03/15/2013 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB112 | |
| HB76 | |
| HB74 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 112 | TELECONFERENCED | |
| += | HB 76 | TELECONFERENCED | |
| += | HB 74 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
March 15, 2013
3:17 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Lora Reinbold, Vice Chair
Representative Mike Chenault
Representative Bob Herron
Representative Dan Saddler
Representative Andy Josephson
MEMBERS ABSENT
Representative Charisse Millett
COMMITTEE CALENDAR
HOUSE BILL NO. 112
"An Act repealing the film production tax credit; providing for
an effective date by repealing the effective dates of secs. 31 -
33, ch. 51, SLA 2012; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 76
"An Act relating to electronic filing of certain information
with the Department of Labor and Workforce Development; relating
to surcharges, rate increase reduction, prohibition on the
relief of certain charges, the unemployment trust fund account,
and the offset of certain unemployment compensation debt under
the Alaska Employment Security Act; relating to the definition
of 'covered unemployment compensation debt' in the Alaska
Employment Security Act; and providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 74
"An Act relating to development project financing by the Alaska
Industrial Development and Export Authority; relating to the
dividends from the Alaska Industrial and Export Authority;
authorizing the Alaska Industrial Development and Export
Authority to provide financing and issue bonds for a liquefied
natural gas production system and natural gas distribution
system; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 112
SHORT TITLE: REPEAL FILM PRODUCTION TAX CREDIT
SPONSOR(s): REPRESENTATIVE(s) STOLTZE
02/11/13 (H) READ THE FIRST TIME - REFERRALS
02/11/13 (H) L&C, FIN
03/13/13 (H) L&C AT 3:15 PM BARNES 124
03/13/13 (H) Heard & Held
03/13/13 (H) MINUTE(L&C)
03/15/13 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 76
SHORT TITLE: UNEMPLOYMENT; ELEC. FILING OF LABOR INFO
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/18/13 (H) READ THE FIRST TIME - REFERRALS
01/18/13 (H) L&C, FIN
03/04/13 (H) L&C AT 3:15 PM CAPITOL 106
03/04/13 (H) AIDEA: LNG PROJECT; DIVIDENDS;
FINANCING
03/05/13 (H) L&C AT 8:00 AM BARNES 124
03/05/13 (H) -- Meeting Continued from 3/4/13 --
03/13/13 (H) L&C AT 3:15 PM BARNES 124
03/13/13 (H) Heard & Held
03/13/13 (H) MINUTE(L&C)
03/15/13 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 74
SHORT TITLE: AIDEA: LNG PROJECT; DIVIDENDS; FINANCING
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/16/13 (H) READ THE FIRST TIME - REFERRALS
01/16/13 (H) L&C, FIN
02/08/13 (H) L&C AT 3:15 PM BARNES 124
02/08/13 (H) Heard & Held
02/08/13 (H) MINUTE(L&C)
03/04/13 (H) L&C AT 3:15 PM CAPITOL 106
03/04/13 (H) ** Meeting will Recess and Reconvene at
03/05/13 (H) L&C AT 8:00 AM BARNES 124
03/05/13 (H) -- Meeting Continued from 3/4/13 --
03/11/13 (H) L&C AT 3:15 PM BARNES 124
03/11/13 (H) Heard & Held
03/11/13 (H) MINUTE(L&C)
03/13/13 (H) L&C AT 3:15 PM BARNES 124
03/13/13 (H) Heard & Held
03/13/13 (H) MINUTE(L&C)
03/15/13 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
ROBERTA GRAHAM, Assistant Commissioner
Department of Commerce, Community & Economic Development (DCCED)
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of HB 112.
RON HOLMSTROM
Screen Actors Guild (SAG)
American Federation of Television and Radio Artists (AFTRA)
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 112.
D.K. JOHNSTON, Executive Producer/Director
Alaska Filmmakers
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 112.
JOHN BUTZKE, Owner
Talking Circle Media
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 112.
ROBIN KORNFIELD, Vice President
Communications & Marketing
NANA Development Corporation (NANA); President; Piksik
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 112.
BILL POPP, President & Chief Executive Officer
Anchorage Economic Development Corporation (AEDC)
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 112.
BRUCE OSKOLKOFF, Owner
Limelight Recording Studios
Ninilchik, Alaska
POSITION STATEMENT: Testified in opposition to HB 112.
THOMAS RANDELL DALY
HiSpeed Gear Inc.
Kenai, Alaska
POSITION STATEMENT: Testified in opposition to HB 112.
DEBORAH SCHILDT, President
Alaska Film Group
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 112.
STACY BOLES, Director
Alaska Crew Training
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 112.
BOB CROCKETT, General Manager
Piksik
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 112.
KATIE JOHNSTON
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 112.
BRAD SWENSON
Chief Executive Officer (CEO)
Crooked Pictures
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 112.
STEVE RYCHETNIK, Cinematographer
Sprocket Heads
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of HB 112.
MIKE DEVLIN, Chief Executive Officer
Evergreen Films
Anchorage, Alaska
POSITION STATEMENT: Testified in opposition to HB 112.
MICHAEL POLLEN
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
GEORGE BERRY
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
DAVE MESSIER, Rural Energy Coordinator
Tanana Chiefs Conference (TCC)
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
KARL GOHLKE, Outside Sales
Frontier Supply Company (FSC)
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
DAN PORTWINE
Portwine Plumbing and Heating
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
JEREMY HOLAN, Business Representative
Teamsters Local 959
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
BILL ST. PIERRE
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
DICK BRICKLEY, Chair
ICE Alaska
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
MARIA RENSEL
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
TIMOTHY GUNDERSON
North Pole, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
ANDREW REIMHERR
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
JIM LAITI
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
JIM DODSON, President
Fairbanks Economic Development Corporation (FEDC)
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
RENE STALEY
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74 during the
discussion of HB 74.
JACK WILBUR, President
Design Alaska
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
CAM CARLSON
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
BOB SHEFCHIK, Chair
Fairbanks Chamber of Commerce Energy Committee;
Chair, Interior Gas Utility Board
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
JOMO STEWART, Energy Project Manager
Fairbanks Economic Development Corporation (FEDC)
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
WES MADDEN, Owner
Real Estate
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
LISA HERBERT, Executive Director
Fairbanks Chamber of Commerce
Fairbanks, Alaska
POSITION STATEMENT: Testified in support of HB 74.
LISA PEGER
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of HB 74.
ACTION NARRATIVE
3:17:07 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:17 p.m. Representatives
Josephson, Herron, Reinbold, Chenault and Olson were present at
the call to order. Representative Saddler arrived as the
meeting was in progress.
HB 112-REPEAL FILM PRODUCTION TAX CREDIT
3:17:32 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 112, "An Act repealing the film production tax
credit; providing for an effective date by repealing the
effective dates of secs. 31 - 33, ch. 51, SLA 2012; and
providing for an effective date."
3:19:30 PM
REPRESENTATIVE JOSEPHSON asked whether the department could
testify.
3:19:48 PM
ROBERTA GRAHAM, Assistant Commissioner, introduced herself.
REPRESENTATIVE JOSEPHSON asked whether the film tax credit is a
moneymaker for the state.
MS. GRAHAM responded that certainly a number of businesses
ranging from production companies and caterers, as well as
actors, and others have begun as a result of the industry so it
is a growing industry. Based on total wages to date for the
industry, of the $35.1 million in tax credits issued,
approximately $10.4 million has been paid in wages to Alaskans.
