Legislature(1995 - 1996)
01/24/1996 01:07 PM House TRA
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE
January 24, 1996
1:07 p.m.
MEMBERS PRESENT
Representative Gary Davis, Chairman
Representative Beverly Masek, Vice Chair
Representative Jeanette James
Representative Tom Brice
Representative Jerry Sanders
Representative Bill Williams
Representative Don Long
MEMBERS ABSENT
All members present
OTHER HOUSE MEMBERS PRESENT
Representative Norman Rokeberg
COMMITTEE CALENDAR
* HOUSE BILL NO. 411
"An Act naming Mountain View Road in Gustavus."
- PASSED OUT OF COMMITTEE
* HOUSE BILL NO. 63
"An Act establishing special request licenses depicting the sport
of dog mushing."
- PASSED OUT OF COMMITTEE
* HOUSE BILL NO. 362
"An Act extending the motor fuel tax exemption for fuel sold for
use in jet propulsion aircraft to fuel used in those aircraft for
flights that continue from a foreign country."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 411
SHORT TITLE: MOUNTAIN VIEW ROAD - GUSTAVUS
SPONSOR(S): REPRESENTATIVE(S) MACKIE
JRN-DATE JRN-PG ACTION
01/12/96 2426 (H) READ THE FIRST TIME - REFERRAL(S)
01/12/96 2426 (H) TRANSPORTATION, FINANCE
01/24/96 (H) TRA AT 01:00 PM CAPITOL 17
BILL: HB 63
SHORT TITLE: DOG MUSHING VANITY PLATES
SPONSOR(S):REPRESENTATIVE(S)DAVIES, Bunde,
Barnes, Willis, Elton, Toohey, James, Nicholia
JRN-DATE JRN-PG ACTION
01/06/95 37 (H) PREFILE RELEASED
01/16/95 37 (H) READ THE FIRST TIME - REFERRAL(S)
01/16/95 37 (H) TRANSPORTATION, STATE AFFAIRS, FINANCE
01/19/95 91 (H) COSPONSOR(S): BUNDE
03/15/95 740 (H) SPONSOR SUBSTITUTE INTRODUCED-REFERRALS
03/15/95 740 (H) READ THE FIRST TIME - REFERRAL(S)
03/15/95 741 (H) TRANSPORTATION, STATE AFFAIRS, FINANCE
01/08/96 2382 (H) COSPONSOR(S): BARNES, WILLIS, ELTON
01/08/96 2382 (H) COSPONSOR(S): TOOHEY
01/17/96 2474 (H) COSPONSOR(S): JAMES
01/24/96 (H) TRA AT 01:00 PM CAPITOL 17
01/24/96 2527 (H) COSPONSOR(S): NICHOLIA
BILL: HB 362
SHORT TITLE: AVIATION FUEL TAX EXEMPTION
SPONSOR(S): REPRESENTATIVE(S) THERRIAULT
JRN-DATE JRN-PG ACTION
12/29/95 2360 (H) PREFILE RELEASED
01/08/96 2361 (H) READ THE FIRST TIME - REFERRAL(S)
01/08/96 2361 (H) TRANSPORTATION, FINANCE
01/24/96 (H) TRA AT 01:00 PM CAPITOL 17
WITNESS REGISTER
REPRESENTATIVE JERRY MACKIE
Alaska State Legislature
Capitol Building, Room 404
Juneau, AK 99801
Telephone: (907) 465-4925
POSITION STATEMENT: Sponsor of HB 411
BRITTANY OLSEN, Student
Gustavus School
P.O. Box 120
Gustavus, Alaska 99826
Telephone: (907) 697-2248
POSITION STATEMENT: Supported HB 411
KELLY MILLS, student
Gustavus School
P.O. Box 120
Gustavus, Alaska 99826
Telephone: (907) 697-2248
POSITION STATEMENT: Supported HB 411
CALYSTA JOHNSON, Student
Gustavus School
P.O. Box 120
Gustavus, Alaska 99826
Telephone: (907) 697-2248
POSITION STATEMENT: Supported HB 411
MIKE PEDERSON
P.O. Box 137
Gustavus, Alaska 99826
Telephone: (907) 697-2433
POSITION STATEMENT: Supported HB 411
REPRESENTATIVE JOHN DAVIES
Alaska State Legislature
Capitol Building, Room 422
Juneau, AK 99801
Telephone: (907) 465-4457
