Legislature(2025 - 2026)ADAMS 519
05/01/2025 01:30 PM House FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB57 | |
| HB27 | |
| HB194 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 57 | TELECONFERENCED | |
| += | HB 27 | TELECONFERENCED | |
| + | HB 194 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
May 1, 2025
1:40 p.m.
1:40:48 PM
CALL TO ORDER
Co-Chair Schrage called the House Finance Committee meeting
to order at 1:40 p.m.
MEMBERS PRESENT
Representative Neal Foster, Co-Chair
Representative Andy Josephson, Co-Chair(via teleconference)
Representative Calvin Schrage, Co-Chair
Representative Jamie Allard
Representative Jeremy Bynum
Representative Alyse Galvin
Representative Sara Hannan
Representative Nellie Unangiq Jimmie
Representative DeLena Johnson
Representative Will Stapp
Representative Frank Tomaszewski
MEMBERS ABSENT
None
ALSO PRESENT
Erik Gunderson, Staff, Representative Calvin Schrage;
Representative Genevieve Mina, Sponsor; Katie Giorgio,
Staff, Representative Genevieve Mina; John Crowther, Deputy
Commissioner, Department of Natural Resources; Ryan
Fitzpatrick, Commercial Manager, Division of Oil and Gas,
Department of Natural Resources.
PRESENT VIA TELECONFERENCE
Michael Partlow, Analyst, Legislative Finance Division; Dom
Pannone, Director, Program Management and Administration,
Department of Transportation and Public Facilities; Casey
Sullivan, Government and Public Affairs Manager, Marathon
Petroleum, Anchorage.
SUMMARY
HB 27 MEDICAL MAJOR EMERGENCIES
CSHB 27(HSS) was REPORTED out of committee with
five "do pass" recommendations, one "do not pass"
recommendation, four "no recommendation"
recommendations and with one previously published
fiscal impact note: FN1 (DOH).
HB 194 APPROVE MARATHON PETRO ROYALTY OIL SALE
HB 194 was REPORTED out of committee with eight
"do pass" recommendations and with one previously
published indeterminate fiscal note: FN1 (DNR).
CSSB 57(FIN)
APPROP: CAPITAL/FUNDS/REAPPROP
CSSB 57(FIN) was HEARD and HELD in committee for
further consideration.
Co-Chair Schrage reviewed the meeting agenda.
CS FOR SENATE BILL NO. 57(FIN)
"An Act making appropriations, including capital
appropriations and other appropriations; making
reappropriations; making appropriations to capitalize
funds; and providing for an effective date."
1:41:46 PM
Co-Chair Foster MOVED to ADOPT the proposed committee
substitute for CSSB 57(FIN), Work Draft 34-GS1460\U (Walsh,
4/30/25)(copy on file).
Co-Chair Schrage OBJECTED for discussion.
Co-Chair Schrage asked his staff to review the changes in
the Committee Substitute (CS).
ERIK GUNDERSON, STAFF, REPRESENTATIVE CALVIN SCHRAGE,
reviewed the changes in the CS. He summarized that the CS
increased deferred maintenance for kindergarten through
grade twelve (K-12) schools, Judiciary, and the University
of Alaska (UA). It also provided additional funding for the
Alaska Travel Industry Association (AITA) while utilizing
other funds and reappropriations. He noted that a few other
changes were covered in the summary of changes document. He
read from the Summary of Changes (copy on file):
Page 3, lines 10-13: Department of Commerce, Community
and Economic Development - increases the grant amount
to Alaska Travel Industry Association from $2,500,000
to $5,000,000 from the general fund and specifies the
grant is for "Tourism Marketing Activities in National
and International Markets".
Page 3, lines 17-18: Department of Education and Early
Development - increases the appropriation from the
general fund to Mt. Edgecumbe High School for
Replacement of Dorm Windows from $1,365,000 to
$2,730,000.
Page 3, lines 19-21: Department of Education and Early
Development - increases the appropriation to the Major
Maintenance Grant Fund (AS 14.11.007) from $19,055,000
to $38,110,038, providing funding for the top 9
projects on the School Major Maintenance list.
Page 5, lines 11-12: Office of the Governor -
increases the appropriation to the Office of the
Governor for Statewide Deferred Maintenance,
Renovation, and Repair from $10,000,000 to $20,000,000
in designated funds from the Alaska Capital Income
Fund.
1:45:22 PM
Page 36, lines 24-25: University of Alaska - increases
the appropriation from the general fund for Facilities
Deferred Maintenance and Modernization from $5,000,000
to $10,000,000.
Page 37, line 3: Judiciary - increases the
appropriation from the general fund for Building
Repairs from $750,000 to $1,500,000.
Page 43, line 30 through page 44, line 3: Department
of Commerce, Community, and Economic Development
(DCCED) - appropriates from the general fund $600,000
to the Department of Commerce, Community, and Economic
Development for organizational grants under AS
29.05.190 to the Xunaa Borough for Fiscal Years 26,
27, and 28.
Page 44, lines 16 - 18: Department of Education and
Early Development DEED) - inserts new subsection (b)
as backfill language in the event that the balance of
the major maintenance grant fund (AS 14.11.007) is
less than $38,110,038, the shortfall amount would be
appropriated from the general fund.
Mr. Gunderson interjected that the last item was in
relation to the Senate's recent CS for the operating budget
which appropriated an estimated $30 million in FY 25
lapsing operating funds to capitalize DEED's Major
Maintenance Grant Fund.
1:47:58 PM
Co-Chair Schrage noted that Representative Galvin joined
the meeting.
Representative Stapp inquired about the $600,000 grant to
the Hoonah (Xunna) Borough. He asked for details. Mr.
Gunderson answered that the $600,000 was part of an
organizational grant through DCCED. There was a forthcoming
election in Hoonah regarding expanding the city to an
organized borough. Funding was provided via state statute
in the event a community transitions to an organized
borough.
Representative Hannan clarified that the "X" was pronounced
as a "H". The funding was conditional on the outcome of the
election in favor of the expansion.