Additionally, another $37.4 million has been paid to vendors,
including caterers, production workers, and any number of others
involved in the industry.
3:21:27 PM
REPRESENTATIVE JOSEPHSON recapped that the total benefits paid
to vendors and in wages was $47.8 million and the incentives
paid for the program totaled $35 million. He asked whether the
$47.8 million was spent in Alaska.
MS. GRAHAM answered yes; the wages and funds were paid to Alaska
companies and Alaska residents.
REPRESENTATIVE JOSEPHSON clarified that none of the money paid
went to pay an actor's salary, such as to Jon Voight.
MS. GRAHAM answered no, and noted that there is a category for
non-resident wages.
3:22:17 PM
RON HOLMSTROM, Screen Actors Guild (SAG), American Federation of
Television and Radio Artists (AFTRA), stated that since the
program has been in existence, the SAG/AFTRA membership of
professional actors in Alaska has more than tripled. The
reputation of Alaska's talent pool has been circulating in
Hollywood and he related his understanding that the Hollywood
industry is pretty amazed. He related that although the high
paying jobs have been going to Lower 48 people, as people in
Alaska become trained more [leading] roles are going to
Alaskans. He recapped that the industry outside Alaska has just
begun to recognize the wealth of talent in Alaska. He said he
was hired as an actor in Hollywood, but he hardly ever saw an
actor in the state he worked in on a film set. However, while
he was on the film set for The Frozen Ground he was amazed that
so many local actors had been hired for prominent roles. He
offered his belief that this is a growing industry and many
people joining the ranks of professional film workers. In fact,
many [Alaskan actors] are receiving residual checks for films
made in Alaska. In closing he said, "Let's keep the jobs coming
and let's grow an industry."
3:24:56 PM
D.K. JOHNSTON, Executive Producer/Director, Alaska Filmmakers,
related he is also representing several other organizations,
including the Alaska Actors Network and the Alaska Film Forum,
who have helped to educate, encourage, and showcase the growing
number of talented storytellers working to build and maintain a
professional production industry created by the Alaska film tax
incentive program. Additionally, he is representing a number of
filmmakers who cannot be here as they are on set working in the
industry that is being jeopardized by HB 112. He mentioned that
he has testified over the past few years about the creative and
hard-working film industry in Alaska. He said the film
incentive program provides filmmakers with opportunities that
would normally require all of them to relocate to pursue their
dreams and develop their talent. He urged members not to
support this bill, but instead to support the growth of an
industry that will only help further the creative minds of
Alaska's storytellers, both young and old. This film incentive
program not only helps create an opportunity for new sources of
revenue in Alaska, but will continue to create a new source of
jobs and creative opportunities for Alaskans. Unfortunately,
the bill in front of members today is sending a strong and
unpleasant message to the production community and if it is
enacted would require those who wish to continue to build their
lives and careers in the production field in Alaska to relocate
out-of-state in order to provide sufficient work and income to
sustain their livelihood. He concluded by stating this is not
just about work, but about families and communities of people
who want to do what they love in a place they call home. He
said he will submit written testimony from himself and those he
is representing today. He expressed hope members would consider
their written comments as they make decisions on HB 112.
3:27:16 PM
JOHN BUTZKE, Owner, Talking Circle Media, related that his
company is an Alaska film, television, and production company.
He began his career in Alaska in 1984. In 1989, he started his
own company in Anchorage. Currently, he has 6 full-time
employees, but has had as many as 17 full- and part-time
employees. He then related his opposition to HB 112 and urged
members to oppose it. He informed the committee that his
company has experienced gross revenues of approximately $500,000
spent by Lower 48 film and television companies directly related
to the film tax credit over the past five years. For example,
this week he is either renting out camera equipment or crew on
projects supported by the film tax incentives. The current film
tax credit brings in money to his business and their families,
but also brings in millions of dollars in income to non-video
related companies all over urban and rural Alaska. Last
legislative session he testified that the prior film tax credit
needed revisions, which were made after much public discussion
and with good judgment when the legislature passed the bill.
With its new restrictions the program is truly a local jobs
creation program. He said he is very confused that anyone would
present HB 112, which desecrates all the work everyone put into
crafting the new program that is scheduled to start this summer.
He offered his belief that HB 112 is based on misguided
information being presented to House leadership by biased
individuals who have no first-hand knowledge of the success of
the film tax credit program. The program has received little
public money, which has seen just under $110 million spent due
to Lower-48 film and television companies. Still, $8 million in
tax credits has been redeemed by corporations over the past five
years. Dozens of outside film companies have applied for
credits but did not finish the process. Thus in those instances
the state incurred no cost, which he believes is a good return
on investment. He urged members to kill or vote against HB 112.
3:30:38 PM
REPRESENTATIVE SADDLER referred to page 3 of the Alaska Film
Office's report to the legislature that indicates that as of
12/31/12 the Department of Revenue (DOR) has issued 55 credit
certificates to approve productions for $35 million rather than
$8 million previously mentioned.
MR. BUTZKE asked if he could respond.
CHAIR OLSON said that there are a number of witnesses who wish
to testify. He noted that members have copies of the report,
his written testimony, and anyone else can also submit written
testimony.
3:31:33 PM
ROBIN KORNFIELD, Vice President, Communications & Marketing,
NANA Development Corporation (NANA); President, Piksik, began by
explaining that Piksik is NANA's film production support
company. She then related her opposition to HB 112. After
several years of work dedicated toward the development of a new
industry, she stated that she is reminding Alaskans about the
value of programs that encourage the development of new
opportunities for the next generation of Alaska business. She
informed the committee that NANA supports the film tax credit
since the existing program has already created jobs for NANA's
shareholders and private-sector income for a wide array of
Alaska businesses. Additionally, NANA wants to be involved in
building new economies in the state. She said that NANA
developed Red Dog Mine and in doing so created opportunities for
thousands of Alaskans. She pointed out that NANA researched the
film business as it does any other opportunity and learned
characteristics about the film industry. She characterized the
industry as a platform industry, similar to natural resources in
that it creates primary products such as films, TV series, and
other programs. The film industry requires support services,
similar to what NANA does today in terms of supporting
construction, food service, technology services, hospitality,
and security. Additionally, it creates specialized job
opportunities that are not yet widespread in Alaska. Another
characteristic is that the entire state can be involved from
urban Alaska to remote locations. While the big productions get
attention, hundreds of cable channels worldwide want to fill up
24 hours of programming each day. In fact, NANA created a
documentary this past winter about the people of Diomede and
whales. Further, reality shows have brought lots of attention
to Alaska, which is mostly positive, as well as national
advertising, such as the COORS commercials filmed on Knik
Glacier or the Carhart's commercials shot last fall, which is
done with Alaska's talent and Alaska's production support.
3:34:11 PM
MR. KORNFIELD said that investments in training and facilities
that NANA would like to do are made at NANA's risk and are not
eligible for tax credits; however, the tax credits are necessary
to bring business to Alaska. Alaska competes with film
production destinations around the world, all of which offer
compelling incentives for producers to select their location.
She stated that NANA is opposed to HB 112 because right when
Alaska has finally achieved an extension on the tax credit
HB 112 "pulls the rug" out from under the potential of a new
industry. Alaska needs time to build this business and support
of the public sector is critical in the global marketplace in
which Alaska competes.
