Legislature(2017 - 2018)BARNES 124

01/29/2018 01:00 PM RESOURCES

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01:10:30 PM Start
01:11:01 PM HB288
03:13:03 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= HB 288 OIL AND GAS PRODUCTION TAX TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
Oil & Gas Industry Testimony
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                        January 29, 2018                                                                                        
                           1:10 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Andy Josephson, Co-Chair                                                                                         
Representative Geran Tarr, Co-Chair                                                                                             
Representative Harriet Drummond                                                                                                 
Representative Justin Parish                                                                                                    
Representative Chris Birch                                                                                                      
Representative DeLena Johnson                                                                                                   
Representative George Rauscher                                                                                                  
Representative David Talerico                                                                                                   
Representative Chris Tuck (alternate)                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 288                                                                                                              
"An Act relating to the minimum tax imposed on oil and gas                                                                      
produced from leases or properties that include land north of 68                                                                
degrees North latitude; and providing for an effective date."                                                                   
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 288                                                                                                                  
SHORT TITLE: OIL AND GAS PRODUCTION TAX                                                                                         
SPONSOR(s): REPRESENTATIVE(s) TARR                                                                                              
                                                                                                                                
01/16/18       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/16/18       (H)       RES, FIN                                                                                               
01/22/18       (H)       RES AT 1:00 PM BARNES 124                                                                              
01/22/18       (H)       Heard & Held                                                                                           
01/22/18       (H)       MINUTE(RES)                                                                                            
01/26/18       (H)       RES AT 1:00 PM BARNES 124                                                                              
01/26/18       (H)       Heard & Held                                                                                           
01/26/18       (H)       MINUTE(RES)                                                                                            
01/29/18       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KARA MORIARTY, President/CEO                                                                                                    
Alaska Oil and Gas Association                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288 and answered questions.                                                                                               
                                                                                                                                
SCOTT JEPSEN, Vice President External Affairs and Transportation                                                                
ConocoPhillips Alaska, Inc.                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288 and answered questions.                                                                                               
                                                                                                                                
PAUL RAUSCH, Vice President Finance                                                                                             
ConocoPhillips Alaska, Inc.                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288 and answered a question.                                                                                              
                                                                                                                                
CARL GIESLER, CEO                                                                                                               
Glacier Oil & Gas Corp                                                                                                          
(No address provided)                                                                                                           
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288.                                                                                                                      
                                                                                                                                
DAMIAN BILBAO, Vice President Commercial Ventures                                                                               
BP                                                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288 and answered questions.                                                                                               
                                                                                                                                
LEWIS WESTWICK, Vice President Finance                                                                                          
BP                                                                                                                              
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288 and answered questions.                                                                                               
                                                                                                                                
CORY QUARLES, Alaska Production Manager                                                                                         
ExxonMobil Production Company                                                                                                   
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288.                                                                                                                      
                                                                                                                                
KATE BLAIR, Government and Public Affairs Manager                                                                               
Andeavor in Alaska                                                                                                              
Kenai, Alaska                                                                                                                   
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288 and answered a question.                                                                                              
                                                                                                                                
BENJAMIN JOHNSON, President/CEO and Director                                                                                    
BlueCrest Energy                                                                                                                
Fort Worth, Texas                                                                                                               
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288.                                                                                                                      
                                                                                                                                
PAT FOLEY, Senior Vice President                                                                                                
Alaska Operations                                                                                                               
Caelus Energy Alaska                                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in opposition  during the hearing                                                             
of HB 288 and answered questions.                                                                                               
                                                                                                                                
KEN ALPER, Director                                                                                                             
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Gave remarks during the hearing of HB 288.                                                               
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:10:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GERAN   TARR  called   the  House   Resources  Standing                                                             
Committee meeting  to order at  1:10 p.m.   Representatives Tarr,                                                               
Birch, Parish,  Talerico, Johnson,  Drummond, and  Josephson were                                                               
present at the call to  order.  Representatives Rauscher and Tuck                                                               
(alternate) arrived as the meeting was in progress.                                                                             
                                                                                                                                
               HB 288-OIL AND GAS PRODUCTION TAX                                                                            
                                                                                                                                
1:11:01 PM                                                                                                                    
                                                                                                                                
CO-CHAIR TARR  announced that the  first order of  business would                                                               
be  HOUSE BILL  NO.  288, "An  Act relating  to  the minimum  tax                                                               
imposed on  oil and gas  produced from leases or  properties that                                                               
include land  north of 68  degrees North latitude;  and providing                                                               
for an effective date."                                                                                                         
                                                                                                                                
1:12:24 PM                                                                                                                    
                                                                                                                                
KARA  MORIARTY, President/CEO,  Alaska Oil  and Gas  Association,                                                               
provided a PowerPoint presentation  entitled, "HB 288 Testimony,"                                                               
dated 1/29/18.   She  informed the committee  the Alaska  Oil and                                                               
Gas   Association  (AOGA)   is  a   private  trade   organization                                                               
representing  the  majority  of companies  exploring,  producing,                                                               
refining, and transporting oil and gas  in Alaska (slide 2).  Ms.                                                               
Moriarty said AOGA members have  reported two uninterrupted years                                                               
of  increased  production;  increases  in  production  have  been                                                               
reported from both legacy fields and newer fields (slide 3).                                                                    
                                                                                                                                
REPRESENTATIVE PARISH asked for  the percentages of the increases                                                               
reported in [2016 and 2017].                                                                                                    
                                                                                                                                
MS.  MORIARTY said  the increases  are  1 percent  to 2  percent,                                                               
following  a  historical  decline  of  4  percent  to  8  percent                                                               
annually.  She provided forecast  information from December 2012,                                                               
and fall  of 2017, and  pointed out  the more recent  forecast is                                                               
for production  of 546,360 barrels  per day (bpd), which  is over                                                               
103,460 bpd  higher than the forecast  from five years ago.   She                                                               
concluded  increases in  investment  have led  to  a much  better                                                               
forecast,  partly because  previous tax  systems, Alaska's  Clear                                                               
and  Equitable Share  (ACES) [passed  in the  Twenty-Fifth Alaska                                                               
State Legislature]  rewarded spending and Senate  Bill 21 [passed                                                               
in  the  Twenty-Eighth  Alaska  State  Legislature]  incentivized                                                               
production (slide 4).   As a comparison,  AOGA reviewed projected                                                               
state  revenue  from  royalties, production,  property  tax,  and                                                               
corporate income tax at the  original forecast of 442,900 barrels                                                               
per  day,  and she  noted  the  state  would have  received  $300                                                               
million less in overall state revenue (slide 5).                                                                                
                                                                                                                                
1:16:07 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  TARR  asked  whether  the new  model  utilized  by  the                                                               
[Department  of   Natural  Resources  (DNR)]  will   improve  the                                                               
accuracy of forecasts.                                                                                                          
                                                                                                                                