Representative Stapp asked if the $600,000 was supposed to
be community assistance funding. Mr. Gunderson deferred the
question to the Legislative Finance Division (LFD).
MICHAEL PARTLOW, ANALYST, LEGISLATIVE FINANCE DIVISION (via
teleconference), replied that the organizational grant was
provided for via statute. He delineated that it was
distributed in three payments over three years. The first
payment was $200,000 within 30 days of certification of
incorporation. The second payment of $200,000 was issued
within 30 days of the start of the second fiscal year after
incorporation. Finally, the third payment of $100,000 was
issued within 30 days of the start of the third fiscal
year. He concluded that the grant provided startup money
for a new borough. Representative Stapp asked Mr. Partlow
to repeat his answer. Mr. Partlow reiterated his answer
specifying the distribution of funds.
1:52:20 PM
Representative Stapp asked if the entire $600,000 had to be
front loaded. Mr. Partlow replied that via statute the
funding was all available upfront to the department, but
not the community.
Mr. Gunderson returned to the Summary of Changes:
Page 45, line 19: Department of Transportation and
Public Facilities (DOT) - increases the amount
appropriated from reappropriations to the Department
of Transportation and Public Facilities for federal-
aid highway state match from $47,110,303 to
$49,702,303.
Page 45, lines 23-25: Department of Transportation and
Public Facilities - reappropriates an estimated
balance of $3,457,666 from sec. 13, ch. 29, SLA 2008,
page 159, lines 20-22 Palmer Wasilla Highway
Improvements Phase II, toward federal-aid highway
match.
Representative Johnson had some concerns and questions.
She noted that the prior and following two items were
reappropriations that were all decremented out of
Matanuska-Susitna (Mat-Su) Borough ongoing highway
projects. She thought that reappropriating funding in the
middle of ongoing projects was unusual. She asked for
comment.
Co-Chair Schrage answered that it was a bit unusual, but he
countered that so was the budget process in the current
fiscal situation. He explained that the items were included
in the CS for the committee to consider and scrutinize
whether the progress made on the projects warranted further
funding. He offered that it was a very difficult fiscal
time for the state. He noted that the appropriations were
made five years' prior, and all had significant unobligated
balances. Representative Johnson thought there was a
misunderstanding because the road projects were not
completed and were in the middle of construction. She
voiced that it was highly unusual to remove funding in the
middle of a road project and believed that it was
dangerous." She thought eliminating so much from Mat-Su
projects was "interesting." She would continue to speak to
the issue. Co-Chair Schrage replied that he took any
project with a significant unobligated balance and included
it in the CS for further consideration. He furthered that
on the Palmer Wasilla Highway Improvements project the
original appropriation occurred 17 years ago and it's taken
until the current year to spend one-eighth of the funding.
1:57:24 PM
Representative Johnson shared information regarding the
Glenn Highway project, which was not a project currently in
question. She recalled working on the project in the
planning phases in 2005. She was intimately involved in the
planning from 2010 through 2016 as mayor of Palmer. She
related that right-of-way acquisition took a long time. She
hoped the project would be finished in the coming summer.
The project took 20 years, which was not slow or unusual.
She pointed to the Fairview Loop project that involved a
railroad crossing and right-of-way acquisitions. She would
be looking closely at the reappropriations. She thought it
was a terrible practice to start.
Representative Allard asked if Andy Mills was available
from the Department of Transportation and Public Facilities
(DOT). She asked for clarification on the project. She
shared Representative Johnson's concerns.
Co-Chair Schrage answered in the negative and relayed that
there was another representative available online.
DOM PANNONE, DIRECTOR, PROGRAM MANAGEMENT AND
ADMINISTRATION, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES (via teleconference), asked which project was
being referred to.
Co-Chair Schrage answered that it was the Palmer Wasilla
Highway Improvements Phase II project.
Mr. Pannone replied that it was an "active" project. He
expounded that the remaining balance of funds were for
improvements that were within the scope of the project that
were requested by the City of Wasilla via a resolution. The
funds were encumbered, and the department intended to
expend the funds in the coming summer. The department
collaborated with the city on a planned safety project and
was responding to the public's needs for the project.
Representative Allard asked how the removal of the funds
would impact the area. Mr. Pannone responded that the
safety project entailed turning lanes and traffic patterns
that posed a risk to the traveling public. The funds were
going to be under contract and encumbered. He was not
certain on the technical issues if the funds were
reappropriated while encumbered. He ascertained that if the
project was under contract, it would subject DOT to
potential legal action and the project would be delayed or
stall out due to lack of funding. Representative Allard
asked whether there were safety risks or if lives were at
stake with the liability and she wondered if the state
could be held liable if a lawsuit occurred.
2:03:21 PM
Mr. Pannone did not say the state would be liable. The
project was a requested safety improvement for the
identified portion of road and without the funds it would
not happen.
Representative Bynum noted there were three projects
totaling almost $12 million and only one project was
briefly addressed. He requested more information concerning
the Palmer Wasilla Highway Improvements Phase II project,
the $8.149,630 Fairview Loop Road Reconstruction project
and the Fairview Loop Road pedestrian pathway for $201,221.
He shared that in Ketchikan, there was a Tongass Highway
repaving project that was in the works for a decade and the
project was done in phases due to difficulties in getting
the right of way and other preliminary work done. He asked
about the actual impacts" on all three projects by pulling
the funds before the committee decided on the items.
2:06:28 PM
Mr. Pannone answered that regarding the Palmer Wasilla
Highway project the department intended to be under
construction in the coming summer. He reiterated that the
reappropriation would prevent the work from happening. He
offered to speak to the Fairview Loop projects.
Co-Chair Schrage interjected and inquired if pulling the
funds killed or delayed the project. Mr. Pannone replied
that the department would not be able to proceed .
Representative Bynum wondered about the other projects.
Co-Chair Schrage asked if they were currently under
contract for construction during the coming summer. Mr.
Pannone responded that the funds intended to be under
contract within a "couple of months" but were not currently
under contract.
