding was for studies
needed by the Department of Revenue, which included a fund
source change to the AKLNG project. He stated that AGDC was
provided flexibility to pace both projects. The board was
provided discretion about such pacing.
5:33:30 PM
Representative Guttenberg discussed the Department of
Revenue Taxation and Treasury note. He believed that the
note assumed that gas would be taken in-kind as opposed to
waiting for a best interest finding.
Mr. Pawlowski stated that the note allowed the division to
draft regulations describing the process in the event that
the Department of Natural Resources modified leases.
Another purpose was the process of accounting and
adjustment in the tax revenue management system for either
in-value or in-kind.
5:34:36 PM
Mr. Pawlowski continued with the next fiscal note for fund
capitalization. The request was a supplemental for FY 14.
The fund source was the AKLNG for $69,834,500, which would
allow the project to advance with the immediate effective
date.
5:36:02 PM
Mr. Pawlowski discussed the last fiscal note in the packet
for the Department of Transportation and Public Facilities
for $70 thousand in FY 15. The fund source was in AKLNG
receipts, which would be derived from the earlier mentioned
capitalization.
Co-Chair Stoltze noted that the bill had been passed out
previously, but he wished to offer additional committee
member comments for the record. The fiscal notes would
accompany the bill out of committee.
5:38:10 PM
Representative Gara thanked the administration. He stated
that the state-share numbers led to concern regarding the
version with less ownership and the other with more. If the
state did not buy-in to the equity stake, the state-share
would reside in the lower third of the jurisdictions
provided. He pointed out that the state-share was greater
with a buy-in to the project. He cited Roger Marks,
Legislative Consultant, Legislative Budget and Audit
Committee who stated that countries with similar risks
averaged approximately 80 percent of state-share while
Alaska was estimated at 20 percent less. Representative
Gara expressed concern about Alaska receiving their fair
share.
Representative Gara stated that his second issue was tied
to the expansion of the pipeline. He preferred not to
settle with royalty in-kind, but understood the idea. He
appreciated the common ground reached by the administration
and the legislature. He was unsure how he would vote on the
House Floor.
5:41:56 PM
Co-Chair Stoltze stated that Representative Gara's concerns
both written and verbal were included in the record.
5:42:14 PM
Representative Holmes observed a healthy balance of
optimism and skepticism in the Capitol and among committee
members. She realized that the state was in the early part
of the process. She acknowledged the work ahead. She
recalled a past contract that had been voted down. She
requested that the administration make every effort to
inform the legislature about future changes.
Co-Chair Stoltze stated that the contract was not ratified.
Representative Holmes stood corrected.
5:44:10 PM
Representative Wilson thanked the co-chairs for the
latitude to ask questions. Most of the Interior
delegation's concerns were linked to state energy issues.
She stressed that burning wood was not a long-term solution
for the Interior region. She thanked the team for answering
questions multiple times. She wished for partnership with
the right partner. She stressed that she would update her
constituents as the project moved along.
5:46:23 PM
Representative Costello thanked the co-chairs and the
administration. She appreciated the Alaska Hire and the LNG
marketing amendments added to the bill by the committee.
She acknowledged her concern with the state's relationship
with TransCanada.
5:47:27 PM
Co-Chair Austerman supported the concept of a gas pipeline.
His concerns included those of the public. He wished to
ensure that the public understood the changes in the
state's tax regime resulting from the bill. He hoped that
the administration took the education needs of the public
seriously. He appreciated the candid conversations between
the committee members and the administration.
5:49:02 PM
Representative Thompson thanked the co-chairs for providing
access to the consultants and for the information related
to the gas pipeline processes. He appreciated the
presentations provided by the administration as they added
to his comfort level in the project.
5:49:46 PM
Vice-Chair Neuman relayed his initial opinions regarding
diversifying the state's income. He stated that the gas
pipeline would lead to long-term sustainable energy for
Alaska. He mentioned additional opportunities in mining
that would benefit from the energy available from the
advent of the gas pipeline. The many benefits would help to
diversify the economy. He added that the benefits of jobs
in the communities would help to balance the Department of
Health and Social Services budget. He mentioned the alcohol
and drug abuse in rural Alaska resulting from the lack of
stability and employment. He pointed out the decline of oil
production and noted that Alaska's future included the gas
pipeline.
5:53:37 PM
Representative Guttenberg recalled his experience working
to build the Trans-Alaska Pipeline System (TAPS). He
believed that the new pipeline would lead to future
employment for Alaskans. He appreciated Vice-Chair Neuman's
optimism related to affordable energy throughout the state.
He expressed concern about the process including the
Memorandum of Agreement and Heads of Agreement that were
untouchable by both the legislature and the public. He
stated that he did not understand if AGDC would work on two
projects simultaneously. He stated that past pipeline
projects led to false starts and he expressed worry about
this project as well. He wished the best for the project
and its outcome. He expressed both cynicism and optimism.
5:58:02 PM
Representative Guttenberg stated that the nuances of the
economies in rural Alaska were complicated. He had eternal
optimism for the state and believed it had resources for
many years to come. He discussed characteristics common to
Alaskans including optimism.
5:59:35 PM
Representative Edgmon thanked the co-chairs for their
organization of the hearings related to SB 138. He
acknowledged that the subject was complicated. He spoke to
various oil and gas options including the Petroleum
Production Tax (PPT) and the Alaska's Clear and Equitable
Share (ACES). He believed the legislative product in SB 138
was the most rounded; it spoke to affordable energy and
addressed the issue from a statewide perspective. He listed
other components including infrastructure, ownership
potential, instate provisions and bridges. He expressed
cautious optimism for the project. He appreciated the
stage-gated approach taken by the measure.
6:02:13 PM
Representative Munoz considered the moment historical. She
stated that Alaska learned from the development of the oil
industry. The legislation considered previous experiences
such as municipal impacts and those of roads and bridges.
She echoed the sentiments of Representative Costello
related to local hire and training. She stated that the
legislation incorporated many experiences and lessons from
the past. She looked forward to the economic benefits of a
gas pipeline in Alaska.
6:04:35 PM
Representative Gara thanked Co-Chair Stoltze and Co-Chair
Austerman for allowing Mr. Harper to offer a different
perspective. He thanked Senator Fairclough and Senator
French for arranging the meeting that allowed a more
balanced view for the committee.
6:05:16 PM
Co-Chair Stoltze thanked the committee and staff for the
flexibility on the issue. The issue forced many other
meetings. He admitted to feeling a mix of skepticism and
hope.
6:08:26 PM
Vice-Chair Neuman MOVED to REPORT HCS CSSB 138(FIN) out of
committee with individual recommendations and the
accompanying fiscal notes. There being NO OBJECTION, it was
so ordered.
Vice-Chair Neuman MOVED the letter of intent attached to
the bill. There being NO OBJECTION, it was so ordered.
HCS CSSB 138(FIN) was REPORTED out of committee with a "do
pass" recommendation and with one new fiscal note from the
Department of Commerce, Community and Economic Development,
one new fiscal note from the Department of Transportation
and Public Facilities, one new fiscal note from the House
Finance Committee, two new fiscal notes from the Department
of Revenue, one new fiscal note from the Department of
Natural Resources and one previously published fiscal note:
(CED).
ADJOURNMENT
6:10:43 PM
The meeting was adjourned at 6:10 p.m.
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