MS.  MORIARTY said  AOGA relies  on the  Department of  Revenue's                                                               
(DOR's) published forecasts; AOGA  supports forecasts that show a                                                               
range  between 10,  50,  and  90 percent  probability  to give  a                                                               
better  average, but  AOGA does  not  have supporting  historical                                                               
data.                                                                                                                           
                                                                                                                                
CO-CHAIR  TARR pointed  out  (DNR) plans  to  utilize a  ten-year                                                               
timeframe for a better understanding of events.                                                                                 
                                                                                                                                
1:18:07 PM                                                                                                                    
                                                                                                                                
MS. MORIARTY advised  AOGA members work with DOR  to provide data                                                               
to support its forecasts.                                                                                                       
                                                                                                                                
REPRESENTATIVE PARISH  asked for  the percentage of  the spending                                                               
incentivized  by ACES  that was  directed toward  new investments                                                               
and future growth.                                                                                                              
                                                                                                                                
MS. MORIARTY said  to answer she would  need additional research.                                                               
The  ACES credit  system was  based  on whether  a company  spent                                                               
money but not necessarily upon  activities leading to production;                                                               
however, the per  barrel tax credit is based on  production.  Ms.                                                               
Moriarty  returned to  slide 5,  which  further illustrated  what                                                               
$300  million  in additional  state  revenue  could fund  in  the                                                               
current   proposed  state   budget.     She  stressed   increased                                                               
production  helps the  legislature  appropriate  funds for  state                                                               
needs.   Further, in fiscal year  2018 (FY 18), oil  revenues are                                                               
projected  to represent  75 percent  of the  state's unrestricted                                                               
general  fund (UGF),  and when  combined with  restricted revenue                                                               
and property taxes,  totals over $2.4 billion to  state and local                                                               
governments  (slide 6).   She  discussed  Alaska's mega  resource                                                               
potential noting the  total provided on slide 7  does not include                                                               
recent discoveries,  but does include estimates  for the National                                                               
Petroleum Reserve-Alaska (NPR-A).                                                                                               
                                                                                                                                
1:23:11 PM                                                                                                                    
                                                                                                                                
MS.  MORIARTY   acknowledged  oil  production  in   Alaska  faces                                                               
competition from  the Lower  48 as the  U.S. becomes  the world's                                                               
largest producer.   In October  2017, production in the  U.S. was                                                               
over 9.6 million  bpd; Alaska is producing 5 percent  of the U.S.                                                               
total.    She  pointed  out Alaska's  mega  resources  will  only                                                               
continue  to  contribute  to   increasing  U.S.  production  with                                                               
investment  (slide  8).    A DNR  forecast  from  February  2017,                                                               
illustrated  a long-term  view of  Alaska's declining  production                                                               
through  2069  absent ongoing  and  increased  investment in  all                                                               
fields  (slide  9).   Although  a  short-term  ten-year  forecast                                                               
showed improvement  in production, the long-term  outlook remains                                                               
the  same (slide  10).   Ms. Moriarty  provided a  graph, from  a                                                               
presentation  by  a representative  of  Wells  Fargo Bank,  which                                                               
showed investment  in production  during the  past ten  years for                                                               
Alaska  and the  U.S.   She  concluded in  2018 the  oil and  gas                                                               
industry  in  the  U.S.  will   spend  $120  billion  in  capital                                                               
expenses, of  which less than 2  percent will be spent  in Alaska                                                               
(slide 11).   She questioned how Alaska could  increase its share                                                               
of  the  total amount  of  money  spent  by industry  on  capital                                                               
investments in the U.S.                                                                                                         
                                                                                                                                
MS. MORIARTY  cautioned another tax  change will not  help Alaska                                                               
attract   additional  investment;   as  previous   testimony  has                                                               
revealed, there  have been eight  tax policy changes in  the last                                                               
thirteen years and six have  been opposed by industry (slide 12).                                                               
Turning  to HB  288, she  said the  bill would  negatively impact                                                               
industry by increasing the cost  of the minimum production tax by                                                               
75  percent,  and  would  be   the  third  straight  increase  to                                                               
production taxes in three years.   Increased taxes increase cost,                                                               
which   reduces  competitiveness   for  Alaska's   projects  when                                                               
compared  to  national  or  worldwide  projects.    Ms.  Moriarty                                                               
stressed reducing  competitiveness for  the oil and  gas industry                                                               
affects  one-third of  all jobs  and wages  in Alaska  along with                                                               
less production,  state revenue, and economic  growth (slide 13).                                                               
She said  the industry recognizes  the state's  fiscal challenge;                                                               
however, the industry can contribute  more by growing oil and gas                                                               
production.  Ms. Moriarty  recalled Alaska's Economic Development                                                               
Strategy contains  a section on the  resource extraction industry                                                               
that  concluded  in  order   to  strengthen  resource  extraction                                                               
industries,  the   state  must  promote  a   consistent  business                                                               
environment that  includes a  stable tax regime.   She  said AOGA                                                               
does  not  envision  HB 288  achieving  the  aforementioned  goal                                                               
(slide 14).                                                                                                                     
                                                                                                                                
1:31:25 PM                                                                                                                    
                                                                                                                                
The committee took a brief at ease.                                                                                             
                                                                                                                                
1:31:25 PM                                                                                                                    
                                                                                                                                
SCOTT    JEPSEN,   Vice    President    External   Affairs    and                                                               
Transportation,  ConocoPhillips  Alaska,  Inc.  (ConocoPhillips),                                                               
provided  a PowerPoint  presentation  entitled, "House  Resources                                                               
Committee   HB288,"  dated   1/29/18.     Mr.  Jepsen   said  his                                                               
presentation   would  include   forward-looking  statements   and                                                               
directed  attention to  a cautionary  statement  and safe  harbor                                                               
note (slide 2).  He  turned to ConocoPhillips' projects currently                                                               
underway  on the  western North  Slope, including  Greater Mooses                                                               
Tooth Unit  1 (GMT1),  which may  have production  by the  end of                                                               
2018  and peak  production of  25,000-30,000 barrels  of oil  per                                                               
day.   Another project, Greater  Mooses Tooth Unit 2  (GMT2), may                                                               
reach first  production in 2021 and  is of similar size  to GMT1,                                                               
employing 700 construction jobs.   In the [Colville River Alpine]                                                               
unit,  development of  Fiord  West is  now  possible through  the                                                               
acquisition of  a mobile, extended-reach drilling  rig, and first                                                               
production is  expected in 2020.   Finally, the  Willow Discovery                                                               
oilfield could produce  100,000 barrels of oil per  day, with the                                                               
earliest  production possible  in  2023, and  is  a project  that                                                               
could support thousands of construction  jobs and several hundred                                                               
direct jobs (slide 3).                                                                                                          
                                                                                                                                
REPRESENTATIVE PARISH  asked how  much time  would be  needed for                                                               
the projects to reach peak production.                                                                                          
                                                                                                                                