3:35:02 PM
BILL POPP, President & Chief Executive Officer, Anchorage
Economic Development Corporation (AEDC), stated that AEDC is a
501(c)(6) private non-profit membership organization
representing 240 businesses with business interests throughout
the state. He then related his opposition to HB 112. The AEDC
has been involved since the beginning of this new industry with
the focus on trying to find new ways to diversify the economy in
the coming decade. If the state is not going to be dependent
upon the price of a barrel of oil, a pound of fish, or an ounce
of gold, the state must start making the investments now and try
to find new industries.
MR. POPP indicated the AEDC has considered the film tax credit
as a means to employ caterers and film-related industry
businesses, but also to take the existing trades, including
plumbers, electricians, carpenters, and craftsmen of all kinds
who can provide services to the productions. He characterized
these people as local folks who enjoy the opportunity to be more
fully employed on an annual basis. The AEDC has also considered
the film program as an opportunity to focus on more
diversification in the economy. In 2011, the AEDC was
commissioned to do an economic impact study on the film, Big
Miracle. The AEDC was only halfway through the disclosure
process and identified the production had already spent $7.7
million in goods and services with Alaska companies and an
additional $4 million on payroll and benefits to Alaskans who
worked on the film as cast or crew. The aforementioned averaged
$285,000 spent for each of the 58 days of filming within the
state, plus 1,300 Alaskans were touched through the expenditures
from this one production. He suggested that once the indirect
and induced effects of the direct spending were tallied - in
working with the McDowell Group - the AEDC identified a total
economic impact of $16.5 million from this single production.
He said that the AEDC opposes the passage of HB 112 and believes
it is very premature to make judgments on the incentive program
since very few years have passed. The film industry previously
only had a very small presence in the state. This is not unlike
many industries that have become major parts of the state;
however, it often takes decades for an industry to grow and
develop, as well as the necessity of the state to provide
incentives to grow these industries. He concluded by saying
that the AEDC opposes HB 112.
3:38:25 PM
BRUCE OSKOLKOFF, Owner, Limelight Recording Studios, related
that he also works with the Ninilchik Native Corporation. He
said that this bill would eliminate or negatively impact the
film industry incentives in Alaska. This bill would be
devastating from an immediate perspective, but also from a long-
term growth perspective that may affect generations of Alaskans.
This bill, HB 112, would be a most devastating and detrimental
reaction and oversight in the haste to address other legitimate
economic conditions in Alaska. Enactment of HB 112 is not a
long-term meaningful solution and would have an adverse impact
on the current Alaska-based businesses, contractors, support
facilities, film industry, and film industry infrastructure as
well as the residents involved in the industry. This bill may
simply and quickly turn off this industry's development in
Alaska. As a lifelong Alaskan, he said he has witnessed the
halting of growth in various industries in the state via
innocuous legislation. He informed the committee that he has
participated in the film and recording industries in Alaska for
over 30 years and has benefited greatly as these industries have
taken hold in Alaska and shown signs of growth and enhancement.
Mr. Oskolkoff related that he maintains opposition to HB 112,
even after listening to the discussions on the bill.
Furthermore, he said he has been quite appalled the legislature
would consider this at a time when the state can benefit from
the program. Even the state's oil industry started slowly with
little support in the initial stages and required and still
requires structured incentives to maintain it as a viable part
of the economy, a resource for employment, and an industry that
supports many facets of the state's capacity, including our
educational college systems. He offered his belief that many
people are not fully aware of the magnitude of the film industry
and urged members to vote against HB 112 and take if off the
state's legislative table.
3:42:10 PM
THOMAS RANDELL DALY, HiSpeed Gear Inc., stated he runs several
HiSpeed companies in the state and also produces the Tom Randell
Daly Show. He related his opposition to HB 112, the effect of
which is the opposite of what Alaska needs, which is a
competitive, stable economy. As a business owner, he said
several things came to mind when he heard about HB 112.
Firstly, Alaska has a three-legged economy consisting of
government, energy, and all other sectors. However, the most
successful leg, energy, is in a cycle of decline as is expected
to be the case for the federal government revenue leg.
Therefore, the third leg of the economy, all other businesses,
will need to shoulder more of the economic responsibility.
Although the current film program, scheduled to end in July, is
not perfect, it still returned $2.05 in business revenue for
every $1.00 in film incentives spent, according to the numbers
reported in the recently completed legislative audit.
MR. Daly reminded the committee that the state is currently
completing its first five-year experience in the film industry.
A legislative audit recently reviewed the film [incentive]
program and determined that improvements needed to be made. If
two films cover the same topic but one casts a star like Tom
Cruise, the public will likely want to see the well-known actor
and this personifies the reason for the premiums paid in the
past. New ideas needed to be implemented if the program was
expected to move forward. After reviewing the existing program
and finding ways to make the film program better, the new film
[incentive] program set to become effective this year would
shift a greater emphasis on hiring Alaskans throughout all
levels of production and will maximize the benefit from the
program to Alaskans, Alaska's businesses, and the state, and
would increase the revenue per dollar of tax credit.
MR. DALY said he has spoken to most of the vendors involved in
film projects on the Kenai Peninsula, which has been known as a
federally recognized hub zone for traditionally high
unemployment. The overall experience with the film industry has
been very positive and the industry is well-received. However,
HB l12 will discontinue the film incentive program and for all
intent and purposes will kill the industry in Alaska. If that
happens, all the investments, capital, and time spent to develop
the film industry in Alaska to this point will have been wasted.
He urged members to kill HB 112 and allow the film industry to
grow.
MR. DALY then offered his belief that to repeal the film
production tax credit at this time would waste two years of
legislative work to produce a new more beneficial film
production program and five years of industry work, investment,
and training to set the foundations of the industry. Alaska's
competitors are investing more aggressively and are seeing
bigger gains. He suggested the legislature move forward with
the plan that was worked out together in the legislature last
session. He asked members to please join him in supporting
business and industry in the state and continue to diversify the
economy for a stronger future. He said, "Let's do what we
agreed to do. Invest in Alaska by providing a stable and
competitive environment for the film industry to grow in Alaska.
Join me in stopping HB l12 - an anti-business bill."
3:46:35 PM
DEBORAH SCHILDT, President, Alaska Film Group, informed the
committee that the Alaska Film Group is Alaska's largest non-
profit association of film and video professionals. Over the
past 20 years, the group has grown from 12 people in a garage in
Eagle River to 100-plus members from all around the state. The
group consists of film professionals, support service providers,
and ancillary businesses. Everyone in this group has seen an
economic boom from having a growing film industry in the state.
The state has gone from one or two outside productions per year
offering a few weeks work in the days prior to film incentives
to dozens of productions offering months of work. Incentives
are the way films work today, he said. Producers shop the globe
for incentives and take their projects to that location. It's
the reason why Alaskan stories like The Guardian went to
Shreveport, Louisiana. It's the reason that Big Miracle came
here. She said that HB 112 is a deal breaker for the film
industry in Alaska, an industry that has had positive economic
impact on many Alaskans, not just the Alaska Film Group's
membership. Hundreds of statewide businesses and several Alaska
corporations have benefited by using the tax credits in the
banking, fishing, mining, and tourism sectors of Alaska's
economy.
MS. SCHILDT said, with respect to labor, that students and
tradesmen are enrolled in programs statewide and hundreds of
Alaskans are employed by this industry. The new incentive
program will decrease incentives for outside hire and will
increase incentives for local hire. The film industry is a
proven job generator. She asked members not to discourage the
industry when the job rate is down from 2012. She said with
respect to commerce, that this program does pencil out as noted
on page 19 of the 2012 legislative audit by Northern Economic.