Representative Hannan asked what the original appropriation
in 2008 was. She noted that it was as a phase two project
and asked about other prior phases. Mr. Pannone replied
that he did not have all of the specific projects or scopes
of work on hand. He would follow up to answer the question.
Representative Hannan asked if it was correct to conclude
that some of the 2008 funding had been spent and the
$3,457,666 was the amount remaining. Mr. Pannone replied
that over $500,000 had been expended from the original $4
million appropriation. The department could also combine
funding with other projects or have "multiple discreet
scopes of work under an appropriation such as this."
2:10:05 PM
Representative Tomaszewski shared that he had heard from a
few contractors concerning the lack of work for the coming
summer. He thought the project looked to be shovel ready
and removal of the funding would stop the project for the
summer. He worried about contractors in the state. He asked
if it would kill the projects and lessen the pool of
contracts. Mr. Pannone answered that he would agree with
the statement that pulling the funding could reduce the
number of projects DOT was trying to put on the street in
the coming summer.
Representative Bynum asked about the communities'
expectation of the project. He also wondered if it had an
impact on federal match. Mr. Pannone replied that the City
of Wasilla assembly had conveyed the desire for DOT to
complete the project. He believed the assembly understood
the department was moving forward on the projects. He added
that if the reappropriation was substituting "hard match"
funding, DOT would continue to request the same amount of
funding.
2:13:55 PM
Representative Galvin asked for clarification if Mr.
Pannone stated there was a federal match for the funds. Mr.
Pannone responded that he was speaking to any
reappropriations being used to provide matching funds for
the current year's federal revenue and if the
reappropriations were not made DOT would continue to
request the original amount of match included in the
governor's budget.
Co-Chair Schrage would work to provide further clarity.
Representative Allard stated that the Mat-Su was the
fastest growing area in the state and pulling the project
would be detrimental.
Mr. Gunderson continued reviewing the changes in the CS:
Page 45, lines 26-28: Department of Transportation and
Public Facilities - reappropriates an estimated
balance of $201,221 from sec. 7, ch.43, SLA 2010, page
36, lines 29-31, Fairview Loop Road pedestrian
pathway, toward federal-aid highway match.
Page 46, lines 1-3: Department of Transportation and
Public Facilities - reappropriates an estimated
balance of $8,149,630 from sec. 1, ch.17, SLA 2012,
page 133, lines Fairview Loop Road reconstruction,
toward federal-aid highway match.
2:16:47 PM
Representative Johnson informed the committee that the road
had been an ongoing issue for quite some time. She
explained that there was an offramp to the Parks Highway
that provided a path to Knik Goose Bay Road. Many commuters
returning from Anchorage took the exit to bypass Wasilla
and arrive at Knik Goose Bay Road, which was a rapidly
growing neighborhood. The current road was an old wagon
farm road that was highly trafficked. She elucidated that
for old roads that had been in place there were a number of
properties that had to be purchased for the right-of-way
acquisition. She shared that the project was in the
acquisition process. She relayed more information regarding
acquisitions and utility relocations over five years
regarding the Glenn Highway project. She emphasized that it
took a lot of negotiations to get things in place before
construction could be completed. The road in question had
many houses and properties along it and was far from
completion.
Representative Allard had never seen reappropriating
funding from ongoing projects. She did not support taking
money from one project for another. She stressed that it
could cost lives and was "dangerous.
Representative Johnson drew attention to the second
project; the pedestrian pathway. She related that the two
projects were interrelated and was under the same
appropriation.
2:21:17 PM
Mr. Gunderson continued with the Summary of Changes:
Page 46, lines 6-9: Department of Transportation and
Public Facilities - reappropriates an estimated
balance of $766, from sec. 1, ch.18, SLA 2014, page
63, line 4 and allocated on page 63, lines 12-13, as
amended by secs. 14(d), 21(g), and 21(h), ch.1, TSSLA
2017, Knik Arm bridge project development, toward
federal-aid highway match.
Representative Johnson relayed that initially there was a
much larger appropriation, and the funding was
reappropriated to the Kivalina School. She hoped they would
follow the rule to keep money in the same district. She
understood the federal funding for the project was
$40,000,000.
Co-Chair Schrage commented that sometimes changes happened
because they were warranted.
Representative Stapp thought it probably cost more than
$766. to reappropriate the $766. He thought the
administrative cost alone exceeded the amount. Co-Chair
Schrage did not have any experts available to perform the
calculation.
2:23:58 PM
Mr. Gunderson continued with the summary of changes:
Page 46, line 15-17: Department of Commerce,
Community, and Economic Development - Alaska Energy
Authority - reappropriates an estimated balance of
$782,125 from sec.14, ch.11, SLA 2022, page 117, lines
19-20, electrical vehicle infrastructure plan, toward
federal-aid highway match. The Department of Commerce,
Community, and Economic Development - removes
reappropriation sec. 14, ch.11, SLA 2022 page 86, line
31, City of Nome, deep draft port.
Representative Bynum cited the electric vehicle program. He
noted that the program was suspended by the federal
government and the program could not be revived. He asked
if he was correct. Co-Chair Schrage answered in the
affirmative. Representative Bynum believed the suspension
was unfortunate.
Representative Hannan related that the item was not in the
summary of changes, but her colleague had spoken to the
idea that reappropriations should remain within the same
district. She pointed out that her district likely had the
biggest loss on page 46, at a total of $36 million being
reappropriated; none to her district. She did not believe
that certain projects or regions were being picked on and
believed that her district was the "biggest loser"
Representative Johnson wanted to speak to the Juneau Access
Road that had much local opposition. She pointed out the
there currently was no road and she did not view it as a
safety issue. Representative Hannan contended that she was
not asserting it was a safety issue but was addressing the
tradition of reappropriations remaining in the district.
2:26:52 PM
Representative Tomaszewski spoke to the road to Juneau. He
would like to see more citizens of Alaska get the
opportunity to come to Juneau via a road.