POSITION STATEMENT: Sponsor of HB 63
REPRESENTATIVE GENE THERRIAULT
Alaska State Legislature
Capitol Building, Room 421
Juneau, AK 99801
Telephone: (907) 465-4797
POSITION STATEMENT: Sponsor of HB 362
WILSON L. CONDON, Commissioner
Department of Revenue
P.O. Box 110400
Juneau, Alaska 99811-0400
Telephone: (907) 465-2300
POSITION STATEMENT: Commented on HB 362
BOB BARTHOLOMEW, Deputy Director
Income and Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, Alaska 99811-0420
Telephone: (907) 465-2320
POSITION STATEMENT: Commented on HB 362
STEPHEN LEWIS, Chairman of the Board
Petro Star/Arctic Slope
201 Arctic Slope Avenue
Anchorage, Alaska 99501
Telephone: (907) 344-2661
POSITION STATEMENT: Testified on HB 362
JEFF COOK, Vice President
Mapco Alaska Petroleum
1180 H and H Lane
Fairbanks, Alaska 99705
Telephone: (907) 488-2741
POSITION STATEMENT: Testified on HB 362
JAMES BURNS
Petro Marine Services
16200 Luna Street
Anchorage, Alaska 99516
Telephone: (907) 345-4145
POSITION STATEMENT: Testified on HB 362
KIM DANIELS-ROSS, Director
Alaska Air Carriers Association
1117 East 35th Street, Number 102
Anchorage, Alaska 99501
Telephone: (907) 277-0071
POSITION STATEMENT: Opposed HB 362
PAM LaBOLLE, President
Alaska State Chamber of Commerce
2117 Second Street, Number 201
Juneau, Alaska 99801
Telephone: (907) 586-2323
POSITION STATEMENT: Testified on HB 362
M. CLYDE STOLTZFUS, Special Assistant
Office of the Commissioner
Department of Transportation and Public Facilities
3132 Channel Drive
Juneau, Alaska 99801-7898
Telephone: (907) 465-3906
POSITION STATEMENT: Testified on HB 362
ACTION NARRATIVE
TAPE 96-1, SIDE A
Number 000
The House Transportation Standing Committee was called to order by
Chairman Gary Davis at 1:07 p.m. Members present at the call to
order were Representatives G. Davis, Masek, Brice, and Sanders.
Representatives James, Williams and Long were absent. A quorum was
present. This meeting was teleconferenced to Gustavus and
Anchorage, and Fairbanks.
CHAIRMAN GARY DAVIS announced the agenda as HB 411, HB 63 and HB
362 in that order.
HB 411 - MOUNTAIN VIEW ROAD - GUSTAVUS
Number 103
REPRESENTATIVE JERRY MACKIE, sponsor of HB 411, read his sponsor
statement into the record with the announcement that the community
of Gustavus supports HB 411. "Alaska Statute Section 29.10.085
requires that highway names be given through legislation. Based on
my contacts with the community and the petition which is included
in each of your files, it is obvious that if Gustavus could have
accomplished this task locally, the sign would read `Mountain View
Road' today.
In the late 1950s Eugene and Ann (Chase) Gregg acquired their
homestead land which contained 160 acres and another 50 acres from
Archie Chase. The Chase family, at that time, named the road
`Mountain View Road.' Today, the road is referred to in a variety
of ways including, `Main Road,' `Airport Road' and `Park Service
Road.' I respect the communities' efforts in pursuing this name
which has substantial historic value to them.
