Legislature(2001 - 2002)
01/22/2002 08:53 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
January 22, 2002
8:53 AM
TAPE HFC 02 7, Side A
CALL TO ORDER
Co-Chair Mulder called the House Finance Committee meeting
to order at 8:53 AM.
MEMBERS PRESENT
Representative Eldon Mulder, Co-Chair
Representative Bill Williams, Co-Chair
Representative Eric Croft
Representative John Davies
Representative Richard Foster
Representative John Harris
Representative Bill Hudson
Representative Ken Lancaster
Representative Carl Moses
MEMBERS ABSENT
Representative Con Bunde, Vice-Chair
Representative Jim Whitaker
ALSO PRESENT
Kim Duke, Executive Director, Arctic Power;
PRESENT VIA TELECONFERENCE
Representative Gary Stevens; Jim Sykes, Oilwatch Alaska,
Mat-Su; Pamela A. Miller, Anchorage; Deb Moore, Northern
Environmental Center, Fairbanks; Mary Shields, Fairbanks;
Todd Burnside, Fairbanks; Patricia Walsh, Fairbanks; Gary
Newman, Fairbanks; Gary Newman, Fairbanks; Arthur Hussey,
Fairbanks, Stacey Fritz, Fairbanks; Carolyn Kreners,
Fairbanks; Debbie Miller, Fairbanks.
SUMMARY
HB 334 "An Act making appropriations for a grant to
Arctic Power to promote the opening of the Arctic
National Wildlife Refuge for oil and gas
exploration and development; and providing for an
effective date."
HB 334 was REPORTED out of Committee with a "do
pass" recommendation.
HOUSE BILL NO. 334
"An Act making appropriations for a grant to Arctic
Power to promote the opening of the Arctic National
Wildlife Refuge for oil and gas exploration and
development; and providing for an effective date."
KIM DUKE, EXECUTIVE DIRECTOR, ARCTIC POWER noted that the
urgency of additional funding for Arctic Power stands from
the extension of the campaign into 2002. The $2 million
dollar grant for 2001 was purposely expended through the
year. There was an expectation of success, which was not
realized. The campaign needs to be extended into the next
three months. She acknowledged that the energy policy
regarding the Arctic National Wildlife Refuge (ANWR) is
controversial. Arctic Power plans to do an intense three-
month campaign. They have swung another member of Congress:
Georgia Democrat, Zell Miller. There are indications that
the President will be addressing the issue in the State of
the Union address on January 29. There have been other
positive signs. The Chicago Tribune has changed their
editorial stance in support of opening ANWR.
Representative John Davies asked for more information about
the appropriation for union outreach. Ms. Duke explained
that union outreach was one of the original categories in
the grant. The item supported tours of union officials to
the North Slope. There was also a contribution to an
advertising campaign coordinated by the unions. The 5
percent administration fee goes to Arctic Power.
Co-Chair Mulder noted that private sector fund raising has
been extensive and successful. Ms. Duke observed that they
raised over $175 thousand dollars from the private sector
in the Anchorage area. She added that further funds of
approximately $600 thousand dollars were received from
unions and industry for advertising.
Representative John Davies felt that industry should
provide greater support, but observed that he would not
offer an amendment to require a match by industry.
Representative Hudson noted that there is a 2006 sunset
date. Ms. Duke clarified that the intent is to use the
funds in the next three-months. She did not anticipate that
funds would remain after that time.
Co-Chair Mulder pointed out that it is standard language
with any capital appropriation.
Co-Chair Mulder provided members with a proposed committee
substitute #22-LS1281\F, 1/18/02 (copy on file).
Representative John Davies MOVED to ADOPT the proposed
committee substitute, #22-LS1281\F. There being NO
OBJECTION, it was so ordered.
JIM SYKES, OILWATCH ALASKA, MAT-SU testified via
teleconference in opposition to HB 334. He felt that the
legislation was not needed. He spoke to the financial
ramifications of Arctic Refuge oil. If the Arctic Refuge
were opened for drilling, almost two barrels of oil would
have to be produced to earn the same amount of royalties
the state now receives from one produced barrel. Senator
Murkowski told the Palmer Chamber of Commerce, last
Wednesday, that the maximum royalty the state could expect
from Arctic Refuge oil is 50%, which translates to more
than a 44% loss of revenue per barrel compared with oil
produced on state lands.
The oil industry, along with federal and state governments,
project another 30 years of oil development from lands West
of the Arctic Refuge. Add in West Sak heavy oil, which the
U.S. Energy Information Administration estimates has three
to six billion barrels of potentially recoverable oil, and
the estimate rises to 40 years. Additionally, 93% of North
Slope's estimated natural gas reserves lie outside the
Arctic Refuge.
Mr. Sykes observed that opening the Arctic Refuge would
take away the state's leverage to prioritize oil
development on state lands, including West Sak heavy oil
and natural gas.
Mr. Sykes spoke to who could best support the effort: state
of Alaska or industry. He pointed out that the published
2000 Annual reports from Exxon-Mobil, BP and Phillips taken
together show a total net profit of $33.7 billion dollars.
When they become available, 2001 reports may have lower
figures, but Exxon-Mobil and BP are among the largest and
most profitable Companies in the world. The Alaska
Department of Revenue projects a total FY03 state income of
$6.36 billion dollars from all sources. Spending proposals
for FY03 total $7.3 billion dollars. The difference is
roughly a billion dollar shortfall.
Mr. Sykes concluded that the legislation is unwarranted and
pointed out that industry has billions of dollars for
investment. He observed that the state is proposing salary
freezes and reductions and emphasized the need to fund
public safety, health, and education.