Co-Chair Schrage noted there was a marine highway that was
available for passenger and vehicle transport to the
capitol.
Mr. Gunderson continued with the Summary of Changes:
Page 51, lines 3-7: Office of the Governor - updates
reappropriation language for lapsing operating funds
from the Office of the Governor to include expenses
related to the commissioning of the USS Ted Stevens,
US Navy Ship, and associated support activities in the
state for fiscal years 2026 and 2027, not to exceed
$100,000.
Page 51, lines 23-28: Office of the Governor - updates
reappropriation language for lapsing operating funds
from the Office of the Governor to include capital
costs and material purchases related to facilities
repairs, information technology improvements and
upgrades, food security, the 2026 Alaska Sustainable
Energy Conference, government efficiencies, and
resource development analyses, studies, and process
reviews.
2:28:51 PM
Representative Stapp thought change on page 51, lines 3
through 7 was an interesting reappropriation. He recounted
that the state did not commission ships. He believed that
reappropriating money from the governor's office for the
items listed in the prior two items was unusual and wanted
further clarification.
2:29:43 PM
AT EASE
2:30:52 PM
RECONVENED
Co-Chair Schrage explained that the Navy destroyer, named
after the late Senator Ted Stevens, would journey to Juneau
and also visit Kodiak, Anchorage, and Ketchikan. He noted
that there were funds reappropriated to provide some
auxiliary support for the effort. Representative Stapp
wondered what they were spending $100,000 on. Co-Chair
Schrage would follow up on the specific costs. He was aware
that the state wanted an active role in the effort.
Representative Allard also would like further details. She
found it peculiar.
Representative Johnson thought that typically the military
took great pride in showing off its equipment. She read the
language from the prior version of the bill [CS SB 57
(FIN)] on page 49, lines 13 through 16:
The unexpended and unobligated general fund balances
of the following appropriations are reappropriated to
the Office of the Governor for capital costs related
to facility repair and maintenance, information
technology infrastructure, elections equipment, and
material purchases
Representative Johnson believed that the reappropriations
were removing the funding out of maintaining
infrastructure. She was concerned that funding was
eliminated for the purchase of elections equipment and
believed that infrastructure should be maintained for
reasons like a visiting ship.
2:34:23 PM
Mr. Gunderson maintained that there was no requirement that
$100,000 was spent by the Office of the Governor. The item
merely granted authority to use up to that amount of
lapsing funds as it saw fit. He read the final items from
the Summary of Changes:
Page 52, lines 22-25 - conforming changes.
Page 52, lines 29-30: Adds contingency language that
the $600,000 appropriation to the Xunaa Borough is
contingent on the incorporation of the Xunaa Borough
on or before December 31, 2025.
Mr. Gunderson relayed high level changes to the CS. He
indicated that there was a projected $730,000 reduction in
Undesignated General Funds(UGF), a $40,000,000 increase in
Designated General Funds (DGF), and a roughly $2,500,000
forecasted increase in other state funds.
2:35:45 PM
Representative Johnson asked about the next step in the
budget process.
Co-Chair Schrage replied that there would be an amendment
deadline set for the following week.
Co-Chair Schrage WITHDREW the objection.
Representative Johnson OBJECTED.
Representative Johnson reiterated her concern regarding the
reappropriations from the Mat-Su appropriations. She
believed that it placed the projects in "jeopardy,
increased the projects' costs and was a "disservice" to the
citizens of Alaska who relied on the safety upgrades.
2:37:49 PM
Representative Bynum supported Representative Johnson's
perspective due to his understanding of the effects of
delaying a project in mid-course.
A roll call vote was taken on the motion.
IN FAVOR: Galvin, Jimmie, Hannah, Schrage, Foster,
Josephson
OPPOSED: Johnson, Bynum, Tomaszewski, Allard, Stapp
The MOTION PASSED (6/5). There being NO further OBJECTION,
work draft 34-GS1460\U (Walsh, 4/30/25) was ADOPTED.
Co-Chair Schrage set an amendment deadline for Monday, May
5 at 12:00 p.m.
Representative Allard remarked on the amendment deadline.
She asked to move the deadline to Tuesday.
Co-Chair Schrage replied that he would not change the
amendment deadline.
CSSB 57(FIN) was HEARD and HELD in committee for further
consideration.
2:40:03 PM
AT EASE
2:40:38 PM
RECONVENED
HOUSE BILL NO. 27
"An Act relating to medical care for major
emergencies."
2:40:48 PM
Co-Chair Foster relayed that the committee held two prior
hearings on the bill. He requested a recap of the bill.
REPRESENTATIVE GENEVIEVE MINA, SPONSOR, provided a recap of
the bill that modernized Alaska's Emergency Medical
Services System (EMS), which had an excellent system of
trauma care but lacked the same to respond to strokes and
heart attacks. She furthered that there were many gaps in
many areas of the state that would benefit from a system of
care structure that also provided data and enhanced
coordination among responders and providers.
2:42:33 PM
Co-Chair Schrage MOVED to REPORT CSHB 27(HSS) out of
committee with individual recommendations and the
accompanying fiscal note.
Representative Allard OBJECTED.
Representative Allard disagreed with the "entirety of the
bill." She discussed the cost of the bill that she
determined would cost approximately $1,200,000. She did not
believe that due to fiscal circumstances the committee
should refrain from spending on bills.
Co-Chair Foster asked Rep. Mina to address the fiscal note.
Representative Mina summarized that in FY 2026, the bill
would cost $240,600 and would continue to cost $216,600
specifically for an additional staff position in the EMS
Office. She deferred to Mr. Wiseman for details.
Representative Allard maintained her objection due to the
costs.
2:45:43 PM
AT EASE
2:46:12 PM
RECONVENED
Representative Galvin spoke in favor of the bill. She
recalled that the state would experience cost savings or at
least cost neutrality due to the immediate response to
strokes that improved outcomes creating savings for the
long-term.
Representative Mina discussed the cost savings of the bill.
