Legislature(1993 - 1994)
01/26/1993 10:00 AM House O&G
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL & GAS
January 26, 1993
10:00 a.m.
MEMBERS PRESENT
Representative Joe Green, Chairman
Representative Pete Kott, Vice-Chairman
Representative Harley Olberg
Representative Gary Davis
Representative Jerry Sanders
Representative Joe Sitton
Representative Jerry Mackie
MEMBERS ABSENT
None
COMMITTEE CALENDAR
Organizational Meeting
WITNESS REGISTER
Chip Thoma
Two Marine Way
Juneau, Alaska 99801
POSITION STATEMENT: Spoke on issues related to the gas and
oil industry
ACTION NARRATIVE
TAPE 93-1, Side A
Number 000
CHAIRMAN JOE GREEN called the meeting to order at 10:03
a.m., and noted all members were present. He then asked
members to introduce themselves.
Number 011
REPRESENTATIVE PETE KOTT of Eagle River, District 24,
advised of his military background and his interest in oil
and gas. He believed opportunities for the industry could
be promoted, since the industry created a very nice economic
environment for the state.
Number 017
REPRESENTATIVE HARLEY OLBERG a farmer and former banker from
Delta Junction, said he was interested in learning all he
could about oil and gas. He represented Valdez.
Number 020
REPRESENTATIVE JERRY MACKIE from Craig represented
Southeast, a district comprised of 34 communities from
Metlakatla to Yakutat. Although his district did not have
any oil exploration development, he said it did not take a
rocket scientist to figure out that 85 percent of the
state's revenues came from oil and, therefore, the state
needed to create new opportunities, some incentives, and the
proper environment for the oil industry to flourish and
continue to want to invest in Alaska and not in other
regions of the world. His interest was pro-development, he
added.
Number 027
REPRESENTATIVE JOE SITTON from District 31 in Fairbanks, was
vitally interested in the oil and gas industry. He
recognized the contributions of the industry to the
financing of state government operations. He was interested
in having things be as reasonable as possible for people who
do business in the state, while at the same time protecting
the interest of the people in the state as well as the
resources.
REPRESENTATIVE SITTON looked forward to working on the
committee and assured his cooperation whenever possible.
Number 036
REPRESENTATIVE JERRY SANDERS from mid-town Anchorage,
District 19, was interested in petroleum because of the
financial benefit to the state, and encouraged exploration
with responsible development. He worked in the oil field as
a roughneck and, therefore, knew a lot about it.
REPRESENTATIVE SANDERS stated he was there to be part of the
group and "to try to move things along for the economic
development portion of it."
Number 044
REPRESENTATIVE GARY DAVIS from District 8, which included
Soldotna to Seward, pointed out his district also included
Swanson River, which was the first commercial find of oil
and gas in the state, discovered in 1957. He advised that
he lived in the area for 30 years, and had been mayor of
Soldotna, which was typically a bedroom community of people
employed in the oil and gas industry: A bedroom community
for North Slope workers and offshore platforms in Cook
Inlet, as well as Swanson River. He and his constituents
had a deep vested interest in oil and gas, he concluded.
Number 053
CHAIRMAN GREEN of South Anchorage, stated that as a
petroleum engineer with 37 years in the oil industry he had
some insight on some of those matters. He was particularly
delighted that the committee had such a cross-section of
people that represented such a wide geographical area.
CHAIRMAN GREEN was looking for some way to encourage further
development in the state in an environmentally sound manner.
He hoped the committee would become knowledgeable in oil and
gas matters, and thought they needed to stay receptive to
new concepts.
CHAIRMAN GREEN believed it was incumbent upon the committee
to look at other ways and new concepts that they could
actually encourage. He noted the loss of a tremendous
number of oil and gas companies from the state over the last
few years and thought it incumbent upon the committee to
come up with methods, ways, ideas, and concepts that could
turn that around and make Alaska an exciting place for
companies to invest their money.
CHAIRMAN GREEN concluded that recent discoveries had been a
help, but thought the basic climate of government was going
to be important.
Number 078
REPRESENTATIVE OLBERG believed the single most important
thing that the committee and the legislature could do was
improve the regulatory climate, which he felt was driving
people out of the state and inhibiting people from coming to
the state. The known area of petroleum development were now
eastern Soviet Union, China, and Indonesia, and there just
wasn't the climate in Alaska today to encourage people to
invest here, he said. This was something that really needed
to be addressed, he added.