She read, "The state realizes a positive return on investment
from the AFPIP. It generates an estimated $2 in Alaskan
economic output for every $1 in tax credit - an economic
multiplier of 2.05 per the consultant's analysis." The new
program has $100 million allocated for each of two five-year
periods beginning in July 2013. She asked members to do the
math, work with the facts and not fiction when making the
decision. This program makes economic sense to many Alaskans,
from mom and pop operations to corporations building
infrastructure for this industry. She cautioned that none of
them can afford to lose their capital investments. These
companies are depending on the legislature. She offered her
belief that HB 112 is a losing proposition at a time when Alaska
needs to send a positive pro-business message. Alaskan
businesses need the legislature's vote of confidence in order to
continue to move forward with their investments in film
infrastructure. Producers from around the world need to hear
that Alaska's incentive program is stable and bankable when they
consider Alaska for their next production. This new 10-year
film tax incentive program is truly new and improved. It is
more Alaska centric in structure and implementation.
Furthermore, the new program offers credits, not subsidies, and
credits are issued only after the money is spent in Alaska. The
program offers proven value to Alaskans across the map. She
urged members to prove the film industry's worth before cutting
the program. She concluded that member's votes will impact
economic opportunities for all members of the Alaska Film Group.
3:50:40 PM
STACY BOLES, Director, Alaska Crew Training, informed the
committee she is a lifelong Alaskan from Sitka with a background
in theatre that she has been unable to use until the passage of
the film incentive program. She explained that Alaska Crew
Training is a nonprofit organization that responds to the needs
of film production because when productions come to Alaska the
companies want the assurance and confidence that a crew base and
infrastructure exist and that Alaska is doing its best to
provide trained crew who can work on their productions. The
film tax credit incentives have created this asset because when
companies hire Alaskans, the production companies also get a
better break. She said that Alaska Crew Training creates a
program to train entry level positions, but also identifies
existing labor and goods for production companies. Alaska Crew
Training works with local groups, including the University of
Alaska Fairbanks to provide curriculum designed to grow a person
from an entry-level position to a key position. The on-the-job
training is important as is the incentive program to lure
companies into the state and continue the training opportunities
otherwise opportunities for already trained workers in the film
industry are limited.
3:52:54 PM
MS. BOLES related that she taught a single one-week class and
within a week two people were put to work: one in a public
service announcement (PSA) announcement and the second was cast
in a national television commercial, which means these people
made good wages and were eligible for residual payments - all
from attending one class. She said her company is successful
and to date has trained 200 people and hopes to train 500 people
by the end of 2013. She noted that the Department of Labor &
Workforce Development (DLWD) has a program called Alaska Crew
and Cast Advancement Program (AKCCAP) which supports interested
Alaskans who wish to work in the film industry. The program
provides tuition and helps develop curriculum. Alaskans are
coming to the industry in an unconventional way. Her company
helps people "figure out the secret handshake," which means
everything to the industry. However, killing the Alaska Film
Production Incentive Program with passage of HB 112 will stop
the momentum of this growing industry. This bill is a short-
term reaction to long-range planning for the industry. She
urged members to think about the people who put the time into
developing this program and the workers that may be displaced.
She concluded that HB 112 will limit the amount of industry
coming to the state and the jobs for Alaskan workers. Many
Alaskans want to return to the state to work in the film
industry and remain in Alaska. She concluded by stating her
opposition to HB 112.
3:55:02 PM
BOB CROCKETT, General Manager, Piksik, stated that he has been
an Alaskan resident for 40 years and would like to testify in
opposition to HB 112. He related that he has worked in the film
industry for over 30 years during which time the industry has
evolved into a more sustainable industry. Since the advent of
Alaska's economic incentive in 2008, companies have invested
millions in infrastructure and equipment. For example, a new
sound stage is being built in south Anchorage and Piksik has
purchased and shipped industry-type trucks to Alaska that are
being rented to film productions. Other companies are making
similar investments in cameras and other high-dollar rental
equipment to meet the demand of increased production activity.
Workforce training is underway. However, the introduction of
HB 112 "has sent a chill around the world." Alaska's Film
Production Incentive Program is competitive in the industry but
needs fiscal stability. The program provides the competitive
driver for infrastructure and crew development. When a
commitment is made by a legislature, as was the case in 2008,
and again in 2011, the private sector moved forward and invested
millions of dollars. Uncertainty with Alaska's commitment to
industry has many investors putting everything on hold until the
fiscal uncertainty can be addressed.
3:56:54 PM
MR. CROCKETT said he is keenly aware of how the current and new
Film Production Incentive program works. He commended
Representative Costello, her staff, and the many legislators
that had the vision to create a more Alaska-centric program
during the 27th Legislature. He detailed improvements to the
program, including the non-resident above-the-line workers, such
as producers, directors, actors, and screenwriters, incentive
was reduced from 30 to 5 percent. Second, the resident hire
incentive increased from 10 to 20 percent, which means the more
Alaskans hired the more benefits the company receives for above-
the-line workers. Third, productions must spend all dollars in
Alaska and prove to the state that the film they prequalified
for remains the same when applying for final application. Those
dollars circulate throughout the economy and are compounded by
the productions direct spend - the suppliers spending to
restock, and wages each crew spends while visiting or living in
Alaska before a tax credit is even issued. Fourth, a cabinet-
level review of all projects is performed to ensure the best
interest of the state in residence. This review process will
occur in the pre-qualification phase, as well as the final
application phase. This includes a verification of Alaska
expenditures in a 99 percent sampling by a third-party certified
public accountant at production expense, which is more than any
other state.
MR. CROCKETT continued and stated that productions must submit a
non-refundable application fee assessed at two-tenths percent of
the total estimated qualified Alaska spend, except that the fee
must not be less than $200 or more than $5,000. Taxes and fees
are also collected through business licenses, business
registration fees, application fees, rental car taxes, and hotel
bed taxes. Tax relief to Alaska businesses occur through the
tax credit purchase thereby creating more capital to make
additional investments or hire additional Alaskans. To date,
industries that have purchased tax credits include mining,
tourism, fishing, banking, and retail. A 2012 legislative audit
by Northern Economics demonstrates that the Alaska Film
Production Incentive Program generated an estimated $2 in
economic output for every $1 in tax credits. He thanked members
for taking the time to address this important issue. In
closing, he urged the committee not to move HB 112.
3:59:47 PM
KATIE JOHNSTON began her testimony by informing the committee
her husband is a filmmaker and her family loves Alaska and wants
to continue to live in a state they call home. Her husband has
been a filmmaker since he was eight years old and has a passion
for it unlike any she has ever known. In order to follow his
dream, they left Alaska and moved to the Lower 48 to continue
his education. When the Alaska Film Production Incentive
Program passed they were thrilled since this was their ticket to
come home. When he graduated with a Master's Degree in
filmmaking, the family returned home to Alaska. She said, "This
is where we want to put our talents to work. This is where we
want to raise our children. And this is where we want to put
down our roots." She offered her belief that the Alaska film
incentive has allowed them to do just that and is crucial to
keep film and television production in Alaska and to keeping
Alaska's talent at home. This is not about the glamour of
Hollywood. This is about a growing industry of talented men and
women who want to work. She urged members not to send her
family to places like British Columbia, Michigan, and Louisiana
to do for those state's economies what they could do by staying
in Alaska and helping Alaska's economy.
