Legislature(1993 - 1994)

01/26/1993 10:00 AM O&G

Audio Topic
* first hearing in first committee of referral
+ 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                                                               
  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                  
  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                       
  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                      
  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                         
  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                 
  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                                
  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.                             
  CHAIRMAN GREEN then adjourned the meeting at 10:40 a.m.                      

Document Name Date/Time Subjects