MR. JEPSEN  estimated one to  two years after  initial production                                                               
[a project reaches  peak production].  He  said ConocoPhillips is                                                               
conducting its  largest exploration program since  2002, drilling                                                               
five exploration  wells, including  wells in Willow,  Stony Hill,                                                               
and Putu.   Further, ConocoPhillips  is undertaking a  250 square                                                               
mile seismic program on state land (slide 4).                                                                                   
                                                                                                                                
1:37:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TALERICO  asked how  many jobs would  be generated                                                               
for the exploration projects.                                                                                                   
                                                                                                                                
MR. JEPSEN said approximately 400.                                                                                              
                                                                                                                                
REPRESENTATIVE PARISH asked for  the potential royalty share from                                                               
the Stony Hill development.                                                                                                     
                                                                                                                                
1:38:04 PM                                                                                                                    
                                                                                                                                
MR.  JEPSEN said  royalty would  be either  12.5 percent  or 16.7                                                               
percent on  state land and  there would be  a 50/50 split  of all                                                               
federal oil and  gas revenues; however, a portion  of the revenue                                                               
would  be dedicated  to  mitigating impacts  to  villages in  the                                                               
National Petroleum  Reserve-Alaska (NPR-A).  In  further response                                                               
to  Representative  Parish's question  as  to  the proportion  of                                                               
revenue  dedicated for  mitigation,  he explained  the amount  is                                                               
unknown until  grant requests are  received from  villages within                                                               
the North Slope Borough, and he described the grant process.                                                                    
                                                                                                                                
CO-CHAIR  TARR suggested  information  on  revenue dedicated  for                                                               
mitigation is detailed in the state budget.                                                                                     
                                                                                                                                
1:39:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH asked how much it costs to drill a well.                                                                   
                                                                                                                                
MR. JEPSEN  answered the cost  of an individual  exploration well                                                               
can  be  tens of  millions  of  dollars.    He then  referred  to                                                               
previous testimony by the Department  of Revenue stating that the                                                               
minimum  tax does  not apply  to new  oil; however,  he said  the                                                               
minimum  tax does  apply to  ConocoPhillips projects  because its                                                               
projects are subject  to state severance tax.  Slide  5 was a map                                                               
which  illustrated many  activities ongoing  on the  North Slope,                                                               
including projects by ConocoPhillips  and other companies such as                                                               
BP, Hilcorp,  Repsol/Armstrong, Brooks  Range Petro,  Caelus, and                                                               
the  Alaska LNG  Project.   He  said the  five projects  furthest                                                               
along  would  spend  over $13  billion  in  capital  expenditures                                                               
(CAPEX)  and cautioned  that the  facilities at  Alpine, Kuparuk,                                                               
and  Prudhoe Bay  must have  investment in  order to  provide the                                                               
infrastructure needed to support new  development.  He provided a                                                               
graph   that  illustrated   production  forecasts   to  2027   as                                                               
influenced  by increased  investment:   the encircled  portion of                                                               
the graph from  2014 to 2027 contained  projections of additional                                                               
production he attributed to the  tax framework of Senate Bill 21.                                                               
Increased production  was indicated in  the near-term and  in the                                                               
long-term,  including  significant  revenue  and jobs  due  to  a                                                               
competitive  tax framework.    Mr. Jepsen  said  what would  have                                                               
happened  without the  influence of  Senate Bill  21 is  unknown;                                                               
however, he  assured the committee  the tax  regime is a  part of                                                               
investment decisions made by ConocoPhillips (slide 6).                                                                          
                                                                                                                                
1:44:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  RAUSCHER  questioned  whether there  are  further                                                               
impacts of legislation enacted after Senate Bill 21.                                                                            
                                                                                                                                
MR. JEPSEN said the increases  are encircled on slide 6, although                                                               
subsequent changes  have been made  regarding tax credits  and to                                                               
"fringes  of  the  core  tax  structure."   He  pointed  out  the                                                               
forecast was  provided by  DOR after DOR  gathered data  from the                                                               
companies on the North Slope.                                                                                                   
                                                                                                                                
REPRESENTATIVE  PARISH expressed  his  interest in  a graph  that                                                               
would show  investment that has  occurred in the past  few years.                                                               
A previous tax system, ACES,  encouraged investment and spending,                                                               
and  he questioned  where the  investment attributed  to ACES  is                                                               
shown.                                                                                                                          
                                                                                                                                
MR.  JEPSEN explained  he does  not have  access to  all industry                                                               
data but would supply data  for ConocoPhillips' spending profile.                                                               
He pointed  out ACES did  not encourage cutting costs  because 90                                                               
percent  of industry  savings  went  to the  state.   Mr.  Jepsen                                                               
turned  to  Alaska's  oil  and   gas  industry  competition  from                                                               
unconventional plays  found in the  Lower 48, that  have enormous                                                               
resource potential,  and which  are closer  to market,  easier to                                                               
permit and are  governed by stable fiscal policies.   He said oil                                                               
and  gas plays  in the  Lower  48 are  setting investment  costs,                                                               
especially  in Texas.   Although  - due  to its  efficiencies and                                                               
investments -  ConocoPhillips in Alaska remains  competitive, any                                                               
increases in tax cost decreases its competitiveness.                                                                            
                                                                                                                                
1:49:35 PM                                                                                                                    
                                                                                                                                
PAUL  RAUSCH,  Vice  President  Finance,  ConocoPhillips  Alaska,                                                               
Inc.,  directed attention  to the  financial aspects  of producer                                                               
and government  profit share.   As illustrated on slide  8, total                                                               
net cash  flow from the  North Slope  at various oil  prices from                                                               
$30 to $100 per barrel of  oil was divided between producers, the                                                               
federal  government, and  the state  government.   The  estimates                                                               
were  generated   from  Fall  2017  Revenue   Source  Book  (RSB)                                                               
assumptions  and a  21 percent  federal tax  rate for  the entire                                                               
fiscal year.   He  stressed total Alaska  government take  is not                                                               
only  production  tax  but includes  income  tax,  property  tax,                                                               
royalty, and production  tax.  Mr. Rausch  noted total government                                                               
share  is greater  than  producer  share at  all  prices, and  at                                                               
prices of $30 to $35 per  barrel of oil, the producers' profit is                                                               
negative,  and  an  increase  in   minimum  state  tax  would  be                                                               
particularly difficult.                                                                                                         
                                                                                                                                