4:01:26 PM
BRAD SWENSON, Chief Executive Officer (CEO), Crooked Pictures,
stated that Crooked Pictures is an award winning Alaska-based
film company that to date has not applied for any film credits.
He provided his film background and related that in 1991, he
moved to Alaska looking for opportunities. Eighteen years
earlier, his uncle, Rick Swenson, had moved to Alaska and became
a five-time Iditarod champion. "It worked out well for his
uncle, so why not give it a shot," he said. Like the Robert
Service poem, the first winter was hell. After the first winter
he met William Bacon III, arguably one of Alaska's greatest
filmmakers. The opportunity continued when he was asked to edit
his film, Tibet - a Moment in Time. This led him to be the
international product manager for Professional Editing Systems -
Fast Multimedia in Munich Germany. After the company sold the
technology to Avid [Technology, Inc.], he moved back to Alaska
and continued making films with Bill until his retirement. He
then joined Levi Taylor and his company, Crooked Pictures,
during the creation of his short film Way Up North that won the
Beverly Hills Film Festival in 2009 for best editing and best
short film. That film used 150 Alaskan actors, crew, and
artisans. Many of these people have gone on to work on other
feature films and other projects in Alaska. Crooked Pictures
has continued working on Alaska's films and stories and in 2012,
produced three short films, plus an hour long docu-drama. He
emphasized this company uses crew that has been trained on the
projects filmed in Alaska, which he characterized as
professional crew who hone their skills daily on projects coming
to Alaska as a result of the Alaska Film Production Incentive
Program. He offered his belief that this program is working.
In fact, the obvious audit results of a two-to-one ratio benefit
shows this program is bringing money and work to Alaska. He
stated that Alaska's film industry is a growing industry. He
applauded the legislature for creating opportunities for
Alaskans. In essence, there is no reason to stop this
partnership now, and therefore he said his company looks forward
to working in partnership by moving the program forward, not
restricting economic growth, and to end HB 112. He said he
looks forward to continuing in the great tradition of
storytelling.
4:04:48 PM
STEVE RYCHETNIK, Cinematographer, Sprocket Heads, speaking as a
filmmaker in Alaska since 1977, he related support for the
Alaska Film Production Incentive Program. Prior to the film
incentive program, he was faced with relocating to another
state. In 2010, he was hired as a first unit camera operator
for Everybody Loves Whales. He was also the sole camera
operator for the second unit that shot film in Barrow and
captured the local color of the community, which are images that
give the film its authenticity. He said when the Nicolas Cage,
John Cusack film, Frozen Ground was filmed, he worked as the
first unit cameraman and was the second unit director of
photography. Most recently, he has been asked to be director of
photography on December Echoes, an independent film to be shot
in Fairbanks and Anchorage. Years ago he scouted locations with
Batman director, Christopher Nolan as Mr. Nolan prepared to
shoot his Alaska-based thriller Insomnia [2002]. He offered his
belief that Mr. Nolan wanted to shoot his film in Alaska, but he
had to take it to British Columbia since Alaska did not offer
film incentives. He said, "Incentives always trump location."
Currently, Sprocket Heads is working with over 10 feature films
in various stages of development that want to shoot in Alaska.
One project of note is a military action series already approved
by the U.S. Department of Defense (DOD), which is a series that
will put down roots and give Alaska the steady economic infusion
like the Netflix produced House of Cards provided for Maryland.
While making motion pictures is hugely rewarding, the best part
of the Alaska Film Production Incentive program is for him to be
able to provide for his family while living in the place he
loves. He stated that he sees a brighter future for Alaska if
the Alaska Film Production Incentive program, which was signed
into law, is allowed to continue to 2023. In fact, the Alaska
State Legislature needs to keep its word, to keep the promise it
made to Alaska's businesses and Alaskans when it extended the
program to 2023, he emphasized.
4:07:41 PM
MIKE DEVLIN, Chief Executive Officer, Evergreen Films, stated
that Evergreen Films an Alaska-based film company with state-of-
the art 3-D production studios in both Anchorage and Los
Angeles. He provided his brief background in the software
business, noting that after graduating from the U.S. Air Force
Academy and Stanford University in computer science, he created
a software company called Rational Software. He and one of his
classmates grew this company from two employees to over 4,000
employees generating over $800 million in revenue. In 2002, his
company was purchased by IBM for $2.1 billion. In 2005, he came
to Alaska to start a new company focused on family-oriented
high-end feature films. In fact, currently he is in post-
production on his first theatrical release, Walking With
Dinosaurs 3-D, which is a co-production between Evergreen Films
and BBC Earth. He said that 20th Century Fox is releasing this
film in December 2013 and he anticipates the film will be a
worldwide blockbuster film. This film was shot in Girdwood, the
Kenai Peninsula, and New Zealand. Additionally, his company has
currently invested over $6 million in a film production facility
and these investments are not eligible for tax credits. If
HB 112 passes, this investment will need to be written off.
Therefore, he said he will need to relocate his operations
outside Alaska, as part of his responsibility to his
shareholders, although he would prefer to continue production in
Alaska. He related that he has produced high-paying jobs and
would like to do so again. However, he pointed out there is a
fine line between success and failure and the film incentive
program creates a level playing field to allow companies to work
in Alaska.
[HB 112 was held over.]
HB 76-UNEMPLOYMENT; ELEC. FILING OF LABOR INFO
4:11:00 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 76, "An Act relating to electronic filing of
certain information with the Department of Labor and Workforce
Development; relating to surcharges, rate increase reduction,
prohibition on the relief of certain charges, the unemployment
trust fund account, and the offset of certain unemployment
compensation debt under the Alaska Employment Security Act;
relating to the definition of 'covered unemployment compensation
debt' in the Alaska Employment Security Act; and providing for
an effective date."
4:11:37 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 76.
[HB 76 was held over.]
The committee took an at-ease from 4:11 p.m. to 4:19 p.m.
HB 74-AIDEA: LNG PROJECT; DIVIDENDS; FINANCING
4:19:10 PM
CHAIR OLSON announced that the final order of business would be
HOUSE BILL NO. 74, "An Act relating to development project
financing by the Alaska Industrial Development and Export
Authority; relating to the dividends from the Alaska Industrial
and Export Authority; authorizing the Alaska Industrial
Development and Export Authority to provide financing and issue
bonds for a liquefied natural gas production system and natural
gas distribution system; and providing for an effective date."
4:19:49 PM
MICHAEL POLLEN informed the committee that he has served 12
years on the Fairbanks North Star Borough (FNSB) Air Pollution
Control Commission. During this past winter Fairbanks has been
experiencing what he characterized as Beijing quality air
quality with respect to 2.5 particulate matter counts. One of
the only truly sustainable answers to the air quality problem is
natural gas. He recalled the FNSB mayor, Luke Hopkins, spoke to
that problem. He reiterated that this is a very serious health
problem in Fairbanks and the proposed LNG and trucking project
is a very effective solution. Thus, on the basis of health
issues alone the project is worth it; however, this project
would have a tremendous economic impact, which many people have
highlighted. Additionally, this bill would improve the
economics in Fairbanks and would promote industry, bring jobs to
the city and to the Railbelt. In particular, he said he is
tired of buying his propane from Calgary, Alberta, Canada.
Instead, he suggested Alaska should make it in Alaska. In
essence, this bill could bring LNG to Fairbanks and provide a
short-term solution since it would mesh well with any pipeline
project. He reiterated his support for HB 74 and urged members
to support the bill.