Number 086
CHAIRMAN GREEN concurred.
REPRESENTATIVE MACKIE mentioned his strong interest in the
Arctic National Wildlife Refuge (ANWR). With the current
administration it was really unclear as to what Alaska's
direction should be in terms of lobbying efforts, he said.
REPRESENTATIVE MACKIE advised of his experience in lobbying
for ANWR over the last few years, and his willingness to
actively continue such lobbying efforts. He and Governor
Sheffield met with President-Elect Clinton when he was a
candidate and discussed this issue with him, and also
addressed the convention on the issue of ANWR, he added.
REPRESENTATIVE MACKIE hoped the committee would take a more
active interest in ANWR. He saw ANWR as being very vital to
Alaska's future, and believed that any escalation of
problems in the middle east or any kind of disasters in the
United States or oil shortages would show the administration
the need for ANWR to provide for our country.
REPRESENTATIVE MACKIE hoped the committee could work with
the Senate Oil and Gas Committee. He stated the Governor
was going to need funds to follow through with whatever his
strategy might be. He thought it important not to try to
shove ANWR down anyone's throat, and that timing would be a
real necessary thing to monitor.
REPRESENTATIVE MACKIE thought Governor Sheffield would
continue to be involved, as well as Representative Mike
Navarre and others.
CHAIRMAN GREEN shared Representative Mackie's concerns. He
said, "If Yeltsin can't pull off this westernizing of Russia
we may have yet to see them again, if not as an enemy, as a
not very friendly ally and we know the problems we had
nationalizing the middle east so China and these other areas
we are looking at I think we definitely need to focus and
bring the industry back to focus within the Continental
United States."
Number 135
REPRESENTATIVE SITTON referenced a recent telecast in the
Lower 48 which indicated how many hundreds of oil field
production companies had gone out of business. All the
smaller companies were in a lot of trouble in the lower 48,
not just Alaska, he said.
REPRESENTATIVE SITTON was intrigued that a decision had been
made among some oil company executives to concentrate on
overseas rather than domestic production, for a variety of
reasons. He hoped one of the reasons for that was not to
support substandard pay in third world countries because he
certainly did not want that in Alaska either.
Number 148
REPRESENTATIVE OLBERG thought that Governor Sheffield had
publicly remarked that this was a good time to back off on
ANWR. He suggested an approach to consider using was to do
an inventory of ANWR rather than full scale development. He
felt the minimum necessary exploratory drilling should be
done to know what was there.
REPRESENTATIVE OLBERG believed full scale development of
ANWR was a dead issue for a few years, but could be
approached on a limited experimental drilling basis.
CHAIRMAN GREEN believed knowing what was in ANWR was of
major importance in deciding what to do with it, and in
order to make sound policy.
REPRESENTATIVE SITTON was intrigued by Representative
Olberg's comments, and wondered how an inventory of ANWR
would be accomplished and how costly that might be.
REPRESENTATIVE OLBERG had no idea how to go about getting an
inventory of ANWR done.
Number 174
CHAIRMAN GREEN responded that an inventory of ANWR would be
very expensive since any kind of drilling in remote areas
was very expensive. He then expounded on the term "cost
hold," which was a concept of drilling off structure
purposely so that the drilling would relate the geology.
Then, it was up to the players to determine whether or not
the geology would be conducive on structure, he said.
CHAIRMAN GREEN thought a lot of environmentalists were
concerned that there would not be this interim part and that
once ANWR was developed there would be significant reserves
and a floodgate of development. He added that once found,
even in the best of situations, short of maybe a national
emergency, it would be a significant number of years before
oil from ANWR could be produced on the scale of that in
Valdez.
CHAIRMAN GREEN distributed Petroleum Handbooks which
contained information specifically applicable to the Arctic
Environment. He encouraged members to review the Petroleum
Handbook to get an idea of what went on in the oil industry.
Number 217
REPRESENTATIVE SANDERS agreed with Representative Olberg
with regard to doing an inventory of ANWR, but was concerned
that if appreciable amounts of oil were found some federal
complacency and complacency in other states might be
created.
CHAIRMAN GREEN pointed out the industry historically had a
boom/bust situation.
