Legislature(2013 - 2014)SENATE FINANCE 532

03/12/2013 04:00 PM FINANCE


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04:07:53 PM Start
04:08:36 PM SB21
06:00:52 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 21 OIL AND GAS PRODUCTION TAX TELECONFERENCED
Heard & Held
Public Testimony
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 12, 2013                                                                                            
                         4:07 p.m.                                                                                              
                                                                                                                                
4:07:53 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer  called the Senate Finance  Committee meeting                                                                    
to order at 4:07 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Kevin Meyer, Co-Chair                                                                                                   
Senator Anna Fairclough, Vice-Chair                                                                                             
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Lyman Hoffman                                                                                                           
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Paul  D.   Beran,  Self,  Juneau;  Barbara   Huff  Tuckness,                                                                    
Director of Governmental  and Legislative Affairs, Teamsters                                                                    
Local  959; Bill  Corbus,  Member,  Make Alaska  Competitive                                                                    
Coalition, Juneau; Tony Tengs, Self, Juneau                                                                                     
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Jack  Roderick,  Self,  Anchorage; Lynn  C.  Johnson,  Self,                                                                    
Anchorage;  Rada Khadjinova,  Self, Anchorage;  Larry Howle,                                                                    
Self, Anchorage;  Sandra Udehoven, Self,  Anchorage; Jeanine                                                                    
St.  John,   Self,  Anchorage;  Roger  C.   Burggarf,  Self,                                                                    
Fairbanks;  Gary  Atwood,  Self,  Fairbanks;  Terri  Froese,                                                                    
Chair,  Fairbanks Chamber  of Commerce  Board of  Directors,                                                                    
Fairbanks; Karl Gohlke,  Frontier Supply Company, Fairbanks;                                                                    
Tim  Gunderson,  Self,  North   Pole;  Delbert  Parr,  Self,                                                                    
Fairbanks;  Jerry Ahwinona,  Self,  Anchorage; Carl  Benson,                                                                    
Self,  Anchorage; Crystal  Nygard, Matsu  Business Alliance,                                                                    
Matsu; Marvin  Yoder, Matsu Business Alliance,  Matsu; David                                                                    
Trantham, Self, Bethel; Troy  McAllister, Self, Kenai; Monte                                                                    
Davis, Self, Homer; Kelly  Walters, Self, Anchorage; Michael                                                                    
Jesperson,  Self,   Anchorage;  Rachael   Petro,  President,                                                                    
Alaska  State Chamber  of Commerce,  Anchorage; Gary  Dixon,                                                                    
Member, Teamsters Local 959,  Anchorage; Sonya Funaro, Self,                                                                    
Anchorage;  Deantha  Crockett,  Executive  Director,  Alaska                                                                    
Miners Association,  Anchorage; Al Cramer,  Self, Anchorage;                                                                    
Tom  Lakosh, Self,  Anchorage;  John  Lau, Self,  Anchorage;                                                                    
Lenny Rhude,  Self, Chugiak; Kati Capozzi,  Self, Anchorage;                                                                    
Ed Gohr,  Delta Constructors, Anchorage; Jason  Brune, Self,                                                                    
Anchorage; Caroline Bolar, Self, Anchorage                                                                                      
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB  21    OIL AND GAS PRODUCTION TAX                                                                                            
                                                                                                                                
          SB 21 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
SENATE BILL NO. 21                                                                                                            
                                                                                                                                
     "An  Act relating  to  appropriations  from taxes  paid                                                                    
     under the  Alaska Net Income  Tax Act; relating  to the                                                                    
     oil and gas  production tax rate; relating  to gas used                                                                    
     in the state; relating  to monthly installment payments                                                                    
     of the oil and gas  production tax; relating to oil and                                                                    
     gas  production  tax  credits for  certain  losses  and                                                                    
     expenditures; relating  to oil  and gas  production tax                                                                    
     credit  certificates; relating  to nontransferable  tax                                                                    
     credits based  on production; relating  to the  oil and                                                                    
     gas tax  credit fund; relating to  annual statements by                                                                    
     producers and explorers;  relating to the determination                                                                    
     of annual  oil and gas production  tax values including                                                                    
     adjustments  based on  a percentage  of gross  value at                                                                    
     the  point   of  production  from  certain   leases  or                                                                    
     properties;    making   conforming    amendments;   and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
4:08:36 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer  explained the  changes in  the CS:  the base                                                                    
rate had  been raised from  25 to  30 and the  gross revenue                                                                    
exclusion (GRE) was changed from 30 to 20.                                                                                      
                                                                                                                                