4:21:58 PM
GEORGE BERRY offered his belief that Fairbanks, the Fairbanks
area, and those who live on the river system will be positively
affected by this bill. He said HB 74 would lower space heating
costs in Fairbanks, along the road system, and other areas of
the state as this bill has wide ranging impact for residents.
He said that natural gas and in particular propane will be able
to reach out and lower space heating costs in rural Alaska. He
explained that propane is a direct byproduct of the liquefied
natural gas (LNG) process, which would be produced on the North
Slope. Thus, once LNG is produced, propane will also be
produced and become available, which is a positive aspect for
those who do not have access to a pipeline. Furthermore, this
bill could compliment various pipeline proposals. In
conclusion, Mr. Berry expressed hope that residents can
encourage the legislature to perform its due diligence and move
HB 74 along and allow residents to invest in their families and
the future.
4:24:23 PM
DAVE MESSIER, Rural Energy Coordinator, Tanana Chiefs Conference
(TCC), explained that TCC is a nonprofit tribal consortium that
represents 42 communities in Interior Alaska. He then related
his support for HB 74 and the Governor's Interior Energy Plan.
He offered his belief that more affordable energy in Fairbanks,
the hub for most of TCC's communities, generally means cheaper,
more affordable energy for its tribes. Specifically, HB 74 has
the potential to significantly lower the cost of propane
delivered to rural communities in Alaska. Since nearly half of
TCC's tribal members live in and around Fairbanks this bill
would have a positive impact on TCC's members. He reported that
at the TCC's annual convention, the full board passed a
resolution supporting HB 74 and the governor's energy plan. He
concluded that access to low-cost energy has led to increased
economic activity and opportunity in the Lower 48, which the TCC
believes would be the case in Fairbanks as well. Therefore, he
strongly encouraged members to move HB 74 forward since it helps
address the needs of all of Interior Alaska and the state as a
whole. He stressed the importance of an energy strategy that
includes funding for energy efficiency, weatherization, or
renewable energy as a combined approach. He said the TCC
greatly appreciates the committee's support for HB 74.
4:25:43 PM
KARL GOHLKE, Outside Sales, Frontier Supply Company (FSC),
stated that FSC has been in Fairbanks since 1989 and have been
long time members of the Alliance, the Resource Development
Council (RDC), Alaska Miners Association (AMA), Association of
General Contractors (AGC), and the Greater Fairbanks Chamber of
Commerce. Originally as Co-Chair and later as the chair of the
Transportation Committee for the Greater Fairbanks Chamber of
Commerce, he has been involved in the trucking gas project for
the past five years when it was first introduced by Fairbanks
Natural Gas (FNG). The project, although it had merit when it
began, has even more merit today than five years ago. At the
time, competing projects, community politics and disagreements
regarding the North Slope trucking projects hindered its
progress. However, Fairbanks Natural Gas (FNG) stayed focused
on the project. Today, FNG, the Golden Valley Electric
Association (GVEA), and local politicians are in agreement that
the trucking project is a bridge to remove Fairbanks from the
national list as the number one city with the highest energy
cost.
MR. GOHLKE said it has always been a challenge to live and work
in Fairbanks, but in the past several years the high cost of
energy has made it much more challenging. In fact, many have
found it impossible and have moved from Alaska. The cost of
providing electricity, heating, and water combined with
rent/mortgage and food leaves little discretionary or no
discretionary income. He said that this lack of discretionary
income places a strain on businesses and families that is felt
in the Interior as well as Anchorage. Today's economic
situation has many unknowns; however, one thing that is known is
that Fairbanks is challenged with the high cost of energy. This
makes it hard for businesses to keep people employed and keeps
businesses from coming to Fairbanks. He offered his belief that
the Interior remains the place to do business; however, it has
been made more difficult by each year that passes without
actions for solutions that address the high cost of energy. The
consensus for a near-term immediate solution is trucking gas
from the North Slope as a bridge to a long-term solution of
piped natural gas. He offered that HB 74 is a great start to
provide gas to the Interior and the trucking of natural gas from
the North Slope is broader than just Fairbanks. He related that
GVEA and FNG have received inquiries and have responded with
operational plans for the extended plan to truck gas to
Southcentral Alaska. This energy project would leverage natural
gas from smaller communities and other regions of Alaska to
create a backbone for economic expansions to fit in with the
pipeline plan and be a catalyst for private sector
participation. He asked members to support HB 74 and not lose
sight of getting the lowest cost gas to as many Fairbanks,
Interior Alaskan residents, and businesses as possible by 2015
and help to make Fairbanks and the Interior a vital place to
live and to do business.
4:29:11 PM
DAN PORTWINE, noting that he has been in the plumbing and
heating business for nearly 40 years, stated that at the end of
the Trans-Alaska Pipeline System (TAPS) construction, in 1977,
his business did numerous heat conversions from electric to oil
since electricity costs had skyrocketed. He recalled that at
that time most people wanted to be sure the boiler could be
converted to natural gas; however, the community is still
waiting for that. With regard to a concern raised at a previous
hearing about the cost of conversion, he pointed out that there
has been a push in Fairbanks in recent years to replace aged
boilers with more efficient boilers. The majority if these
boilers can easily be converted to gas for a cost of $1,500 to
$2,000, he noted. Mr. Portwine related a conversation with a
retiree last year during which the retiree said he couldn't
afford the utility costs in Fairbanks and was planning his "exit
strategy," which is a term that has bothered Mr. Portwine. He
urged the committee to support and pass HB 74.
4:30:49 PM
JEREMY HOLAN, Business Representative, Teamsters Local 959,
informed the committee that prior to his current job, he worked
as a fuel truck driver when heating oil prices rose from $1 per
gallon to $4.50 per gallon. The heating oil market continues to
remain unstable, he said. In fact, the current price for number
one heating oil is $4.23 per gallon and for number two heating
fuel at $4.16 per gallon. He personally burns about 1,100
gallons of fuel oil per year, along with coal and wood use.
These energy costs are hurting Fairbanks and the rural
communities. In 2009, he noticed homes going up for sale or
going into foreclosure as he learned that people could no longer
afford to live in Fairbanks. He pointed out the choices to heat
homes in Fairbanks include electric, oil, wood, or coal.
Currently, individuals and organizations are in the process of
curbing homeowner use of wood or coal since these fuels create
health issues. He offered his support for the LNG project. He
concluded that Fairbanks and the rural communities need cheaper
costs of living and need HB 74 to pass since it will stimulate
the economy and lower fuel costs.
4:32:45 PM
BILL ST. PIERRE, speaking as a 30-year Fairbanks resident who
has owned and operated many local businesses, including
software, media, and others, including an Anchorage business
with over 30 employees, said he can vouch for the large number
of advertising dollars that come to Fairbanks from Anchorage and
other parts of the state. These advertising dollars illustrate
the investment in Fairbanks by Anchorage businesses and business
owners, including sandwich shops, furniture stores, banks and
credit unions, medical facilities, and the contractors who build
them. He hoped members would realize HB 74 does not just affect
Fairbanks residents, but relates to the hundreds of millions of
dollars in Anchorage-owned assets and investments in Fairbanks.
He said the high cost of energy is needlessly stripping away
value from these businesses and the cost of energy in Fairbanks
is simply too high causing many residents and businesses to
leave, consider leaving, or to refrain from further investment.
