Legislature(1995 - 1996)

01/24/1996 01:07 PM TRA

Audio Topic
* first hearing in first committee of referral
+ 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            
 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             
 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             
 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               
 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              
 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           
 HB 362 is needed to provide a level playing field to Alaska                   
 producers by allowing the exemption for all fuel used in foreign              
 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           
 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             
 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                
 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            
 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           
 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                 
 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             
 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              
 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             
 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.                                            
 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.                                                      

Document Name Date/Time Subjects