She lacked exact numbers but agreed that the proper
immediate response saved in long-term costs of care that
was often covered by Medicaid.
Representative Allard asked what department would gain the
additional staff. Representative Mina answered that it was
specifically in the Office of Emergency Medical Services,
Department of Health (DOH). Representative Allard
maintained her objection and believed that departments had
"slush funds" due to the many vacancies.
Representative Tomaszewski had been a recipient of one of
the major emergencies in the past. He appreciated the
medical treatment he received and believed that there were
discrepancies in the system in the state. He would support
moving the bill moving forward.
Representative Stapp would vote no to move the bill out of
committee due to costs.
2:50:46 PM
Representative Johnson relayed that she would be a no vote.
She appreciated the sponsor and the need for the services
in the state.
KATIE GIORGIO, STAFF, REPRESENTATIVE GENEVIEVE MINA,
addressed some of the comments. She offered that the state
had a trauma system of care for many years that yielded
great results. The bill was requested by all types of EMS
medical professional in the state. They expected to
experience "real results" for patient outcomes and cost
savings.
2:52:22 PM
A roll call vote was taken on the motion.
IN FAVOR: Representative Tomaszewski, Hannan, Galvin,
Bynum, Jimmie, Schrage, Foster
OPPOSED: Stapp, Johnson, Allard
The MOTION PASSED (7/3).
There being NO further OBJECTION, CSHB 27(HSS) was REPORTED
out of committee with five "do pass" recommendations, one
"do not pass" recommendation, four "no recommendation"
recommendations and with one previously published fiscal
impact note: FN1 (DOH).
Representative Mina thanked the committee for hearing the
bill.
HOUSE BILL NO. 194
"An Act approving and ratifying the sale of royalty
oil by the State of Alaska to Marathon Petroleum
Supply and Trading Company LLC; and providing for an
effective date."
2:53:44 PM
JOHN CROWTHER, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES, explained that the bill sought legislative
approval for a "royalty in kind" contract, which was how
the state disposed its share of royalty oil. It was a
longstanding process and resulted in a small premium to the
state versus the average value of royalty, supported the
state's refineries, and ensured fuel security. He asked for
the committee's support for the bill.
RYAN FITZPATRICK, COMMERCIAL MANAGER, DIVISION OF OIL AND
GAS, DEPARTMENT OF NATURAL RESOURCES, provided a PowerPoint
presentation titled "House Bill 194: Approve Marathon Petro
Royalty Oil Sale," dated May 1, 2025 (copy on file). He
began on slide 2 titled "What is "Royalty In-Kind":
Oil and gas leases issued by the State reserve a
"royalty share" to the State a portion of production
that the State receives as owner of the resource. The
State has the option to take its royalty oil and gas
in-value (RIV) or in-kind (RIK).
• RIV: Lessees market the royalty oil or gas alongside
their own production; the State receives the proceeds
from the sale of its royalty oil, subject to fair
market value
• RIK: Lessees provide royalty oil or gas of sales
quality to the State; the State is responsible for
marketing its royalty oil or gas.
Department of Natural Resources (DNR) has statutory
processes for receiving royalty:
• Alaska Statute (AS) 38.05.182 requires DNR to make
best interest findings for RIV and RIK determinations,
and requires the commissioner report annually to the
Legislature about these elections
• AS 38.05.183 guides DNR in the sales of RIK and
requires that contracts meet a number of statutory
criteria and, in certain cases, receive legislative
approval before being entered into
• AS 38.06 establishes the Alaska Royalty Oil and Gas
Development Advisory Board, which reviews royalty-in-
kind actions by DNR
Mr. Fitzpatrick expounded that the state's royalty share
ranged from 12.5 percent to approximately 16.7 percent. The
state's share was free of production costs but paid
transportation costs. The state had the option to take the
royalty in two ways as described on the slide.
Mr. Fitzpatrick moved to slide 3 titled "Royalty A Core
Lease Term." That depicted a snapshot of royalty provisions
and the agreement. He turned to slide 4 titled "Sources of
North Slope Royalty," which showed an overview map of the
North Slope. The shaded units were state oil and gas units
where the state received its share of production in
royalty-in-kind, which were almost exclusively derived from
North Slope leases.
2:58:30 PM
Mr. Fitzpatrick turned to slide 5 titled "Royalty In-Kind
Contract History
• The State has historically selected to receive
royalty oil both in-kind and in-value
• About 97 percent of the State's royalty oil in-kind
selections have been North Slope oil
The amount of RIK oil that the State sells
varies and depends on many factors:
• Alaska North Slope (ANS) oil
production from state-owned lands
• Royalty rates for State oil and gas
leases
• State's selection of the fields from
which to choose RIK oil
• Quantity of crude oil sought by in-state
refineries or other potential buyers
• Competitiveness of ANS royalty oil
versus other sources of crude oil for instate
refineries or other potential buyers
Mr. Fitzpatrick explained that that the state had taken
royalty in-kind since 1980. The slide portrayed a chart
containing its historical contract history of in-kind
(green) versus in-value royalties (black). He pointed out
that the amount of in-kind royalty varied considerably over
the years. He reported that historically the barrels were
completely marketed, often out-of-state. Recent statutes
required the department to support in-state refining
creating a preference for in-state refineries or other in-
state purchasers before it could be marketed out-of-state.
He elaborated that part of DNR's process was to release a
public notice on potential royalty sales to gauge market
demand. Over the last decade, there were no firm out-of-
state contracts for the purchase of royalty oil and over
the last two decades the royalty oil was exclusively sold
to in-state refiners.
3:00:34 PM
Mr. Fitzpatrick continued to discuss slide 6 titled
Royalty In-Kind Contract History
• Almost all the nearly one billion barrels sold to
date have been sold via non-competitive sales
• Less than 5 percent has been sold via competitive
sales
• The large majority of RIK oil sold to date has been
to in-state entities, with a few historical cases
where RIK oil was sold for export outside of Alaska
Mr. Fitzpatrick indicated that the slide also depicted the
history of the different royalty in-kind contracts. He
noted the several long-term contracts existed for many
years. He pointed to the recent Petro Star and
Tesoro/Marathon contracts.