The impact of the Department of Transportation/Public Facilities
(DOT/PF) has prepared a zero fiscal note. The new sign will be
coordinated into an existing project on the road this summer.
HB 411 has given the Gustavus community a common purpose. Students
and adults have received a positive view and an informational view
of the legislative process."
REPRESENTATIVE MACKIE summed up that HB 411 is a simple bill and
within the community of Gustavus there did not appear to be any
opposition to HB 411.
Number 252
REPRESENTATIVE WILLIAMS asked the reason why HB 411 needed to get
approval by the committee and was told that it was because of
Alaska statutes.
Number 297
BRITTANY OLSEN, student, Gustavus School, said that she felt
Mountain View Road is a good name because it goes back in history.
In addition at the end of the road it has a perfect view of the
mountain that everyone here enjoys.
Number 402
KELLY MILLS, student, Gustavus School, said she think that it
should be named Mountain View Road because if you were visiting
Gustavus you might not understand why it is named Airport Road, but
you would understand why it was named Mountain View Road because of
the beautiful view of the mountain.
Number 420
CALYSTA JOHNSON, Student, Gustavus School, said there is a
beautiful mountain above this road and she thought the name
described the road.
MIKE PEDERSON read a statement prepared by CHRIS SPUTE, Editor, Icy
Passages News. The statement pronounced support for HB 411 and
listed historical and community reasons for the name Mountain View
Road.
Number 542
REPRESENTATIVE TOM BRICE made a motion to move HB 411, with zero
fiscal notes and committee referral. Hearing no objection HB 411
was moved from the House Standing Committee on Transportation.
HB 63 - DOG MUSHING VANITY PLATES
Number 606
REPRESENTATIVE JOHN DAVIES, Sponsor of HB 63 read his statement
into the record. "With recent attacks on our state sport, it is
more important than ever for Alaskans to show their enthusiastic
support for dog mushing. While not a musher myself, dog mushing is
a sport I enjoy following very much. There is nothing quite like
watching a good team moving quietly along the trails in Goldstream
Valley and I'm sure in other parts of the state. I am worried that
the loss of financial backing for the long distance races
specifically the Quest and the Iditarod might have the effect of
eroding the support for the whole sport.
"For that reason, I introduced HB 63 which would allow the
Department of Public Safety to issue dog mushing license plates.
Clearly HB 63 is not going to solve all of the problems of the
long-distance races, nor is it the most important issue facing the
state. But it will encourage and allow Alaskans to show their zest
for mushing again which is our state sport.
HB 63 would allow automobile owners to purchase specially designed
license plates depicting some aspect of mushing. The extra $50 fee
will more than pay for the plates and any excess revenue could be
appropriated by the legislature to support dog mushing programs
statewide. Admittedly, the pool of money would be generated in
this way would be modest, but the real objective would be met by
making dog mushing more visible on every street and parking lot in
Alaska. Moreover, is it gives nonmushers an opportunity to bolster
the mushing community with a proud symbol of their support."
Number 724
REPRESENTATIVE JEANETTE JAMES requested information on special
request university license plates and whether that ever generated
money.
Number 740
REPRESENTATIVE DAVIES said the dog mushing community would get the
money set aside from proceeds from the license plates. He said the
problem with the university plates in the setting up a fund which
was delayed because it was for such a small amount of money.
Number 776
REPRESENTATIVE BEVERLY MASEK clarified for the record that money
raised cannot be dedicated legally to any particular issue.
Number 800
REPRESENTATIVE DAVIES repeated his spoken statement that the
legislature may appropriate money into an account for dog mushing.
He said this language merely shows the intent that if this license
plate generates money, the legislature can pass legislation to
appropriate that money.
Number 869
REPRESENTATIVE MASEK asked for an explanation of the fiscal note.