1:52:50 PM                                                                                                                    
                                                                                                                                
MR. JEPSEN turned  attention to the impacts of HB  288.  Previous                                                               
DOR testimony  was that at $72  per barrel of oil  the equivalent                                                               
gross tax to Senate  Bill 21 net tax is about 7  percent.  If oil                                                               
prices increase, HB  288 would not have much  impact; however, HB                                                               
288 is a tax increase at  low prices thus when industry is losing                                                               
cash,  the legislation  would disincentivize  investment.   Also,                                                               
the core  Senate Bill 21 tax  system has been in  place for about                                                               
four years  which has been helpful  to ConocoPhillips' investment                                                               
decisions.   Mr.  Jepsen agreed  with earlier  industry testimony                                                               
that investment is  a key element to managing the  budget gap and                                                               
more production  leads to  jobs and state  revenue.   Finally, he                                                               
observed the industry on the  North Slope is close to significant                                                               
development,  spending,  and  new production,  and  he  expressed                                                               
opposition to HB 288.                                                                                                           
                                                                                                                                
1:56:27 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOSEPHSON   recalled  DOR   has  reported   that  lease                                                               
expenditures in some legacy fields  have been reduced from $50 to                                                               
less than $30  and he returned attention to slide  11 of the AOGA                                                               
PowerPoint  presentation that  showed total  capital expenditures                                                               
in  Alaska  are   lower,  but  production  has   increased.    He                                                               
questioned   where  ConocoPhillips'   capital  expenditures   are                                                               
reflected in the information that has been provided.                                                                            
                                                                                                                                
MR. JEPSEN said  he has not provided a  representation of capital                                                               
investments;  however,  if  ConocoPhillips had  not  reduced  its                                                               
lease expenditures,  it would  not have invested  in Alaska.   By                                                               
increasing  efficiencies, ConocoPhillips  continued to  invest in                                                               
Alaska  during   the  downturn  [of  oil   prices],  and  remains                                                               
competitive.    He  cautioned  that   new  parties  would  invest                                                               
elsewhere.   Although  he said  he  did not  have information  on                                                               
where  all the  capital  is  being spent,  over  $400 million  in                                                               
incremental investment has been spent  in CD5.  Further, advances                                                               
in technology have brought efficiencies in drilling.                                                                            
                                                                                                                                
CO-CHAIR TARR  related previous testimony that  oil production in                                                               
Alaska  requires  a   lead  time  of  five  to   ten  years,  yet                                                               
ConocoPhillips stated  the four-year term  of Senate Bill  21 has                                                               
led to increased production and  a positive business environment;                                                               
she  inquired  as  to  the   discrepancy  between  the  differing                                                               
timelines.                                                                                                                      
                                                                                                                                
MR. JEPSEN  said ConocoPhillips makes investment  decisions based                                                               
on assumptions of  oil price, costs, tax rates,  and reserves; in                                                               
addition, assumptions  about state  tax policy are  predicted for                                                               
two  years, and  all are  factors affected  by uncertainty.   The                                                               
industry  is  accustomed  to  uncertainty,  however,  stable  tax                                                               
policy is desired.                                                                                                              
                                                                                                                                
MR.  RAUSCH returned  attention to  slides 5  and 6,  noting that                                                               
ConocoPhillips  projects  are  long-term,   such  as  the  Willow                                                               
project, and shorter term, such as GMT 1 and GMT 2.                                                                             
                                                                                                                                
MR.  JEPSEN cautioned  that ConocoPhillips  is  not committed  to                                                               
develop Willow and the project  will not be pursued under certain                                                               
circumstances.                                                                                                                  
                                                                                                                                
2:03:19 PM                                                                                                                    
                                                                                                                                
CARL GIESLER,  President/CEO, Glacier  Oil & Gas  Corp (Glacier),                                                               
stated his intent  to provide a small company  perspective to the                                                               
discussion  of HB  288.   He informed  the committee  Glacier has                                                               
small  oil operations  on the  west side  of Cook  Inlet and  gas                                                               
operations on the Kenai [Peninsula];  on the North Slope, Glacier                                                               
operates the  Badami field, processing  plant, and  pipeline west                                                               
of Point Thomson.  Also in  the Badami field, Glacier is drilling                                                               
an exploration  well, Starfish, which  is the first  well drilled                                                               
in that field in more than  five years.  Mr. Geisler acknowledged                                                               
the state's  budget quandary; however,  he said  HB 288 is  not a                                                               
good solution  at this time  due to  its substantial harm  to the                                                               
industry and to  the state's reputation.  The oil  and gas sector                                                               
in  Alaska  has  had  recent   good  news:    major  discoveries;                                                               
increased  ice  road  activity;  increases  to  the  Trans-Alaska                                                               
Pipeline System  (TAPS); a  purchase by  Oil Search  Ltd.; rising                                                               
oil prices; opening  of the Arctic National  Wildlife Refuge 1002                                                               
area.    However, for  small  companies,  the foundation  of  the                                                               
state's oil  and gas  ecosystem is  eroding due  to an  exodus of                                                               
producers and  vendors, and less  capital and jobs; in  fact, the                                                               
number of entities  in the oil and gas sector  is declining which                                                               
means there are fewer service  companies and it becomes difficult                                                               
and costly to  get work done.  For example,  in Cook Inlet, there                                                               
is only one  company left to provide water  transportation to the                                                               
job site for workers.                                                                                                           
                                                                                                                                
2:08:05 PM                                                                                                                    
                                                                                                                                
MR. GEISLER continued to a  second issue which is financial firms                                                               
and  banks have  become wary  of  investing in  Alaska; in  fact,                                                               
Alaska  banks declined  to  invest in  the  Cook Inlet  reservoir                                                               
basin because  there are  too few  producers.   Further, thirteen                                                               
banks in  the Lower 48  that were  contacted by Glacier  were not                                                               
interested in  assets in  Alaska because  of their  perception of                                                               
[state] policy  and the lack  of small  commercial opportunities.                                                               
Mr.  Geisler  said  anything  that deters  new  capital  and  new                                                               
companies from  coming to  Alaska is not  helpful because  of its                                                               
effect on job growth.   He pointed out Alaska's unemployment rate                                                               
is a percentage point below 49  states, which would not be helped                                                               
by  an  increase  in  the  tax  rate.    Previous  testimony  has                                                               
described  HB 288  as one  change, however,  the bill  would more                                                               
likely make two changes:  the  working group formed last year has                                                               
not  started its  work, thus  a change  made by  HB 288  would be                                                               
followed by further  changes from the working  group, which would                                                               
be problematic.                                                                                                                 
                                                                                                                                
2:11:38 PM                                                                                                                    
                                                                                                                                
DAMIAN BILBAO,  Vice President Commercial Ventures,  BP, provided                                                               
a  PowerPoint  presentation  entitled,  "Testimony  before  House                                                               
Resources - HB 288," dated 1/18/18.                                                                                             
                                                                                                                                
2:12:57 PM                                                                                                                    
                                                                                                                                
LEWIS  WESTWICK,  Vice  President  Finance,  BP,  provided  brief                                                               
personal background information.                                                                                                
                                                                                                                                