He briefly discussed slide 7 titled "Processes And
Legislative Approval
RIK contract development and execution involves
several significant steps:
• DNR commissioner follows a statutory process to
negotiate a proposed sale; then DNR publishes a
proposed finding describing the terms and reasons for
the sale
• DNR must brief the Alaska Royalty Oil and Gas
Development Advisory Board (AS 38.06) (Royalty Board)
on the proposed sale and receive the Board's review
and approval
• After receiving public comment on the proposed
findings, DNR publishes a final best interest finding
AS 38.06.055 requires authorization by the
Legislature before a contract can be Executed
There are limited exceptions to this process, such
contracts to relieve storage or market conditions with
a duration of one year or less, and contracts for
sales of 400 barrels per day or less. These exceptions
do not apply to the Marathon contract now under
consideration.
Mr. Fitzpatrick emphasized that before the contract was
submitted to the legislature for approval, the proposed
contract went through an extensive public process. He
reported that DNR did not receive any public comment on
this contract.
Representative Hannan cited the last sentence on the slide
regarding the exceptions not applying to the current
Marathon contract and asked for clarity. Mr. Fitzpatrick
responded that the public process was for sales contracts
such as the Marathon sale currently before the committee.
He furthered that the department had separate statutory
authority in certain contracts and was not required to be
submitted to the legislature. The contracts went through
public comment and published a best interest finding and
were usually for the short-term of one year or less and for
contracts considered di minimus, subject to a limited
number of barrels or mcf (one thousand cubic feet) of gas
per day.
3:04:50 PM
Mr. Fitzpatrick examined slide 8 titled "Royalty Board
Review:"
AS 38.06.050 requires the Alaska Royalty Oil and Gas
Development Advisory Board:
• To provide a written recommendation of the board on
the proposed sale, submitted to the Legislature at the
time a bill approving the proposed sale is introduced,
and
• To provide a report on the criteria used to evaluate
the proposed sale.
Mr. Fitzpatrick indicated that the slide also depicted
portions of the board's resolution and report to the
legislature.
He turned to slide 9 titled "Royalty Board Review
Criteria:"
Sec. 38.06.070. Criteria. (a) In the exercise of its
powers under AS
38.06.040(a) and 38.06.050 the board shall consider
(1) the revenue needs and projected fiscal condition
of the state;
(2) the existence and extent of present and projected
local and regional needs for oil and gas products and
by-products, the effect of state or federal commodity
allocation requirements which might be applicable to
those products and by-products, and the priorities
among competing needs;
(3) the desirability of localized capital investment,
increased payroll, secondary development and other
possible effects of the sale, exchange, or other
disposition of oil and gas or both;
(4) the projected social impacts of the transaction;
(5) the projected additional costs and
responsibilities which could be
imposed upon the state and affected political
subdivisions by development related to the
transaction;
(6) the existence of specific local or regional labor
or consumption markets or both which should be met by
the transaction;
(7) the projected positive and negative environmental
effects related to the transaction; and
(8) the projected effects of the proposed transaction
upon existing private commercial enterprise and
patterns of investments.
(b) When it is economically feasible and in the public
interest, the board may recommend to the commissioner
of natural resources, as a condition of the sale of
oil or gas obtained by the state as royalty, that
(1) the oil or gas be refined or processed in the
state;
(2) the purchaser be a refiner who supplies products
to the Alaska market with price or supply benefits to
state citizens; or
(3) the purchaser construct a processing or refining
facility in the state.
The board shall make a full report to the legislature
on each criterion specified in (a) or (b) of this
section for any disposition of royalty oil or gas that
requires legislative approval. The board's report
shall be submitted for legislative review at the time
a bill for legislative approval of a proposed
disposition of royalty oil or gas is introduced in the
legislature.
3:06:21 PM
Mr. Fitzpatrick reported that DNR worked extensively with
the royalty board regarding the Marathon contract and
passed a resolution in support of the contract. He
discussed slide 10 titled "Recent RIK Contracts:" The chart
portrayed several of the more recent contracts. The
proposed Marathon contract showed a royalty volume range
(nomination range) from 10,000 to 15,000 barrels per day,
which could vary between the range. He disclosed that
Marathon only negotiated a three-year contract in its prior
contract. Currently, Marathon started with a primary term
of 3 years with an option of 7 years of annual extensions.
The options were exercised one year at a time. Either party
maintained the option to terminate the contract in three
years or at the end of each subsequent year. In addition,
if both parties were satisfied, they had the option to
continue the contract.
Representative Hannan asked about the mutual consent
contract extension. She asked who was responsible for
agreeing to the extension concerning the state's interest.
Mr. Fitzpatrick answered that the decision on renewals was
undertaken by the department. Functionally, the decision
was made by the commissioner, but the decisions were run
through the Division of Oil and Gas and managed by the
Commercial Section. Representative Hannan asked if the
annual extension required a specific time period. She
thought a one year extension seemed short. She wondered
whether the state could initiate the request to extend. Mr.
Fitzpatrick answered that there was a notice period prior
to the end of each subsequent one year term and the
agreement had to be made prior to the end of each term. He
furthered that the requirement lasted 30 or 60 days and the
decision had to be made before the contract lapsed. The
department had a certain window when the producers had to
be notified that the state was electing royalty in-kind and
the stated needed certainty that the contract would be
renewed prior to the nomination window, therefore the
actual time-period to renew or lapse was several months
before the end of the other time periods.
3:11:37 PM
Representative Galvin deduced that the chart showed all of
the contracts that had been approved since 2016. Mr.
Fitzpatrick replied affirmatively. Representative Galvin
thought that the current Marathon contract was a standout
due to the seven year optional potential. She wondered if
there was any inherent reason for it to be designed so
differently than other past contracts. Mr. Fitzpatrick
answered that the chart depicted "adjustments to the
contracts" versus brand new contracts. The extensions were
a method to extend the contract on a basis both parties
understood. He characterized it as a modification versus a
wholesale change in terms. In addition, longer-term
contracts were a positive thing for the state and important
part of energy security.