This trucking plan is a good plan that will solve problems and
create statewide opportunities, as well as provide a foundation
for further development of Alaska's gas resources in the longer
term, he opined. This bill, he further opined, would protect
the millions of dollars that statewide investors have in
Fairbanks and would create millions more in development and
operational opportunities. He asked members to support this
bill since it is in the interest of the entire state.
4:34:46 PM
DICK BRICKLEY, Chair, ICE Alaska, noted his appreciation for the
funding the legislature and the governor put in the budget. He
stated that it is critically important to the Interior and
Fairbanks that this bill move forward. Speaking as the Chair of
ICE Alaska, he related that HB 74 will save the company over
$40,000 in energy costs. He reiterated that it is critically
important that this bill moves forward as Fairbanks needs help
and it will be a great thing for the entire state of Alaska.
4:35:52 PM
MARIA RENSEL asked members to pass HB 74 out of the committee
for the reasons already stated, including space heating, air
quality, and electricity generation. The high cost of energy
doesn't leave people a lot of choice and many families are
leaving the Fairbanks area. She concluded that Fairbanks needs
to have HB 74 pass out of committee, signed, sealed, and
delivered this legislative session.
4:36:44 PM
TIMOTHY GUNDERSON related that he came to Alaska with his family
in 1971 and has raised three children, who have also married and
raised families here. He now has married grandchildren who want
to raise their families here as well. However, one child moved
away last year due to the percentage of income the family spent
for heating and electricity and in order to have better economic
opportunities. He asked to add his voice to those in favor of
LNG; however, he would like to focus on the propane issue since
that reaches a large group of people that have not been
discussed and certainly reaches far beyond the Fairbanks area.
He explained that propane is a byproduct of creating LNG, which
is created when natural gas is reduced to 261 degrees below zero
in order to liquefy the gas. However, propane must be removed
from the LNG since the propane will turn solid. He said that
Cook Inlet natural gas contains propane in the amount of about 1
percent, whereas Prudhoe Bay gas contains propane in the amount
of 12-15 percent. In short, when GVEA begins its [North Slope]
production, it will produce 30,000 gallons per day of propane
byproduct, which could be trucked and barged up the Yukon River.
Additionally, the infrastructure necessary for using propane is
considerably smaller since it does not require a piped
distribution system, a storage facility, or need to be kept at
below zero temperatures. Currently, all propane used in Alaska
is imported from Canada, which is shipped by rail to Prince
Rupert, then barged to Whittier, shipped by rail to Fairbanks
and Anchorage, and trucked to other points. Currently, propane
costs, he reported, are $4 per gallon in Fairbanks. He related
that the Anchorage Port Authority and FNG have estimated the
price would be reduced from $1.20-$1.50 per gallon for Prudhoe
Bay produced natural gas. He concluded that this could be a
huge consideration for energy for Bush Alaska and Fairbanks, as
well as for those who will not be served by pipeline for years
to come. He shared his background, including that he worked for
the Teamsters Training Center, has been involved in the trucking
industry for 40 years, and teaches commercial drivers how to
drive the Dalton Highway. He mentioned that he has five
students from TCC who will likely benefit from this as
commercial drivers.
CHAIR OLSON remarked that he has hit on a point, which is how to
reach people outside the core areas, noting that propane and
other liquids may be the way to do so.
4:40:51 PM
ANDREW REIMHERR said he wanted to speak to this issue since he
is very concerned with the economy in Fairbanks, particularly
since he learned from the boss of his wife, a real estate
appraiser, that Fairbanks has had a phenomenal number of
foreclosures this year, which were attributed to energy costs.
In fact, many people just packed up and left similar to what
happened in the 1980s. He offered his belief that the solution
to the heating energy and air quality issues is gas and the
necessary infrastructure.
4:42:20 PM
JIM LAITI began by relating that four generations of his family
actively live in Fairbanks as well as numerous friends and
neighbors. A common topic of conversation among them is a lack
of optimism, especially among young people. The obvious
solution, he opined, is natural gas for Fairbanks and the LNG
project is the perfect jump start to build the project. In
hindsight, bringing natural gas at that the time TAPS was
constructed by extending the pipeline to Fairbanks would have
been a benefit to the Interior. Although people are often
concerned about starting a project, good benefits result from
projects such as this one, he opined. He acknowledged that
pipeline discussions have occurred for 50 years, but he offered
his belief that this LNG project could be symbiotic with a
pipeline in that infrastructure and a consumer base would be in
place in Fairbanks and in large areas of rural Alaska as well.
He urged members to move HB 74 forward.
4:45:11 PM
JIM DODSON, President, Fairbanks Economic Development
Corporation (FEDC) stated he has seen first-hand the problems
created by the high cost of energy in Alaska, in particular, in
Fairbanks. Currently, the Fairbanks community is spending over
$600 million on energy costs, of which 68 percent or
approximately $400 million is being spent on space heating.
These costs are stifling the economy's ability to grow and
opportunities for children to live and enjoy Alaska. This bill,
HB 74, is the right legislation for the Fairbanks community at
this time, as well as being the right type of legislation for
other communities to build their energy portfolio around and
start to diversify Alaska's economy by creating jobs and
opportunities around the development of Alaska resources. He
urged members to support HB 74.
4:46:46 PM
RENE STALEY stated that she works for Birchwood Homes and is
also a city council member for the City of Fairbanks. She read
a prepared statement in support of HB 74. She said this bill is
imperative to Alaskans to take a closer look at increasing
energy costs. At Birchwood homes, the company provides heat to
400 homes on 76 acres of property. Each home is heated by a
dual boiler system, which helps keep the home quiet and energy
efficient for space heating requirements. However, with
increasing costs, the area's future and energy needs are of
utmost importance. Trucking LNG from the North Slope to the
Interior as a means to replace fuel oil needs to be addressed.
The stated goal of securing project financing by the Alaska
Industrial Development and Export Authority (AIDEA) will help
provide public interest in promoting the prosperity of new
housing development, new employment, and new business
development. She the related support for resolution number 4566
from the Fairbanks City Council. She closed her testimony by
thanking members for their service to the state.
4:48:13 PM
JACK WILBUR, President, Design Alaska, informed the committee
that Design Alaska is a small local business that employs 60
Fairbanks residents. He spoke in support of HB 74 and explained
how getting natural gas to Fairbanks will help his business.
Obviously, one reason would be to decrease utility, heating and
electricity costs; however, more importantly, this bill would
also decrease the cost for the 60 families he supports. He
stated that with the high cost of energy, his employees look to
him to increase their wages in order for them to be able to pay
their bills. He said he essentially not only pays the high cost
of energy for his own business, but he also pays for the high
cost of energy for his employees' homes. He encouraged support
for HB 74 because he is concerned about Fairbanks's economy,
particularly as the president of an architectural engineering
company that depends heavily on the economic health of the
community. Unless the community can grow and be healthy, Mr.
Wilbur said his business cannot continue to grow and be healthy,
either. He concluded by saying it is very important to him as a
businessman in Fairbanks that HB 74 be supported and bring gas
to Fairbanks in a timely fashion.
4:50:12 PM
CAM CARLSON related that her electric heating bills run $1,100
to $1,200 in the winter. If GVEA can benefit from this and
decrease her heating bills, she would be elated. She echoed
earlier comments regarding conversations about people who have
to leave due to the percentage of their income that is used for
energy costs. Although the aforementioned might be hard for
Anchorage residents to believe since their costs are so low, it
is tough in Fairbanks and she appreciated the opportunity to
express this.