2:13:34 PM                                                                                                                    
                                                                                                                                
MR. BILBAO  said BP opposes HB  288.  He presented  slide 2 which                                                               
included  a graph  of total  worldwide  oil demand  from 2000  to                                                               
present - about 92 million barrels  per day - and a forecast that                                                               
oil  demand will  peak around  2035-2040.   Mr.  Bilbao said  the                                                               
world economy  drives oil demand, however,  increased efficiency,                                                               
new technologies,  and changes such  as ride sharing,  will lower                                                               
the demand so that industry  will become more competitive than it                                                               
is  today.   Also shown  on slide  2 was  a graph  of technically                                                               
recoverable oil  resources of approximately 2.5  trillion barrels                                                               
worldwide, and  oil demand  through 2050,  which is  1.2 trillion                                                               
barrels.   He cautioned if  Alaska's resources are  not developed                                                               
at  competitive prices,  its oil  will  remain in  the ground  as                                                               
undeveloped resources.  He pointed  out Alaska produces less than                                                               
1 percent of worldwide oil production  and less than 5 percent of                                                               
total oil  production in the U.S.   Mr. Bilbao said  HB 288 makes                                                               
Alaska  less competitive  because  as  costs increase,  economics                                                               
worsen and investment goes elsewhere in the world.                                                                              
                                                                                                                                
2:18:08 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  BIRCH expressed  his understanding  North America                                                               
has  more technically  recoverable  resources than  are shown  on                                                               
slide 2.                                                                                                                        
                                                                                                                                
MR. BILBAO explained  400 billion barrels is  a tremendous amount                                                               
of resource in  North America and most production  is coming from                                                               
the  U.S.; although  the graph  shows Central  and South  America                                                               
have  a greater  amount of  recoverable resources,  in Venezuela,                                                               
heavier oil  does not  attract investment  due to  poor economics                                                               
and political climate, which illustrates  that investment goes to                                                               
the  most attractive  resource.   He stressed  BP wants  a higher                                                               
proportion  of  U.S.  investment  in  Alaska.    In  response  to                                                               
Representative  Parish's  question  as   to  what  countries  are                                                               
indicated by CIS, he said  the Commonwealth of Independent States                                                               
(CIS) includes most of the former Soviet Union.                                                                                 
                                                                                                                                
CO-CHAIR  TARR  asked  how  the   advantages  of  BP's  ownership                                                               
interest in TAPS influences its investment in Alaska.                                                                           
                                                                                                                                
MR. BILBAO  advised said advantages  are a misperception  in that                                                               
BP  must  pay  for  pipeline and  marine  transportation  of  its                                                               
products.   He explained  BP compares  its investments  in Alaska                                                               
with  opportunities  around the  world  and  will always  operate                                                               
responsibly in Alaska and elsewhere.                                                                                            
                                                                                                                                
CO-CHAIR  TARR  inquired  as to  whether  access  to  established                                                               
infrastructure  would  be a  positive  factor  when BP  considers                                                               
investment decisions.                                                                                                           
                                                                                                                                
MR. BILBAO  said the final cost  of projects is compared  and the                                                               
final   cost   could   include   the   cost   of   building   new                                                               
infrastructure; the cost of operating  on the North Slope is very                                                               
expensive without the factors of taxes and increasing taxes.                                                                    
                                                                                                                                
2:24:21 PM                                                                                                                    
                                                                                                                                
MR.  BILBAO presented  slide  3 which  depicted  two North  Slope                                                               
decline  curves, a  1 percent  decline and  a 6  percent decline.                                                               
Using  a  TAPS throughput  indicative  point  of 300,000  barrels                                                               
[shown by a dotted line],  at which transporting oil through TAPS                                                               
becomes more  expensive, he  pointed out at  a 6  percent decline                                                               
rate  the indicative  point is  reached in  10-15 years;  at a  1                                                               
percent decline, the indicative point  is not reached for over 40                                                               
years.   Also  shown was  that at  a 6  percent decline,  tax and                                                               
royalty to the state is $11  billion, and at a 1 percent decline,                                                               
tax and  royalty to the state  is $66 billion.   He concluded the                                                               
industry  and the  state benefit  from mitigating  oil production                                                               
decline as does the Senate Bill 21 tax system.                                                                                  
                                                                                                                                
REPRESENTATIVE  RAUSCHER  asked  for BP's  response  to  previous                                                               
testimony related to $85 million in profits made by BP.                                                                         
                                                                                                                                
MR. WESTWICK explained BP's annual  report for 2016 indicated $85                                                               
million which  represents a  "slice of  our Alaska  business"; in                                                               
fact, the amount  excludes TAPS and marine entities.   He said BP                                                               
in 2016 reported a loss in Alaska of almost $200 million.                                                                       
                                                                                                                                
REPRESENTATIVE RAUSCHER referred to  an article that reported the                                                               
state got $464  million in taxes and royalties  in 2016 [document                                                               
not provided].   He surmised when the industry  seeks to increase                                                               
their  profits  through  technology,   the  state  looks  for  an                                                               
additional share.                                                                                                               
                                                                                                                                
MR. WESTWICK said  BP strives to be as efficient  as possible; HB                                                               
288  represents   an  increase   in  taxes  which   degrades  the                                                               
profitability of the oil.                                                                                                       
                                                                                                                                
REPRESENTATIVE   PARISH  said   the   article   referred  to   by                                                               
Representative  Rauscher  reported  74  percent  of  BP's  global                                                               
profits  came  out  of  Alaska   [document  not  provided].    He                                                               
questioned how 74  percent of BP's reported  global profits could                                                               
come only from Alaska's 1 percent of global production.                                                                         
                                                                                                                                
MR. WESTWICK further  explained $85 million is a  portion of BP's                                                               
Alaska  business; the  entirety  of Alaska's  BP businesses  lost                                                               
almost  $200 million  in 2016,  which  is not  disclosed in  BP's                                                               
annual report  for legal reasons,  and which would  not represent                                                               
75 percent of its global profits.                                                                                               
                                                                                                                                