3:13:51 PM
Representative Galvin believed that it appeared positive
that the producers were looking to have a longer term
commitment. She thought it locked in the number of barrels.
She asked if there was any reason for the state to hesitate
to lock in for a longer period of time. Mr. Crowther
responded that the pricing term had also been adjusted
slightly to lock in the premium but also float year to year
with an adjustment rather than being fixed for the entire
term of the contract. He indicated that prior contracts had
a fixed model. The more flexible the contract with a
guaranteed premium and option to extend worked in the
state's favor. Representative Galvin deemed that it could
be very helpful for the company to have a fixed price
because it would know what its profits looked like in the
future. She wanted to determine whether the state had done
its best to capture the most revenue possible. Mr. Crowther
answered that the contract did not expose the state to
underpricing due to the contract's price terms associated
with an index that changes with the market.
3:16:26 PM
Representative Galvin inquired whether the legislature had
ever rejected a royalty in-kind contract and if so, why.
Mr. Crowther replied in the negative. He believed that it
was in part, due to the robust public process.
Mr. Fitzpatrick turned to slide 11 titled "Competitive Vs.
Non-Competitive Sales:"
• AS 38.05.183 requires the sale of royalty oil be by
competitive bid, unless determined that the best
interest of the State does not require it, or no
competition exists
• A non-competitive sale requires a written finding by
DNR; for the Marathon contract, a Final Best Interest
Finding was published on April 14, 2025
• How does DNR decide between a competitive and non-
competitive sale? • DNR publishes a "Solicitation of
Interest" letter with the goal of gauging the interest
of the market
• In this letter, DNR establishes its preferred method
of sale (i.e., competitive disposition) with non-
binding parameters for such sale
• Interested parties are invited to comment on their
willingness to buy RIK oil and their preferred terms
• DNR analyzes those responses and makes a written
determination of the method of sale that is in the
best interest of the State
When awarding a royalty sale the commissioner shall
consider:
• The cash value offered;
• The projected effects of the sale, exchange, or
other disposal on the economy of the state;
• The projected benefits of refining or processing the
oil or gas in the state;
• The ability of the prospective buyer to provide
refined products or by-products for distribution and
sale in the state with price or supply benefits to the
citizens of the state; and
• The criteria listed in AS 38.06.070(a) There have
been very limited competitive sales in the past:
• Competitive sales of RIK oil only occurred in 1981,
1985, and 1986
• Less than 5 percent of RIK oil (46 million barrels
of approximately one billion overall barrels) sold to
date has been via competitive sales
Mr. Fitzpatrick communicated that when DNR only dealt with
a single purchaser it was viewed as potentially problematic
from a competitive standpoint. The bidder lacked a
competitive environment and lacked the incentive to bid
over the minimum of the bid. The state would then engage in
non-competitive sales and enter into direct negotiations
with the producer to increase the premium the state
received.
3:18:51 PM
Mr. Fitzpatrick addressed slide 12 titled "Royalty-in-Kind
In-State Priority
DNR is statutorily directed to give a priority to in-
state RIK sales:
Sec. 38.05.183. Sale of royalty.
d) Oil or gas taken in kind by the state as its
royalty share, or gas delivered to the state
under AS 43.55.014(b) may not be sold or
otherwise disposed of for export from the state
until the commissioner determines that the oil or
gas is surplus to the present and projected
intrastate domestic and industrial needs
Mr. Fitzpatrick reiterated that no out of state interest
had resulted in an in-kind purchase in many years.
3:19:28 PM
Mr. Fitzpatrick moved to slide 13 titled "The Historical
Premium for RIK Sales
• 11 Alaska Administrative Code 03.026(b) states that
the RIK price should be at least equal to the RIV
price
• From 2008 - 2023 the average RIK price was
$1.25/bbl. higher than that RIV price
• The State sold over 173 million barrels of royalty
oil during this period
• RIK sales proceeds were $12.99 billion
• The State made over $188 million in revenue compared
to taking the royalty barrels in-value
Mr. Fitzpatrick cited the slide's graph that depicted the
premium of RIK price over RIV price for ANS royalty oil
from January 2008 through November 2024. He pointed out
that the zero dollar mark demarked the break even between
the RIK and RIV sales. He indicated in almost every month
the state managed to secure a premium for in-kind sales of
over $1 to $3 relative to RIV sales excluding a few periods
of market instability. The in-kind sales garnered
additional revenue for the state.
Mr. Fitzpatrick turned to slide 14 titled RIK Process
Overview." He briefly reported that the slide contained a
flow chart of the Royalty In-Kind process, which he already
discussed in detail.
3:21:39 PM
Mr. Fitzpatrick advanced to slide 15 titled "Recent RIK
Contract Key Terms:
Netback Pricing
DNR sells its royalty oil at the field or "wellhead"
and bases the price on market sales price indices with
various costs backed out. Thus, the price of royalty
oil is calculated by "netting back" the price of ANS
oil from the U.S. West Coast to the field.
RIK price =
ANS price at the U.S. West Coast
- RIK Differential
- Pipeline transportation cost
+/- Quality bank adjustment
- Line loss
Mr. Fitzpatrick explained that the chart was similar to
slide 10 with the same contracts exemplified and related to
Representative Galvin's questions regarding price terms and
the potential for longer term contracts. He pointed to the
far right hand column titled "RIK Differential." He
explained that it showed the pricing term for the
contracts. The RIK differential along with another
"location differential contract" was an equivalent of the
marine transportation costs when comparing the United
States (US) west coast price using the market price indices
for the sales and backed the price into the state of
Alaska. The negotiated price did not have to match Alaska's
actual marine cost and was less than the total marine cost.
He revealed that there was a built in premium for sales
that occurred in the state relative to West Coast sales.