4:09:45 PM                                                                                                                    
                                                                                                                                
JACK   RODERICK,  SELF,   ANCHORAGE  (via   teleconference),                                                                    
testified  against  SB  21.  He  felt  that  oil  production                                                                    
decline  and oil  distribution decline  were inevitable.  He                                                                    
stated that a substantial change  in the tax structure would                                                                    
result  in too  much legislative  work at  a later  date. He                                                                    
stressed  that there  should be  no changes  in the  current                                                                    
law, except slight changes in  progressivity. He pointed out                                                                    
that the  reserves in the  legacy fields had been  known for                                                                    
decades. Oil  companies had known  about those  reserves for                                                                    
over thirty  years, so the  companies should not be  given a                                                                    
tax  break in  order to  produce that  oil. He  relayed that                                                                    
ExxonMobil  discovered  oil  at Point  Thompson  before  the                                                                    
Trans-Alaska Pipeline  System (TAPS)  was in  operation, but                                                                    
ExxonMobil  had not  resumed  exploration  since that  Point                                                                    
Thompson discovery.  He shared  that British  Petroleum (BP)                                                                    
had  not  participated in  new  exploration  since 1985.  He                                                                    
stressed that  tax breaks should  not be given  to companies                                                                    
that  were   not  participating   in  new   exploration.  He                                                                    
reiterated that the legislature  should examine the issue in                                                                    
more  depth,  and  bring  the  issue  forward  in  the  next                                                                    
legislative session.                                                                                                            
                                                                                                                                
4:12:38 PM                                                                                                                    
                                                                                                                                
LYNN  C.  JOHNSON,  SELF,  ANCHORAGE  (via  teleconference),                                                                    
spoke in  favor of SB 21.  He felt that Alaska  needed to be                                                                    
more  competitive  with  other   oil  producing  basins.  He                                                                    
remarked  that  oil production  rates  in  North Dakota  and                                                                    
Texas were  higher than Alaska. He  stressed that investment                                                                    
capital was directed  to regions and projects  with the best                                                                    
overall rate of return. Alaska was  a high cost basin due to                                                                    
geography  and  climate;  and  was  soon  to  be  fourth  in                                                                    
domestic  production among  other oil  producing states.  He                                                                    
stressed  that  meaningful  tax reform  should  be  fair  to                                                                    
Alaskans,  encourages  new  production, is  simple,  and  is                                                                    
durable.  He stressed  that during  the  three-year oil  tax                                                                    
reform conversation in the  legislature, TAPS throughput had                                                                    
declined  by almost  100,000 barrels  per day.  Alaska could                                                                    
not afford further decline or delay of oil tax reform.                                                                          
                                                                                                                                
4:14:29 PM                                                                                                                    
                                                                                                                                
RADA  KHADJINOVA,  SELF,   ANCHORAGE  (via  teleconference),                                                                    
spoke in  favor of SB 21.  She shared that she  had received                                                                    
three  degrees  from  the  University  of  Alaska  Anchorage                                                                    
(UAA), including  a degree  in Environmental  Regulation and                                                                    
Permitting. She would like to  use her degree in a prominent                                                                    
field of study,  specifically the oil and  gas industry. She                                                                    
stressed  that Alaska  needed to  be competitive  with other                                                                    
oil  producing nations  and states.  She felt  that Alaska's                                                                    
Clear  and  Equitable  Share  (ACES)   was  not  working  to                                                                    
Alaska's  benefit. She  shared that  the decision  about oil                                                                    
tax reform should be made  based on the resource development                                                                    
of the  state. She felt that  promoting resource development                                                                    
would  encourage  economic  development. She  stressed  that                                                                    
Alaska was not an attractive  oil producing basin, so it was                                                                    
imperative that Alaska  find a way to  remain competitive in                                                                    
the  oil  industry.  She  felt that  oil  tax  reform  would                                                                    
encourage Alaska to collectively  invest its creative energy                                                                    
into diversifying its economy  to point where someday Alaska                                                                    
could be in an enviable  position by making educated choices                                                                    
about which  industries it  wants to  attract or  repel. She                                                                    
felt that  all tax reform  should be suited for  the current                                                                    
economic climate.                                                                                                               
                                                                                                                                