2:32:05 PM                                                                                                                    
                                                                                                                                
CORY  QUARLES, Alaska  Production Manager,  ExxonMobil Production                                                               
Company    (ExxonMobil),     informed    the     committee    his                                                               
responsibilities   as  production   manager  include   overseeing                                                               
ExxonMobil's  interests at  Prudhoe Bay,  Kuparuk, Endicott,  and                                                               
Point Thomson.   He acknowledged  the legislature's  challenge of                                                               
searching  for solutions  to the  budget shortfall  and improving                                                               
the state's  economy; however, ExxonMobil  opposes HB  288, which                                                               
proposes tax  increases that  are not  good for  the oil  and gas                                                               
industry or  for Alaska's economy.   Firstly, HB 288  would stall                                                               
the  industry's  growing  momentum;   he  referred  to  a  report                                                               
published  by   the  McDowell   Group  that   indicated  industry                                                               
indirectly or  directly provides about  one-third of the  jobs in                                                               
Alaska  [document not  provided].   Secondly, HB  288 would  make                                                               
Alaska less able  to attract and retain investment.   Mr. Quarles                                                               
said Alaska  is a  resource state  with an  abundance of  oil and                                                               
natural  gas.   He directed  attention to  a diagram  on a  slide                                                               
provided in the committee packet  entitled, "Working Together for                                                               
Alaska's  Economy."   The  slide  illustrated  state and  federal                                                               
governments must work  with industry to ensure  a healthy economy                                                               
in a resource state:   state and federal governments must provide                                                               
access to resources  and a stable and  competitive fiscal policy;                                                               
industry is  responsible for the  safe development  of resources.                                                               
He  suggested  HB 288  would  slow  and perhaps  stop  industry's                                                               
recent  momentum.   The federal  government  has piqued  interest                                                               
from the industry by increasing access  to ANWR and NPR-A, and by                                                               
a reduction in  federal corporate income tax,  but Alaska remains                                                               
one of the most unstable  fiscal environments in the world, based                                                               
on  the changes  over the  past  12 years.   Fiscal  policy is  a                                                               
choice of the legislature in what  it wants to achieve, the level                                                               
of  competitiveness,  and  where  to compete.    The  slide  also                                                               
illustrated hypothetical  states with various comparisons  in the                                                               
costs  of federal  tax, state  tax and  royalty, operations,  and                                                               
development.   He  concluded states  with lower  operations costs                                                               
are  more  competitive.   Mr.  Quarles  cautioned legislation  to                                                               
raise  taxes without  an understanding  of  short- and  long-term                                                               
economics  is  counterproductive.   He  advised  the  purpose  of                                                               
previous  legislation  was  to  address  the  issue  of  repeated                                                               
proposals to  increase taxes through a  working group; ExxonMobil                                                               
suggests  HB 288  and other  proposed tax  legislation should  be                                                               
evaluated  by  the working  group  based  on objective  data  and                                                               
expert analysis to educate legislators  and the general public on                                                               
Alaska's tax  structure.  He restated  ExxonMobil's opposition to                                                               
HB 288.                                                                                                                         
                                                                                                                                
2:40:11 PM                                                                                                                    
                                                                                                                                
KATE BLAIR,  Government and Public  Affairs Manager,  Andeavor in                                                               
Alaska,  formerly known  as  the Tesoro  Corporation.   She  said                                                               
Andeavor is  not a  producer but operates  ten refineries  in the                                                               
western  U.S.  with a  combined  refining  capacity of  over  one                                                               
million  barrels per  day.   Andeavor is  growing from  its first                                                               
refinery built  by Tesoro in  Nikiski, employs  approximately 250                                                               
Alaskans at  locations in Nikiski, Anchorage,  and Fairbanks, and                                                               
maintains a greater  than 97 percent Alaska hire  rate.  Further,                                                               
the Andeavor Foundation invests in  community grants and in 2017,                                                               
the  foundation  funded over  $700,000  in  community grants;  in                                                               
2018, Andeavor will invest $900,000  in community programs across                                                               
the state.  Ms. Blair said  Andeavor owns a 69-mile pipeline from                                                               
Nikiski to  the Ted Stevens Anchorage  International Airport, and                                                               
to  the  Port of  Alaska,  that  transports jet  fuel,  ultra-low                                                               
sulfur  diesel,  and  gasoline which  are  stored  until  further                                                               
transported by  railroad or truck.   Andeavor also  has terminals                                                               
in  Fairbanks and  relies on  consistent  in-state production  to                                                               
manufacture jet  fuel and  fuel for  cars throughout  the state's                                                               
road system; in fact, Andeavor  refines all the oil produced from                                                               
the Cook Inlet  basin and buys additional crude  oil from Valdez.                                                               
She  said  the  increased  investment and  production  since  the                                                               
enactment of the  Cook Inlet Recovery Act [passed  in the Twenty-                                                               
Sixth Alaska State  Legislature] and Senate Bill  21 has resulted                                                               
in a stable local supply of  90 percent of the crude purchased by                                                               
Andeavor.   Therefore, declining production  in Cook Inlet  or on                                                               
the North  Slope would necessitate  importing more crude  to meet                                                               
the  demands of  the Alaska  market and  make refining  in Alaska                                                               
less  economical  than importing  refined  products.   Ms.  Blair                                                               
urged  the  committee  to  consider how  the  bill  would  affect                                                               
production  and  thereby  affect  in-state  manufacturing.    She                                                               
agreed  with  previous  testimony  that  Alaska  is  a  high-cost                                                               
business market,  for example, the  cost of natural gas  is three                                                               
times  higher in  Alaska than  for Andeavor's  refineries in  the                                                               
Lower 48.  She advised that to  attain a goal to keep hundreds of                                                               
jobs in Alaska,  and to keep companies  investing in communities,                                                               
the committee  should focus on mitigating  production decline and                                                               
to continue  current policies  that support  long-term production                                                               
and in-state refining.                                                                                                          
                                                                                                                                
2:45:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE RAUSCHER asked for Andeavor's refining capacity.                                                                 
                                                                                                                                
2:45:39 PM                                                                                                                    
                                                                                                                                
MS. BLAIR said Andeavor's total  refining capacity is 1.2 million                                                               
barrels per  day; in Kenai,  Andeavor has a refining  capacity of                                                               
72,000 barrels per day.                                                                                                         
                                                                                                                                
2:45:58 PM                                                                                                                    
                                                                                                                                
BENJAMIN JOHNSON,  President/CEO and Director,  BlueCrest Energy,                                                               
said although  BlueCrest only operates  in Cook Inlet, it  has an                                                               
interest  in HB  288  because the  stability  of Alaska's  taxing                                                               
regime affects every  company operating in the state.   He opined                                                               
HB 288 sends  the wrong message and would be  detrimental to all.                                                               
Currently,  BlueCrest  is developing  one  field  in Cook  Inlet;                                                               
however, its  shareholders own oil  and gas assets  worldwide and                                                               
BlueCrest seeks to  bring more investment to Alaska.   He advised                                                               
the primary  consideration of BlueCrest's investors  is obtaining                                                               
the  highest  return,  which  is   dependent  upon  the  cost  of                                                               
production and is not affected by  the large volume of oil Alaska                                                               
has  in  the ground.    The  base  cost  to develop  and  produce                                                               
Alaska's  new oil  reserves  is higher  than  elsewhere for  many                                                               
reasons  and taxes  add  to  the high  cost  of  production.   He                                                               
referred to  new shale producers that  - due to technology  - are                                                               
now  cashflow positive,  and reported  that  U.S. oil  production                                                               
will soon  exceed 10  million barrels per  day.   He acknowledged                                                               
Alaska  has  tremendous  resources  in the  ground  that  can  be                                                               
responsibly developed to secure  Alaska's fiscal health; however,                                                               
the state  must create  an environment  of confidence  for global                                                               
capital  markets.    Mr.  Johnson  warned  Alaska  is  known  for                                                               
policies that are detrimental to  industry whether oil prices are                                                               
high or low;  for example, billions have been  invested in Alaska                                                               
based on  tax laws that  subsequently were changed.   He restated                                                               
the need for stability and urged the committee to oppose HB 288.                                                                
                                                                                                                                