Number 885
CHAIRMAN GARY DAVIS said that at the bottom of the fiscal note it
reads, "Contractual costs are associated with the design, ordering
and purchase of 900 special request license plates." DMV will have
a contest or some type of arrangement to determine the design of
the license plate.
REPRESENTATIVE MASEK received confirmation that it broke down into
a $7,700 fiscal note.
Number 940
REPRESENTATIVE JAMES said she would like to address the dedicated
fund issue as it seems evident from the fiscal note that the
license plate would be profitable.
Number 965
REPRESENTATIVE DON LONG expressed concern over the method of
appropriating funds.
Number 987
CHAIRMAN GARY DAVIS agreed with Representative Long, but added that
this is the mechanism for getting around the issue of dedicated
funds and, until the method is revised, it will need to be used.
REPRESENTATIVE JAMES said the interested parties need to follow
through and make sure the money in this fund gets appropriated to
them.
Number 1056
CHAIRMAN GARY DAVIS said he had a personal objection to the variety
and number of vanity license plates which makes it difficult to
identify the plates as being from the state of Alaska. He proposed
an amendment which would require the use of the colors blue and
yellowish gold in license plates.
Number 1154
REPRESENTATIVE DAVIES supported the proposed amendment to HB 63.
Number 1160
REPRESENTATIVE WILLIAMS made a motion to adopt the proposed
amendment to HB 63.
Number 1170
REPRESENTATIVE BRICE objected to the motion for the purposes of
discussion.
CHAIRMAN GARY DAVIS read the proposed amendment, "the department
shall use the colors blue and gold in designing the registration
plates under this subsection."
Number 1185
REPRESENTATIVE BRICE asked if there was a need to specify "yellow
gold" in the amendment.
CHAIRMAN GARY DAVIS said he would pursue this wording with
legislative legal services and with the drafter of this proposed
amendment.
Number 1240
REPRESENTATIVE JAMES questioned the elimination all other colors
besides blue and gold.
Number 1284
CHAIRMAN GARY DAVIS said it was not the intent of the proposed
amendment to strictly limit the colors, but rather have the basic
colors gold and blue.
REPRESENTATIVE DAVIES commented that he had understood that to be
the case as well.
REPRESENTATIVE BRICE removed his objection. Hearing no objection
the adoption of the amendment to HB 63 passed.
Number 1368
REPRESENTATIVE BRICE made a motion to move HB 63 with the fiscal
note and individual recommendations. Hearing no objections HB 63
was moved from the House Standing Committee on Transportation.
HB 362 - AVIATION FUEL TAX EXEMPTION
Number 1400
REPRESENTATIVE GENE THERRIAULT read his sponsor statement into the
record, "HB 362 extends the motor fuel tax exemption for fuel used
in aircraft for flights that continue from a foreign country.
Currently, the state of Alaska provides a tax exemption for fuel
used only in flights to foreign countries.
Federal law preempts state taxation of imported aviation fuel
transported through a foreign trade zone (FTZ) for use in aircraft
during foreign flights. The federal definition of `foreign flight'
includes flights originating from and flights continuing to a
foreign country.
Two tankers filled with tax exempt foreign-produced fuel were
brought into Alaska during 1995. It is anticipated this practice
will increase as airlines move to purchase the tax exempt fuel for
use in foreign flights at a lower cost than taxable Alaska produced
fuel.
HB 362 is needed to provide a level playing field to Alaska
producers by allowing the exemption for all fuel used in foreign
flights."
Number 1472
REPRESENTATIVE THERRIAULT informed the committee that in their
packets of letters from the Fairbanks Chamber of Commerce and a
resolution from the Fairbanks Daily News-Miner for the support of
HB 362. He said the letters from Federal Express, and Northwest
Airlines indicate that they will use imported fuel if it is
provided at a lower cost. The Department of Revenue (DOR) report
states the state taxation of imported aviation fuel obtained from
a FTZ in Alaska for use in foreign commerce is preempted by federal
law.