REPRESENTATIVE DAVIS said they were all looking for
additional revenue and business in the state, and encouraged
members to look into the results of the Cook Inlet Oil and
Gas Lease Sale and the amount of interest that sale had
generated, as an indicator of what the industry was doing
right now.
Number 261
CHAIRMAN GREEN stated the company had been very successful
with Cook Inlet, as well as Toodlum Well off ANWR, and two
wells in the Colville Delta. This showed that diligence was
worthwhile and, therefore, others should be encouraged to do
the same thing, he believed.
CHAIRMAN GREEN disclosed a call for nominations, a method
used by the Department of Natural Resources (DNR) on lease
sales, was upcoming. He announced the committee would hear
an overview on Thursday, January 28, 1993, from both the
DNR's Division of Oil and Gas and the Alaska Oil and Gas
Conservation Commission.
CHAIRMAN GREEN pointed out the committee would be the first
to hold a confirmation hearing on Glenn Olds, the candidate
for Commissioner of DNR.
Number 323
REPRESENTATIVE SITTON wondered whether the committee would
be given background information on commission appointees
ahead of time so the committee could determine the necessary
questions.
CHAIRMAN GREEN replied in the affirmative. He disclosed the
committee had received a package of information along with
the request for confirmation.
REPRESENTATIVE SITTON stated that though he respected the
Governor's judgment, it was his intent to look very
thoroughly into the background of commission appointees.
CHAIRMAN GREEN agreed it was the committee's job to "get the
best man for the job."
Number 336
CHAIRMAN GREEN advised that HB 80 which placed a limit on
the amount of acreage a certain entity might hold, would be
heard by the committee after receipt of a similar bill by
the governor.
CHAIRMAN GREEN talked about a bill currently in the House
State Affairs Committee that, in effect, charged a nickel a
barrel to build a fund, the 470 Fund, that would be useable
in case of an oil spill disaster. He was concerned that
this bill had a tendency to want to have more things funded
from that fund. His personal view was that if the fund was
justified to begin with then it should be accomplished and
not be continually syphoned off.
Number 365
REPRESENTATIVE OLBERG thought he had a major investigation
going with regard to where all the money in the 470 Fund
went, but found out that the Department of Environmental
Conservation (DEC), published a book that said $47 million
had been skimmed off and what was done with it. If
necessary, he hoped to submit legislation to cap that fund
at $50 million and stop it from being a "DEC slush fund."
Number 373
CHAIRMAN GREEN believed the committee would be very helpful
in getting a cap on the 470 Fund. He stated the book
mentioned by Representative Olberg was an annual report
published by the DEC. He surmised the fund "runs $27 to $30
million a year of income at a nickel a barrel and you think
in a year and a half it would be full, but it has never got
there. In fact it is dangerously low, it is less than $20
million." He added, "something bad was going on."
Number 387
CHIP THOMA, an active participant in the legislative process
for about 22 years, gave an account of a McNeil Lehrer show
in which Charles DiBona of the American Petroleum Institute,
gave what he perceived as a very inappropriate view of the
way the industry was going to take on the new
administration.
MR. THOMA believed it was very evident from the comments
from Secretary Benson of the Treasury and the comments that
have been made by the new Clinton administration that there
would be an energy tax. He believed further that Mr.
DiBona's reticence to even entertain the idea of a tax, in
fact his unwillingness to consider such a tax, abounded ill
for the industry.
MR. THOMA surmised the administration had recognized that
our industries, homes, cars, and our whole way of using
petroleum based energy was totally inefficient and that we
wasted 50% of the energy we burned. Being in the insulation
business, he noted almost every house in the United States
was not properly insulated.
MR. THOMA stated that as long as the petroleum industry
continued their current way of making money and promoting
inefficiency things were not going to work and there would
be an energy tax on production, marketing, and consumers,
which would raise $150 billion a year to bring down the
deficit and be placed in environmental and conservation
programs throughout the country.
MR. THOMA added that a nickel a barrel was an example of the
type of tax that would be placed on the industry. He agreed
some of those monies had perhaps "gone out the door a little
bit too fast," but urged the committee to consider the trend
in the national administration.
Number 434
CHAIRMAN GREEN invited those in attendance to the next
committee meeting on Thursday, January 28, 1993.
ADJOURNMENT
CHAIRMAN GREEN then adjourned the meeting at 10:40 a.m.
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