2:50:40 PM                                                                                                                    
                                                                                                                                
PAT  FOLEY,  Senior  Vice President,  Alaska  Operations,  Caelus                                                               
Energy Alaska, spoke  in support of earlier  testimony and opined                                                               
the state is in very immediate  need of a complete fiscal plan to                                                               
solve its fiscal  problem; however, HB 288 should not  be part of                                                               
that fiscal plan.   Mr. Foley reviewed activities  by industry on                                                               
the  North Slope  and  said Caelus  has  two projects,  operating                                                               
Oooguruk  unit -  producing about  12,000  barrels of  oil -  and                                                               
developing the Nuna Project (Nuna).   Nuna is expected to produce                                                               
first oil late in 2019 after a  cost of $1.3 billion, and at peak                                                               
will produce 35,000 barrels of oil  per day into TAPS.  Mr. Foley                                                               
said  Caelus is  encouraged by  oil price  stabilization at  $70,                                                               
even  though Caelus  investors consider  the  long-term value  of                                                               
projects at oil prices down to  $59-$60 per barrel.  Also, Caleus                                                               
is encouraged by  working with its contractors on  pricing and by                                                               
the  administration's efforts  to  pay  outstanding tax  credits.                                                               
Mr. Foley  noted that  the state  owes tax  credits of  over $700                                                               
million, of which Caelus holds  25 percent, and he expressed hope                                                               
that the  funds would be paid  in a timely manner  so that Caelus                                                               
can  reinvest the  money  into  Nuna.   Or,  using the  statutory                                                               
minimum payment, the tax credits  would be paid over seven years.                                                               
He  reviewed  the  state's history  of  policies  that  encourage                                                               
exploration and development,  as opposed to HB 288 which  is a 75                                                               
percent tax increase, and which  has ended Caleus's conversations                                                               
with its investment partners.   He said the problem with Alaska's                                                               
reputation  is real  because of  changes to  tax policy  that are                                                               
directed at the  oil and gas industry and because  of the program                                                               
that  induced  new investments  by  issuing  credits that  remain                                                               
unpaid.   Shortly,  the  North America  Prospect  Expo (NAPE)  in                                                               
Texas will be  attended by the Division of Oil  and Gas, DNR, and                                                               
he said he would be surprised  if presentations by DNR mention HB                                                               
288.                                                                                                                            
                                                                                                                                
2:57:13 PM                                                                                                                    
                                                                                                                                
MR. FOLEY  concluded the state  should prioritize paying  the tax                                                               
credits and  not change the  tax if the  state seeks oil  and gas                                                               
activity  and   investments,  and  to  repair   its  reputational                                                               
problem.  Repayment  of the tax credits would  allow new projects                                                               
to advance  and create new  revenue from  royalty and taxes.   He                                                               
pointed  out there  are  only seven  operating  companies on  the                                                               
North Slope,  as compared  to hundreds  in Texas,  and questioned                                                               
whether Alaska  gets its  fair share of  investment dollars.   He                                                               
said it does  not and asked the committee to  work with Caelus to                                                               
find resolution.                                                                                                                
                                                                                                                                
REPRESENTATIVE PARISH asked how much  Caelus has received in cash                                                               
subsidies.                                                                                                                      
                                                                                                                                
MR. FOLEY  said Caelus  has not received  subsidies.   In further                                                               
response to  Representative Parish,  he said Caelus  has received                                                               
tax credits  in an investment  bargain in which the  state agreed                                                               
to  help  Caelus  with  its early  investments  in  exchange  for                                                               
additional jobs,  work, and  oil revenues.   He stressed  the tax                                                               
credits were  earned and  resulted in more  oil from  Oooguruk, a                                                               
discovery in Smith Bay, and advancement for Nuna.                                                                               
                                                                                                                                
REPRESENTATIVE PARISH  asked how  much money Caelus  has received                                                               
from the state.                                                                                                                 
                                                                                                                                
MR. FOLEY said he did not know.                                                                                                 
                                                                                                                                
CO-CHAIR TARR said Hilcorp submitted  written testimony that will                                                               
be provided to the committee.   She reviewed questions that would                                                               
be addressed at subsequent hearings of HB 288.                                                                                  
                                                                                                                                
3:01:35 PM                                                                                                                    
                                                                                                                                
KEN ALPER,  Director, Tax Division,  DOR, said a  required annual                                                               
report  of the  amounts of  cash  that companies  received was  a                                                               
provision  of HB  247 [passed  in the  Twenty-Ninth Alaska  State                                                               
Legislature] and took effect in  2017; the first report published                                                               
in [April 2017]  reported the total $74 million  paid in calendar                                                               
year 2016  and to whom.   Another report related to  cash paid in                                                               
2017 will be published in [March  or April 2018]; $77 million was                                                               
appropriated by the legislature last  session and the report will                                                               
identify each company that was paid.                                                                                            
                                                                                                                                
[HB 288 was held over.]                                                                                                         
                                                                                                                                
3:02:36 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOSEPHSON  informed the committee he  would request that                                                               
the committee  introduce as a  committee bill a  forthcoming bill                                                               
entitled, "An  Act relating  to penalties  for discharges  of oil                                                               
and  other  pollution  violations;   relating  to  oil  discharge                                                               
prevention  and  contingency  plans;  and  for  commercial  motor                                                               
vehicles transporting  crude oil; and providing  for an effective                                                               
date."   He noted  penalties for  pollution violations  have been                                                               
eroded by inflation and the  proposed bill would inflation-adjust                                                               
the  civil penalties  for spills,  expand certain  authorities of                                                               
the  Department  of  Environmental  Conservation  (DEC),  require                                                               
spill contingency  plans for the  transportation of crude  oil by                                                               
truck,  and  other  provisions.    He  asked  whether  there  was                                                               
objection to the introduction of the committee bill as proposed.                                                                
                                                                                                                                
3:04:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TALERICO objected.                                                                                               
                                                                                                                                
3:04:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH  also objected and stated  his preference is                                                               
for legislation to be sponsored  by the Representative who brings                                                               
the bill forward.                                                                                                               
                                                                                                                                
CO-CHAIR JOSEPHSON said  the concept of the  forthcoming bill was                                                               
developed in [the  fall of 2017] with  participation from experts                                                               
in the administration.                                                                                                          
                                                                                                                                
REPRESENTATIVE  JOHNSON  inquired as  to  how  a bill  becomes  a                                                               
committee bill.                                                                                                                 
                                                                                                                                