Number 1534
REPRESENTATIVE THERRIAULT referred to the fiscal note prepared by
the DOR and pointed to the estimated amount the DOR feels it would
lose because of HB 362. DOR specified only half of aviation fuel
tax would be lost because the other half is already under the FTZ
exemption. This amount was listed as $700,000. Representative
Therriault said that the tankers that brought fuel into the state
at the end of the year and brought half of that amount the DOR
estimates. therefore the amount the state would lose to revenue
would be much higher. He continued that if foreign fuel can be
sold under the tax exemption, more companies will chose to do so
and thus more revenue will be lost.
REPRESENTATIVE THERRIAULT asked that if the committee moves HB 362
an effective date at the end of this fiscal year be added.
Number 1708
REPRESENTATIVE JAMES asked if calculations had been preformed as to
the extended cost to the state, such as cost to the railroad,
corporate income tax, et cetera, if HB 362 was not passed.
Number 1729
REPRESENTATIVE THERRIAULT said calculations involve some guess work
and he didn't have anything written down, but he could certainly
see the loss to other areas if foreign fuel was purchased.
Number 1764
REPRESENTATIVE BRICE asked the amount of the collected revenue from
imported fuel and was told that it was under federal jurisdiction
and it was outside the scope of the state to tax it.
Number 1813
WILSON L. CONDON, Commissioner, Department of Revenue was next to
testify on HB 362. He reviewed the history of the tax on aviation
fuel. In 1994, the tax on jet fuel was raised from 2.5 cents to
3.2 cents with the previous increase occurring in 1968. The tax
was raised to replace revenues that were being collected in
conjunction with landing fees at rural airports. The total jet
fuel tax revenue to the state is $17.1 million which is almost 20
percent of the states tax on motor fuel. Of this $17.1 million
about $4.2 million is affected by HB 362.
COMMISSIONER CONDON said Alaska is only allowed to tax planes
flying to and from domestic locations. He said there are two
policy questions, the first being the current taxation method and
the second is whether or not in-state businesses have an economic
disadvantage due to taxation.
Number 2161
COMMISSIONER CONDON discussed the differences between imported and
domestic fuel in the handouts, one based on dollars per barrel and
the other on dollars per gallon, "Comparative Costs to Get Jet Fuel
to Anchorage versus Market Prices in Anchorage." The handouts list
various costs to Mapco versus the jet fuel importer. Mapco starts
with the pump station price, adds TransAlaskan Pipeline tariff, the
quality bank fee, refinery costs, train freight and the fuel tax
for the per barrel Anchorage cost of $20.16 per barrel. For the
importer, it starts off with a Caribbean spot market price, adds
refinery costs and tanker costs for an Anchorage cost of $21.67
barrel. He said this was a best guess estimate and that some of
the figures might be soft. He questioned whether in-state fuel
distributors were or were not competitive with imported fuel
distributors. He said if in-state fuel distributors were not
competitive, the FTZ issues should be addressed and after
addressing that issue, then HB 362 should be enacted.
Number 2475
CHAIRMAN GARY DAVIS asked if the reference to the tanker costs
figure which was based on a Kuwait tanker specifically related to
the fact that it was Kuwait fuel that was sold last year.
COMMISSIONER CONDON refuted this saying it was simply the best
estimated price that they were able to determine.
Number 2499
REPRESENTATIVE BRICE questioned the location of where this jet fuel
would originate from in regards to differences in safety and
environmental standards as compared to those standards of the
domestic fuel.
TAPE 96-1, SIDE B
COMMISSIONER CONDON said the DOR would consider differences in
those standards in determining whether the state needs to assist
in-state producers in maintaining their economic competitiveness.
Number 150
REPRESENTATIVE BRICE said the question is one of equity not of
competitive ability and in that light he suggested that we look at
pieces of legislation, such as HB 362, in a more favorable manner.
Number 216
COMMISSIONER CONDON said his only concern is determining whether or
not in-state producers can out compete foreign producers.