4:51:49 PM
BOB SHEFCHIK, Chair, Fairbanks Chamber of Commerce Energy
Committee; Chair, Interior Gas Utility Board, related he would
not make repetitive comments since many of his comments have
already been made. He informed the committee that the groups he
represents have consistently supported HB 74 and SB 23; this
support has been conveyed during the legislative session in
writing and in public testimony. He said that the leadership of
Governor Parnell on energy issues Alaskans face is truly
appreciated. This bill, HB 74, would provide authorization to
AIDEA to participate in the development of a gas trucking
project designed to lower the space heating and other energy
costs in Fairbanks. The governor's goal of low cost gas to as
many residents as quickly as possible in Interior Alaska is
broadly supported. The combined effects of the high cost of
energy on homeowners, small business, and industry and the
impending consequences of non-attainment to community growth,
state highway funding, and community health threaten the
economic viability of Fairbanks. All of these impacts are real
and immediate. He stated that the provision of low-cost LNG
trucking via the North Slope has combined the lowest capital
cost and the quickest delivery schedule of any energy project on
the horizon. He highlighted that although gas trucking is
considered a near-term solution, it will also provide a bridge
to a long-term pipeline, building the demand and capacity that
helps the economic future of any future pipeline project. This
bill would provide a means for the state to create
infrastructure critical to the Interior and would bring benefits
to FNSB residents, the highway system across the Interior, and
over time to the more difficult areas to reach. He urged
committee members to support HB 74.
4:54:08 PM
JOMO STEWART, Energy Project Manager, Fairbanks Economic
Development Corporation (FEDC), stated that he also sits on the
Fairbanks Chamber of Commerce's energy committee. He said that
sometimes there is a tendency to let the perfect stand in
opposition to good projects by delaying them while waiting for
projects farther down the horizon. Although this is no
different, he opined that it is an opportunity for the state to
begin to take good steps on the way to a better future, which he
hoped the legislature would agree with and help the community
move forward. He acknowledged that the LNG trucking option is
not the perfect solution, nor is it the most efficient or
cheapest way to move gas; however it is a good option. Every
analysis that has been done has shown that it will make an
appreciable savings in the cost of energy to the community.
Furthermore, the LNG trucking project would open the gateway off
the North Slope, which are good things. He also acknowledged
that the funding package isn't perfect, but it is good since it
will create a more sustainable funding mechanism to allow the
state to participate in projects and advance them. He said that
[the community] may not be able to participate in large scale
grants in the future, but the state can make an investment and
the target investment will allow those projects to move forward.
In essence, instead of allowing the perfect to stand in
opposition to the good, he reiterated this is a very good step
on the way to a brighter future using sustainable funding
mechanisms. Moreover, the LNG trucking option offers a short-
term solution that brings real benefits to the community and
sets up Fairbanks and other communities statewide to tap into
larger, better, cheaper solutions. He asked members for their
support.
4:56:53 PM
WES MADDEN, Owner, Madden Estate, said as a real estate broker,
he has been able to help people buy, sell, and manage their
property. He offered his belief that no single threat is
greater than the high cost of energy in Interior Alaska. He
said that families are struggling to heat their homes, make ends
meet, and with their confidence in the state's ability to what
is right for Alaska's sustainable future. He recalled earlier
testimony by the homebuilders on behalf of HB 74. The
homebuilding profession has been all but decimated in Interior
Alaska due to the lower demand for housing and lack of profits
due to slowly declining property values and the increasing cost
to build. Additionally, new construction home sales have
dropped 71 percent, from 157 in 2007 to 45 last year. He
reiterated that the high cost of energy affects everyone and
everything. For instance, rental costs are at an all-time high,
which is solely due to cost of energy that is passed through to
the tenants who struggle to make rent payments.
MR. MADDEN said that his property management firm manages
several multi-family apartments and homeowner associations and
he does not know how his company can get through another winter
let alone this one due to fuel cost increases. In Fairbanks an
abundance of commercial property sits vacant while investors
spend money in other states. Last year, he said his company
lost a sale on an apartment complex to an out-of-state investor,
mostly due to Alaska Housing Finance Corporation's assessment of
the Fairbanks market. Calls from property owners in rural
communities in Interior Alaska come through his office; however,
their property is unsellable since there are not any buyers. He
related that the communities are losing long time generational
Alaskan families, some with names that appear on street signs;
these families aren't just leaving the Interior, they are
leaving the state. He said that HB 74 is the good news that
will ignite the spirit of the Interior Alaskan since it
represents hope and will provide the much needed confidence in
[the state's] leadership and decision making. "However, we need
action and we need action this session," he said. He concluded
by echoing that there's no such thing as a perfect plan, and a
good plan executed now is better than a perfect plan executed
next week. He expressed hope that his business will grow as he
does not want to plan his own exit strategy and be able to
confidently suggest to high school students that Interior Alaska
is a great place to start a career. He also would like his
community to develop, keep Alaskans in Alaska, and raise his
family in this great state. He urged members to support HB 74.
5:00:04 PM
LISA HERBERT, Executive Director, Fairbanks Chamber of Commerce,
stated that the Fairbanks Chamber of Commerce's critical
priority this year is reducing the high cost of energy since
space heating and electricity is driving away business. She
related comments from one of her members, Auto Trim Alaska.
Steve Vincent, General Manager, Auto Trim Design, has a 2,000
square foot house and his friend in Kenai has a 1,900 square
foot home. The natural gas cost to heat the Kenai home is
$1,080, but the cost to heat Mr. Vincent's home in Fairbanks is
$5,040 and is supplemented by oil heat with a wood stove. Mr.
Vincent's 13,000 square foot store has heating costs of $70,000
annually, just three years ago after investing $40,000 in better
roofing and insulation. To offset his utility costs, his entire
staff of 34 employees had to take a 10 percent pay cut and loose
some benefits in order for them to keep their jobs. He foresees
probable layoffs without changes on the horizon. As the
committee has heard, and has continued to hear, the Fairbanks
community has mobilized and stands before the committee this
afternoon offering its wholehearted support for HB 74. She said
the Fairbanks Chamber of Commerce continues to advocate that the
target goal of $15 per thousand thousand British thermal units
(MMBtu) for delivered natural gas will effectively act at
conversion by cutting space heating bills in half, bringing in
$200 million of disposable income to the Fairbanks and statewide
economy. The Fairbanks Chamber of Commerce looks forward to
continuing to be the legislature's partner in what the governor
has referred to as a persistent unrelenting effort to bring low
cost energy to Interior Alaska.
5:02:38 PM
LISA PEGER stated that such a project would give residents
relief year after year. She urged members to move forward with
HB 74. She suggested savings will result in the social welfare
arena from this proposal. Drawing from her experience as a
landlord, she informed the committee that she has fielded phone
calls from families living on top one another since they cannot
afford two or three bedrooms. She then related her support for
the bullet line since having an open season will give
proprietary information and encourage movement since the
producers will know the state can build its own gasline for
several hundred million dollars. She suggested these projects
complement one another since having the trucking will give a
larger bid for gas on the open market of a gasline since the
area will have a larger consumer base. She could not see any
downside to the plan except [the need] to fix the Dalton Highway
from time to time. The LNG plant will be on skids and can be
sold, moved, or repurposed. Ms. Peger expressed interest in
having some good movement on some good projects.
5:05:53 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 74.
[HB 74 was held over.]
5:06:25 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
5:06 p.m.