4:16:58 PM                                                                                                                    
                                                                                                                                
LARRY   HOWLE,   SELF,   ANCHORAGE   (via   teleconference),                                                                    
testified in support  for SB 21. He  stressed the importance                                                                    
of stemming the  decline of oil production.  He relayed that                                                                    
in  the mid-1960s,  his  father moved  his  young family  to                                                                    
Kenai. As  a teenager, he  attended school and  worked prior                                                                    
to  TAPS. He  stressed that,  at  that time,  jobs were  not                                                                    
plentiful and the economy was  not robust. He shared that he                                                                    
was the  first person  in his family  to attend  college. He                                                                    
paid for college  with the money he had earned  from a leave                                                                    
of absence from school to work  as an apprentice welder on a                                                                    
pipe gang north  of the Brooks Range in 1976  and 1977. Like                                                                    
many Alaskans,  he had  benefitted from  35 years  of Alaska                                                                    
North  Slope (ANS)  production.  In 2005,  he  and his  wife                                                                    
attended graduate  school to study  construction management.                                                                    
His  objective in  studying construction  management was  to                                                                    
return to  Alaska to  work on the  Alaska gas  line project,                                                                    
but that  project did not occur.  He was offered a  job with                                                                    
an Alaskan  based oil  fields service  company. He  shared a                                                                    
personal story related  to a poor economy based  on the lack                                                                    
of oil production. He explained  that he had benefitted from                                                                    
35 years of  Alaska North Slope oil  production. He remarked                                                                    
that he had  received a graduate degree,  in anticipation of                                                                    
the  proposed gas  line.  He  remarked that  he  may not  be                                                                    
working on the  gas line, but worked in  the private sector.                                                                    
He felt that the Alaskan  community was extremely fearful of                                                                    
the TAPS throughput decline.                                                                                                    
                                                                                                                                
4:22:02 PM                                                                                                                    
                                                                                                                                
SANDRA  UDEHOVEN,  SELF,   ANCHORAGE  (via  teleconference),                                                                    
testified in  support of SB  21. She shared that  her family                                                                    
moved to Alaska  in 1969, and faced some  very "lean times."                                                                    
the economic climate changed soon  thereafter. She felt that                                                                    
the   economy  was   thriving  in   the  1970s,   which  was                                                                    
immediately following  the building  of TAPS. She  stayed in                                                                    
Alaska to  raise her own  children. She alleged  that Alaska                                                                    
was   experience  mass   population  exodus,   because  many                                                                    
residents  were  unemployed,  and  were  seeking  employment                                                                    
elsewhere.  She wanted  more businesses  in Alaska,  and the                                                                    
current businesses the opportunity  for growth. She remarked                                                                    
that Alaska  was bursting with  natural resources,  but they                                                                    
were not  currently accurately exploited. She  felt that her                                                                    
children should  benefit from the  booming economy  that oil                                                                    
production  and encouragement  would provide.  She commented                                                                    
that there  were many Alaskans who  were unemployed, because                                                                    
the natural resources were not properly explored.                                                                               
                                                                                                                                
4:25:36 PM                                                                                                                    
                                                                                                                                
JEANINE  ST.  JOHN,  SELF, ANCHORAGE  (via  teleconference),                                                                    
testified  in   support  of  SB   21.  She   understood  the                                                                    
difficulty in  making a decision  regarding oil and  gas tax                                                                    
reform. She  felt that ACES  was broken, and the  decline in                                                                    
oil production  was a serious  risk to Alaska's  future. She                                                                    
stressed  that the  oil tax  reform should  be as  simple as                                                                    
possible;  consistent through  changing  oil prices;  places                                                                    
Alaska  in a  competitive position;  and were  sufficient to                                                                    
attract  the investment  from the  explorers and  producers.                                                                    
She urged  the committee to  make a decision in  the current                                                                    
session  regarding oil  and gas  tax reform.  She felt  that                                                                    
there  had  been accurate  and  helpful  testimony; and  the                                                                    
committee was focused on the right track.                                                                                       
                                                                                                                                
4:29:03 PM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  encouraged   individuals  to  send  written                                                                    
testimony to the Senate Finance Committee.                                                                                      
                                                                                                                                
4:29:32 PM                                                                                                                    
                                                                                                                                
ROGER  C. BURGGARF,  SELF,  FAIRBANKS (via  teleconference),                                                                    
testified  in support  of SB  21, but  felt there  should be                                                                    
some modifications. He understood  that Alaska's economy was                                                                    
based almost  wholly on  oil revenues to  cover the  cost of                                                                    
government  and  needed  capital improvements.  He  stressed                                                                    
that  failure to  increase oil  production  in Alaska  would                                                                    
destroy  the economic  liability of  the economy;  and would                                                                    
destroy the opportunities for  Alaska's people in government                                                                    
and  private  industry to  provide  for  their families.  He                                                                    
remarked that  past legislators had failed  to recognize the                                                                    
issue of  decreased oil production.  He stressed  that there                                                                    
needed  to   be  immediate  action  to   encourage  the  oil                                                                    
companies to invest  in Alaska. He felt that  oil tax reform                                                                    
would  energize   and  encourage   investment  by   the  oil                                                                    
companies.  A   strong  infrastructure  was   necessary  for                                                                    
Alaska's economic future. He felt  that a plan was necessary                                                                    
to improve  Alaska's competitiveness. He stressed  that ACES                                                                    
was  not  currently  working   to  encourage  investment  in                                                                    
Alaska.                                                                                                                         
                                                                                                                                