Mr. Sykes recommended revenue-raising measures, such as
enactment of a windfall profit sharing tax. Presently, when
oil prices rise, the state share decreases. He maintained
that if the state and oil industry are truly partners, then
rising profits should be split equally. If prices rose as
they did from 1999 to 2000, it might mean an extra $1.5
billion dollars to the state of Alaska, depending on how
the tax details are structured. He added that corporate
taxes could be equalized in a manner proposed by
Representative Croft. Corporate rates would be lowered, but
the special tax reduction for oil companies would be
removed.
Mr. Sykes summarized that there is plenty of oil and gas
available for at least two more generations outside of the
Arctic Refugee and that there is no need to fund the
appropriation to Arctic Power.
DEB MOORE, NORTHERN ALASKA ENVIRONMENTAL CENTER, FAIRBANKS
testified via teleconference in opposition to HB 334. She
pointed out that the state is facing a budget shortfall.
She felt that it was inappropriate to spend money when half
of the state did not support the opening of ANWR. She
maintained that Arctic Power is lobbying and stressed that
the appropriation raises the question under the Public
Purpose Clause of the Alaska Constitution, that state money
can only be used for a public purpose. A legal opinion in
1991, by the Attorney General cautioned that the
legislature couldn't appropriate money for a partisan
political purpose since they rarely qualify as a public
purpose.
MARY SHIELDS, FAIRBANKS testified via teleconference in
opposition to HB 334. She noted that past appropriations
have not resulted in achieving the goal [of opening ANWR].
She observed that the state funds 70 percent of the effort.
She maintained that industry can pay its own way and
stressed that the funds could be invested into the
Permanent Fund or the Tourism Marketing Fund.
TODD BURNSIDE, FAIRBANKS testified via teleconference in
opposition to HB 334. He observed that a third of Alaskans
oppose opening ANWR. He maintained that the money is being
gambled on a private interest.
PATRICIA WALSH, FAIRBANKS testified via teleconference in
opposition. She noted that she is a tour operator. Bookings
for 2002 are 40 percent below the past years. She requested
that the funds be spent on the Alaska visitor industry. She
maintained that public money should not be spent on Arctic
power in the current fiscal climate.
ARTHUR HUSSEY, FAIRBANKS testified via teleconference in
opposition to HB 334. He pointed out that the state would
receive a greater rate of return on drilling on state
lands. He recommended that equal funds be spent on non-
consumptive, non-extractive uses of ANWR such as guiding,
hunting and tourism. It is also questionable if the state
should support a lobbying activity.
STACEY FRITZ, FAIRBANKS testified via teleconference in
opposition. She maintained that the oil industry can afford
their own lobbying and advertising. She stressed that ANWR
belongs to all Alaskans and the whole nation, of which a
majority oppose drilling. She questioned the legality of
the appropriation.
CAROLYN KRENERS, FAIRBANKS testified via teleconference in
opposition to HB 334. She maintained that Arctic Power is a
private lobbying group that is not supported by a
significant number of Alaskans. Public money should not be
used for a special interest lobbying group. She maintained
that authorization of an additional $1 million dollars to
Arctic Power is unconscionable.
DEBBIE MILLER, FAIRBANKS testified via teleconference in
opposition. She noted that many Alaskans favor protection
of ANWR. She stressed that the funds do not go to
educational purposes and that the funds would be better
spent on education in the state. She questioned the
legality of the appropriation. She noted that the
appropriation might be in violation of the Alaska
Procurement Code. The Attorney General's Office has
expressed concerns in past years that grants to Arctic
Power may be an attempt to avoid the procurement code in
order to receive lobbying services without competition or
public involvement. She noted that Arctic Power has
received approximately $10 thousand dollars a day for their
effort to open ANWR. She added that the appropriation might
also violate AS 37.05.321, which prohibits the legislature
from influencing legislative action.
PAMELA A. MILLER, ANCHORAGE testified via teleconference in
opposition to HB 334. She noted that there is a lack of
accountability. She did not think that the appropriation
reflected well on Alaska. She suggested that the funds be
spent to provide spill prevention and response to assure
adequate oversight. She questioned if funds are coming from
the effort to provide support for the natural gas pipeline.
Ms. Miller expressed concern that there was insufficient
time for the public to be aware of the meeting. Co-Chair
Mulder pointed out that the meeting was advertised under
statutory and uniform rule requirements.
Co-Chair Mulder explained that the majority of the funding
is coming from a reappropriation for evaluation of the
natural gas pipeline. The Administration has indicated that
the funding for [evaluation of the gas pipeline] is not
needed at this time and would be an appropriate
redirection. He felt that Alaskans do support the
legislation.
Representative John Davies MOVED to ADOPT Amendment 1. Co-
Chair Mulder OBJECTED for the purpose of discussion.
Representative John Davies explained that the amendment
would appropriate $100 thousand dollars to the city as
Kaktovik. The city is impacted by the effort to open ANWR.
Funding would also assist the city in the preparation of a
video indicating their support for opening ANWR.
Co-Chair Mulder WITHDREW his OBJECTION.
Representative Hudson spoke in support of the amendment. He
noted that Kaktovik is the community most affected by
efforts to open ANWR and it is in the state's best interest
to provide them assistance.
There being NO OBJECTION, Amendment 1 was adopted.
Representative Foster MOVED to report CSHB 334 (FIN) out of
Committee. There being NO OBJECTION, it was so ordered.
HB 334 was REPORTED out of Committee with a "do pass"
recommendation.
ADJOURNMENT
The meeting was adjourned at 10:02 AM.
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