Number 278
REPRESENTATIVE JERRY SANDERS pointed out to the figures in the
handout and commented that in regards to Fairbanks it would be more
expensive for the importer and less expensive for the in-state
producer. He asked for a break down of fuel tax revenue from
Fairbanks as compared to Anchorage. He also asked if any of this
imported fuel sold last year was sold in Fairbanks.
Number 316
COMMISSIONER CONDON said he was unable to answer those questions.
CHAIRMAN GARY DAVIS said it appeared no foreign fuel was sold last
year in Fairbanks.
Number 355
BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division,
Department of Revenue, said he could produce figures on the amount
of fuel tax collected in Fairbanks as compared with Anchorage.
REPRESENTATIVE SANDERS asked if Fairbanks was under the same
threat, as Anchorage, due to the FTZ.
MR. BARTHOLOMEW said if Fairbanks wanted to enact a FTZ they could
do so, but currently all aviation fuel, in-state and foreign, was
taxed.
Number 392
REPRESENTATIVE JAMES disagreed with the numbers listed in the
handout in that it lists refinery costs as being equal. She also
mentioned that costs to the importer can be reduced depending on
the volume they are selling.
Number 493
COMMISSIONER CONDON discussed the advantages the North Pole
refinery has experienced. He briefly mentioned the tanker issue in
his handout by stating that a larger tanker could not be used to
save costs because of the lack of storage in the Cook Inlet.
Number 574
CHAIRMAN GARY DAVIS mentioned the difficulties faced by in-state
refineries and commented that any efforts to reduce the
marketability of their product could have a drastic impact.
Number 596
REPRESENTATIVE THERRIAULT questioned the handouts refinery pricing
as being the same in both locations. He also questioned using the
figures of spot marketing which assumes that a quantity of fuel is
being sold at one time for one price as compared to on going
contractual selling of fuel. He added that large tankers could be
utilized if there would be two selling points such as Hawaii and
Anchorage. He concluded that in this type of market, pennies can
be the deciding factor and he would not want to lose business in
the state.
Number 692
STEPHEN LEWIS, Chairman of the Board, Petro Star/Arctic Slope,
stated his and other refineries interest in HB 362. He listed his
18 years of experience in the refinery industry with a primary
background in accounting issues. He said he would disagree with
most of the figures proposed by Commissioner Condon. He stated
differences between the smaller refineries such as Petro Star with
Mapco. The North Pole refinery was built in 1977 with a 28,000
barrel per day (BPD) unit and has paid for itself. He said Mapco
has continued to expand to 130,000 BPD. He said that Petro Star
was built in 1985 and in 1993 running 12,000 BPD and 40,000 BPD
respectively and are still in the process of paying for themselves.
MR. LEWIS said the handout listed Mapco contractual price and
stated that no other in-state refinery enjoys such a price from the
pump station. He backed up this statement with the following
numbers, including the fact that PetroStars' crude oil is based
off of a West Coast market price and Tesoro's is a market basket
price backed up to a pump station price.
MR. LEWIS discussed the quality bank fee which used to be based on
specific gravity and is now based on distillation methodology. The
perceived great advantage of the quality bank disappeared a few
years ago with potential of decreasing even further. In addition
PetroStar only retains a quarter to a third of the barrel so for
every dollar paid, only that much of the barrel is recovered.
Mapco is probably in the 35 to 37 percent retainment range per
barrel.
Number 1002
MR. LEWIS said the refineries PetroStar is competing against are
full conversion refineries. In full conversion refineries, the
whole barrel is ground up to get 100 to 100 percent plus product
out of a barrel of crude using cat crackers and reformers.
PetroStar and Mapco only retain a portion of the barrel which means
they have higher conversion costs.