The chart portrayed the previous RIK differential was
negotiated on a fixed dollar basis and was locked in at the
prices shown on the chart. He noted that the price was a
subtraction from what the state received from a barrel of
oil. However, in the current year, instead of fixing a
price, the department used DOR's location differential
based on surveys of all of the oil sales contracts executed
in the state over 12 months. The updates were published
each year that contained the location differential for the
Alaska market. The state used the location differential for
its reference value and negotiated a discount off the
location differential to establish a premium, which was
$0.24 in the current year. It reduced the deduction against
the state's value of oil in addition to the in-state
premium. He expounded that because the state used a market
value reference that was updated on an annual basis based
on the market survey, it provided DNR the confidence to
offer a potential longer term contract. He believed that it
reduced the potential to diminish or eliminate the
additional profit, and the model locked in the premium over
the life of the contract.
3:26:26 PM
Mr. Fitzpatrick addressed slide 16 titled "Why RIK?" He
explained that the graphics showed the value chain for a
barrel of oil in ANS in-value royalty and ANS in-kind
royalty. He pointed out that both started at $80/bbl and
detailed that the marine transportation allowance for in-
value oil was $3.50 while the RIK differential was
$2.25/bbl. There was a deduction on both of $6.00 for other
transportation costs and adjustments. The resulting price
per barrel for RIK oil was $71.75/bbl. and the RIV price
was $70.50/bbl. He noted that the prices were hypothetical.
3:27:27 PM
Mr. Fitzpatrick moved to slide 17 titled "RIK Pricing
Formula The chart contained a formula representation of
the RIK pricing calculation resulting in the Royalty In-
Kind price explained in prior slides. He recounted that the
department used the Reuters and Platts pricing agencies to
determine the market indices for the west coast price. He
noted that the tariff allowance was the actual
transportation cost that also had two other components
associated with it. The first was the Quality Bank
adjustment that reflected the value of the field specific
oil stream in Trans-Alaska Pipeline System (TAPS). The
other was the Line Loss, which was the small variance in
the metered volumes at Pump Station 1 and the Valdez
Terminal. It was a small diminishment of a barrel when two
crude streams were combined with different chemical
conditions.
3:28:25 PM
Mr. Fitzpatrick highlighted slide 18 titled "Contract Terms
For Marathon Using the DOR Location Differential."
Proposed RIK differential = DOR Location Differential
minus 24 cents/bbl.
• Difference between marine deduction and RIK
differential largely drives RIK premium over RIV
• New methodology allows for dynamic RIK differential
deduction over contract term
• DNR estimates $1.08/bbl. RIK premium
• This would result in approximately $4.9 million
incremental revenue per year of the contract over RIV
if Marathon purchases an average of 12.5 thousand
barrels of oil per day (mbopd).
Mr. Fitzpatrick elucidated that the graph depicted the
marine deduction and the RIK differential from 2007 to
2024. The information conveyed how the new pricing term
would have performed relative to the fixed price
differentials. He pointed out that the two tracked
relatively closely with slight differences depending on the
year. The purpose of moving to the market index pricing
formula was not attempting to gain an additional premium,
which was built into its current contracts. The main reason
for the new mechanism was to reduce uncertainty over the
term of the contract and to lock in the premium. He
characterized it as a risk mitigation measure.
3:30:24 PM
Mr. Fitzpatrick moved to slide 19 titled "Maximum Benefit
to Alaskans
As required by AS 38.05.183(e), the Marathon RIK
contract maximizes the benefits to the State:
• The sale results in royalty premiums to the State
compared to the average RIV values
• Incremental increase in State revenue by $4 to $6
million per year
• In-state refining supports Alaskan jobs
• Marathon provides 220 full-time positions at its
Nikiski refinery, over 60 contracted positions and 40
positions at Anchorage and North Pole terminals
• Producing refined products in Alaska reduces the
costs to Alaskans
Fuel security is economic security
• Marathon's Kenai refinery produces 55,000 barrels of
refined product per day
• 30 percent is jet fuel supplied to Ted Stevens
Anchorage International Airport nearly half the
airport's demand
• 27 percent is gasoline, which is consumed in state
• 43 percent is a combination of liquid petroleum gas,
fuel oil, asphalt and other products
Co-Chair Foster asked for a review of the fiscal note.
3:32:02 PM
Mr. Fitzpatrick reported that the published Department of
Natural Resources zero fiscal note (FN1(DNR) had no cost
for the department. The revenue was indeterminate for three
years due to the variability in the amount up to 15,000
bbl. per day. However, the department did estimate between
$4,000,000 and $6,000,000 in additional revenue.
3:32:51 PM
Co-Chair Foster OPENED public testimony.
CASEY SULLIVAN, GOVERNMENT AND PUBLIC AFFAIRS MANAGER,
MARATHON PETROLEUM, ANCHORAGE (via teleconference),
supported the bill. He believed that the contract provided
stability, availably, and flexibility for the Kenai
refinery. He shared that the Kenai facility had been one of
the longest operating refineries in the state, opening in
1969. The plant was capable of producing up to 69,000
barrels per day and was focused on value added products
like propane, diesel, and asphalt. They distributed
products statewide and employed many Alaskans. He relayed
that Marathon was committed to reliably producing quality
fuels in Alaska for the long-term. He concluded that the
contract would provide a positive shared value for all
Alaskans and asked for members' support of HB 194.
Co-Chair Foster thanked Mr. Sullivan.
Co-Chair Foster CLOSED public testimony.
3:35:46 PM
Co-Chair Foster noted the bill did not seem controversial.
He wondered if there was an interest in moving the bill.
Representative Galvin MOVED to REPORT HB 194 out of
committee with individual recommendations and the
accompanying fiscal note.
There being NO OBJECTION, it was so ordered.
HB 194 was REPORTED out of committee with eight "do pass"
recommendations and with one previously published
indeterminate fiscal note: FN1 (DNR).
3:37:36 PM
Co-Chair Foster reviewed the schedule for the following
day.
ADJOURNMENT
3:38:27 PM
The meeting was adjourned at 3:38 p.m.