CO-CHAIR JOSEPHSON explained  a committee bill forms  as noted in                                                               
Mason's  [Manual of  Legislative  Procedure] Section  625 and  as                                                               
described   in  a   memorandum  from   Doug  Gardner,   Director,                                                               
Legislative  Legal Services,  Legislative Affairs  Agency, [dated                                                               
1/22/18].  He  recalled a past dispute about  committee bills and                                                               
stated his  experience "is  they would  simply be  presented, and                                                               
left unchallenged,  largely."   He said a  committee bill  can be                                                               
formed  during a  [House  floor session]  or  during a  committee                                                               
meeting and  stated his  request that  the committee  support the                                                               
introduction of the bill.                                                                                                       
                                                                                                                                
3:05:57 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  TARR   said  the  motion   would  be  limited   to  the                                                               
introduction  of only  the aforementioned  legislation and  would                                                               
not constitute a broad authority for committee bills.                                                                           
                                                                                                                                
REPRESENTATIVE JOHNSON asked to see a copy of the bill.                                                                         
                                                                                                                                
3:06:43 PM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
REPRESENTATIVE BIRCH  pointed out the  committee does not  have a                                                               
copy of the bill  yet is supposed to vote on  its support for the                                                               
bill.   He suggested the  process should  be that the  sponsor or                                                               
the governor  should distribute a  bill for review by  the public                                                               
and the committee,  rather than introducing a  committee bill "as                                                               
if  the  entire  committee  supports  it."   He  stressed  it  is                                                               
important to  "accept some  ownership" by  sponsoring a  bill and                                                               
expressed his objection to "this process."                                                                                      
                                                                                                                                
CO-CHAIR  JOSEPHSON   directed  attention  to   [AS  24.08.060(a)                                                               
Introduction of Bills].   He noted the committee  was notified of                                                               
the request for  permission to entertain the bill  on the morning                                                               
of  1/29/18.    He  further  described aspects  of  the  bill  as                                                               
follows:  inflation  has eroded the value of  the civil penalties                                                               
by one-half; DEC  responded to 20 spills in fiscal  year 2017 (FY                                                               
17); penalties  would rise with  inflation annually;  the minimum                                                               
penalty imposed by  a court would be doubled;  requires crude oil                                                               
trucks  to file  spill contingency  plans; would  insert produced                                                               
waters as one of the factors of total spillage.                                                                                 
                                                                                                                                
CO-CHAIR TARR  recalled her experience  that committee  bills are                                                               
introduced without comment from  committee members; she suggested                                                               
the legislature  may revisit this  issue and noted  past attempts                                                               
to  make  the  issue  less   political,  however,  she  said  the                                                               
committee will follow the existing process.                                                                                     
                                                                                                                                
3:10:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE BIRCH remarked:                                                                                                  
                                                                                                                                
     I was  asked my opinion as  to whether I object  or not                                                                    
     ... I  really can't say as  to whether I object  or not                                                                    
     having not  seen, read, or evaluated  what the co-chair                                                                    
     has  proposed.   So, I  think it's,  it's premature  to                                                                    
     advance  it ...    but if  you're going  to  ask me  my                                                                    
     opinion,  I   would  prefer  to,  to   actually  review                                                                    
     something before I sign on  as a co-sponsor through the                                                                    
     committee process ....                                                                                                     
                                                                                                                                
3:11:41 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  TARR   made  a   motion  to   authorize  Representative                                                               
Josephson,  co-chair of  House Resources  Standing Committee,  to                                                               
introduce as  a committee bill  an Act relating to  penalties for                                                               
discharges  of oil  and other  pollution violations,  relating to                                                               
oil  discharge prevention  and contingency  plans for  commercial                                                               
motor  vehicles  transporting crude  oil,  and  providing for  an                                                               
effective date.                                                                                                                 
                                                                                                                                
CO-CHAIR TARR stated Representative Birch previously objected.                                                                  
                                                                                                                                
3:11:48 PM                                                                                                                    
                                                                                                                                
A roll  call vote was  taken.  Representatives  Tuck (alternate),                                                               
Drummond,  Parish, Josephson,  and  Tarr voted  in  favor of  the                                                               
authorization.  Representatives  Johnson, Rauscher, Talerico, and                                                               
Birch voted against  it.  Therefore, the  authorization passed by                                                               
a vote of 5-4.                                                                                                                  
                                                                                                                                
3:13:03 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Resources Standing Committee meeting was adjourned at 3:13 p.m.                                                                 

Document Name Date/Time Subjects
HB288 ver A 1.16.18.PDF HRES 1/22/2018 1:00:00 PM
HRES 1/26/2018 1:00:00 PM
HRES 1/29/2018 1:00:00 PM
HRES 3/30/2018 1:00:00 PM
HRES 4/2/2018 1:00:00 PM
HRES 4/13/2018 1:00:00 PM
HRES 4/14/2018 2:00:00 PM
HRES 4/16/2018 1:00:00 PM
HB 288
HB288 Fiscal Note DOR-TAX 1.20.18.pdf HRES 1/22/2018 1:00:00 PM
HRES 1/26/2018 1:00:00 PM
HRES 1/29/2018 1:00:00 PM
HRES 3/30/2018 1:00:00 PM
HRES 4/2/2018 1:00:00 PM
HRES 4/13/2018 1:00:00 PM
HRES 4/14/2018 2:00:00 PM
HRES 4/16/2018 1:00:00 PM
HB 288
HB288 Sponsor Statement 1.21.18.pdf HRES 1/22/2018 1:00:00 PM
HRES 1/26/2018 1:00:00 PM
HRES 1/29/2018 1:00:00 PM
HRES 3/30/2018 1:00:00 PM
HRES 4/2/2018 1:00:00 PM
HRES 4/13/2018 1:00:00 PM
HRES 4/14/2018 2:00:00 PM
HRES 4/16/2018 1:00:00 PM
HB 288
HB288 Sectional Analysis 1.21.18.pdf HRES 1/22/2018 1:00:00 PM
HRES 1/26/2018 1:00:00 PM
HRES 1/29/2018 1:00:00 PM
HRES 3/30/2018 1:00:00 PM
HRES 4/2/2018 1:00:00 PM
HRES 4/13/2018 1:00:00 PM
HRES 4/14/2018 2:00:00 PM
HRES 4/16/2018 1:00:00 PM
HB 288
HB288 BP Alaska Testimony 1.29.18.pdf HRES 1/29/2018 1:00:00 PM
HB 288
HB288 AOGA Testimony 1.29.18.pdf HRES 1/29/2018 1:00:00 PM
HB 288
HB288 ConocoPhillips Testimony 1.29.18.pdf HRES 1/29/2018 1:00:00 PM
HB 288
HB288 ExxonMobil Testimony 1.29.18.pdf HRES 1/29/2018 1:00:00 PM
HB 288
HB288 Hilcorp Written Comments 1.29.18.pdf HRES 1/29/2018 1:00:00 PM
HB 288