Number 1057
MR. LEWIS disagreed with the handouts tanker costs predictions. He
reiterated Representative Therriault's point about penny
differentials and added that some times a business will go to the
fourth place in penny savings. He said the tankers last year were
not the first foreign fuel to be introduced and will not be the
last. In PetroStars estimate there is a ten tanker capacity in
Anchorage which displaces $60 million in in-state refineries
revenue. Mr. Lewis cited various competitors in the aviation fuel
market, but said Kuwait Oil announced that they would not pursue
the Alaskan market. He then added the future prospects are worse
and mentioned the major air carriers are planning on bringing in
fuel from outside sources and have plans to assist the smaller
airlines with obtaining this fuel. He said that in-state
refineries should have the same advantages as the importers of
foreign fuel have.
Number 1334
CHAIRMAN GARY DAVIS remarked to Mr. Lewis that the option to tax
foreign fuel is not a state possibility. He asked if there were
any plans for increasing or utilizing storage in Anchorage or in
other places in south central Alaska.
Number 1378
MR. LEWIS said there is a large project occurring at the Anchorage
International Airport adding tankage within the premises. The
military is also finalizing the contract to bring Chevron tankage
back on line. Mapco is also looking at building tankage. He
summed up that storage is increasing in Anchorage especially by the
consortium of the airline carriers at the airport.
Number 1424
REPRESENTATIVE SANDERS asked if the foreign fuel is significantly
lower priced than fuel produced in-state.
Number 1470
MR. LEWIS said outside refineries conversion costs are much cheaper
as well as lower tanker costs. The crude price in Alaska is much
cheaper. He mentioned the handouts use of spot price and said no
one of any size buys spot price.
REPRESENTATIVE SANDERS asked if the outside refineries had such
advantages whether they would always be able to out compete the in
state refineries.
NUMBER 1545
MR. LEWIS said the in-state refineries have gotten much more
competitive but the 3.2 cent fuel tax disadvantage will be hard to
overcome.
Number 1784
JEFF COOK, Vice President, Mapco Alaska Petroleum, was next to
testify. He said Mapco has refineries in North Pole which refines
40,000 BPD with one half of production in jet fuel. Mapco has
locations in Anchorage, Fairbanks, Wasilla, Eagle River and Juneau
for whole sale marketing. They are also expanding into Kenai and
Soldotna this year. Mapco spent $320 million for crude oil
purchases from the state, salaries, supplies, and transportation.
Mapco employs over 375 people and are the largest customer for the
Alaska Railroad and Golden Valley Electric.
MR. COOK said 65 percent of the jet fuel is sold on the
international market through the airport. Of that 65 percent, half
goes to flights leaving for foreign destination and the other half
going to domestic flights.
MR. COOK read from the DOR fiscal note, "Alaska will lose tax
revenue from the FTZ independently of HB 362...actual revenue lost
is dependent on the amount of foreign fuel that will be imported
and placed in the FTZ and Alaska is preempted from taxing this
fuel." Mr. Lewis said the fiscal note used the amounts the two
tankers brought in last year and said air carriers who have now
experienced the cost savings of the FTZ will continue to utilize
them in their fuel purchases. He read from the FedEx and Northwest
Airlines letters that both stated this point.
Number 2049
MR. COOK said Mapco stands to lose up to 63 million gallons in
sales just in the return portion of those foreign fuels. More
revenues could be lost if customers decide it is better to buy all
their jet fuel from a consolidated source and the railroad as well
as in-state refineries would be negatively impacted.
MR. COOK mentioned the oil glut in the world. He referred to the
handout and said it does not accurately reflect operation costs in
Alaska. He said Mapco is willing to look at other options besides
HB 362 if it can reduce the economic disadvantage faced by in-state
refineries.
Number 2368
CHAIRMAN GARY DAVIS asked a question regarding the handout and the
fuel tax figure listed, he questioned and received confirmation
that this figure was just the state tax.
JAMES BURNS, Petro Marine Services, was next to testify.
TAPE 96-2, SIDE A
Number 000
MR. BURNS said most jet fuel is sold based on indexes such as the
West Coast or Singapore index. This fuel is not sold under
transportation cost and added that the fuel can be brought into
Alaska on a much cheaper rate than was listed by Commissioner
Condon.
Number 174
KIM DANIELS-ROSS, Director, Alaska Air Carriers Association said
she is speaking on behalf of 140 domestic air carriers when she
said HB 362, which provides a tax exemption for a few select air
carriers, could be unfair and encourage misuse and manipulation.
She suggested that this might occur within the FTZ and within the
DOT/PF with their accounting and funding mechanisms. She said
three times the DOT/PF came to the domestic carriers with budget
shortfalls and have sought higher user fees, higher fuel taxes and
other revenue enhancement.
MS. DANIELS-ROSS said HB 362 might have a negative impact on
Alaska's local domestic air industry which supports life in the
rural area. HB 362 would create the loss of $4.5 million in tax
revenue which is being used to fund the rural airport maintenance
and operation budget. This loss of revenue would need to be
supplied from other sources such as airport lease rates and landing
fees. One domestic company estimates their portion of the
shortfall due to HB 362 would be $300,000 to $400,000 per year and
would be passed on to the consumers. She questioned the lack of
state challenge to the FTZ rule book. She also urged the
attachment of fiscal plan which would not subject the domestic air
carriers to bear the burden of the shortfall.
Number 553
REPRESENTATIVE THERRIAULT said he believed it was a misstatement
when she declared the state was giving away tax revenue. He added
the DOR projected loss of $700,000 due to foreign fuel sales. He
said he would be interested in challenging the FTZ, but said it
involves more than just questioning it in order for it to go away.
REPRESENTATIVE NORMAN ROKEBERG joined the table for the committee
discussion.
Number 672
MS. DANIELS-ROSS said the ruling by the local customs officer has
not been challenged and that work in that area should be addressed.
Number 710
REPRESENTATIVE JAMES asked if the domestic carriers were using jet
fuel so that she could ascertain if they were subject to taxation.
Number 740
MS. DANIELS-ROSS said the domestic carriers use mostly jet fuel.
REPRESENTATIVE ROKEBERG said he is from the district encompassing
the Anchorage International Airport and worked on the FTZ issue.
Number 851
PAM LaBOLLE, President, Alaska State Chamber of Commerce, read her
sponsor statement titled, Testimony on HB 362, into the record.
She encouraged the support of HB 362, (which she misstated as HB
154.) She reiterated the FTZ economic disadvantage to in-state
businesses. She supported legislation which would reduce the
economic advantage to foreign fuel importers and support Alaskan
businesses.
Number 1043
M. CLYDE STOLTZFUS, Special Assistant, Office of the Commissioner,
Department of Transportation and Public Facilities, was next to
testify. The Administration is currently working with Anchorage to
find the cost benefits of the FTZ and the management of that zone.
He said the original intent of the FTZ was a joint management
between the state of Alaska and the municipality of Anchorage.
Number 1120
REPRESENTATIVE THERRIAULT asked if the ruling of the FTZ has been
challenged.
Number 1160
MR. STOLTZFUS said that a challenge is one of the alternatives the
state is looking into.
CHAIRMAN GARY DAVIS asked if the discussions between Anchorage and
the state have been favorable.
MR. STOLTZFUS said the discussions have been cordial.
Number 1175
REPRESENTATIVE THERRIAULT questioned the expediency of this issue
in regards to the need for the Administration and the Legislature
to work together and mentioned that it might be a year before the
issue can be addressed again.
Number 1185
MR. STOLTZFUS said the most important thing that he is taking from
this meeting is that time is of the essence.
CHAIRMAN GARY DAVIS announced that HB 362 would be carried over
until Wednesday, January 31, 1996.
ADJOURNMENT
As there was no further business to come before the House
Transportation Standing Committee, Chairman Gary Davis adjourned
the meeting at 3:00 p.m.
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