4:32:34 PM                                                                                                                    
                                                                                                                                
GARY   ATWOOD,   SELF,   FAIRBANKS   (via   teleconference),                                                                    
testified in support  of SB 21. He shared that  he had lived                                                                    
in interior Alaska  for nearly 60 years, was  a teamster for                                                                    
58 years,  and was  the business  manager for  the teamsters                                                                    
during the building of TAPS.  He stressed that he had helped                                                                    
build TAPS, so the he understood  the concept of oil and gas                                                                    
exploration  and production  first  hand.  He remarked  that                                                                    
there were some oil companies  that had stopped investing in                                                                    
Alaska, because Alaska  was not an attractive  place for oil                                                                    
production   investment.   Alaska   needed   immediate   and                                                                    
effective tax reform.                                                                                                           
                                                                                                                                
4:35:09 PM                                                                                                                    
                                                                                                                                
TERRI FROESE, CHAIR, FAIRBANKS CHAMBER  OF COMMERCE BOARD OF                                                                    
DIRECTORS, FAIRBANKS  (via teleconference), testified  in SB
21.  She stated  that  she  was a  small  business owner  in                                                                    
Fairbanks.  She   stated  that  the  Fairbanks   Chamber  of                                                                    
Commerce represented  over 700 businesses  and organizations                                                                    
throughout the interior of Alaska.  Its primary was business                                                                    
advocacy; but its mission was  to promote a greater economic                                                                    
environment in  Fairbanks to remain an  attractive place for                                                                    
both  business and  community. The  Chamber's top,  critical                                                                    
priority  for   the  current  legislative  session   was  to                                                                    
encourage  increased  oil   production  by  encouraging  the                                                                    
legislature  and  administration  to  establish  competitive                                                                    
investment   opportunities  through   taxation  that   would                                                                    
facilitate  additional  oil  exploration,  development,  and                                                                    
increased production.  She stressed  the urgency of  oil tax                                                                    
reform to  ensure health and  viability of TAPS.  She shared                                                                    
that  the  Chamber  supported the  governor's  four  guiding                                                                    
principles for tax  reform: it must be fair  to Alaskans, it                                                                    
must encourage new  production from all sources,  it must be                                                                    
simple, and  in must  be durable for  the long-term  to keep                                                                    
Alaska competitive.  She encouraged the legislature  to take                                                                    
the necessary  steps in the  current legislative  session to                                                                    
make Alaska more competitive and  ensure the future of TAPS.                                                                    
She  applauded  the  legislature's  efforts  in  regards  to                                                                    
proper oil and gas tax reform.                                                                                                  
                                                                                                                                
4:37:12 PM                                                                                                                    
                                                                                                                                
KARL  GOHLKE,   FRONTIER  SUPPLY  COMPANY,   FAIRBANKS  (via                                                                    
teleconference), spoke in  support of SB 21.  He stated that                                                                    
the  proposed legislation  would encourage  oil development.                                                                    
He  referred  to  an  article   in  the  Alaska  Journal  of                                                                    
Commerce.   He  felt   that  the   bill  promoted   economic                                                                    
stimulation and would encourage  new production. He stressed                                                                    
that the  recent lack of  oil production was because  of the                                                                    
lack of attraction  in investment in Alaska.  He pointed out                                                                    
that  new oil  production  would  encourage economic  growth                                                                    
across the  state; and meaningful  reform was  necessary for                                                                    
Alaska to succeed and remain  competitive in the oil and gas                                                                    
industry.                                                                                                                       
                                                                                                                                
4:40:38 PM                                                                                                                    
                                                                                                                                
TIM GUNDERSON, SELF, NORTH  POLE (via teleconference), spoke                                                                    
in  support  of SB  21.  He  explained  that he  had  worked                                                                    
directly in  the oil industry  since 1964. He wanted  all of                                                                    
his  children,  grandchildren,  and  great-grandchildren  to                                                                    
have good jobs in Alaska.  He announced that there were many                                                                    
people who were not from  Alaska working in Prudhoe Bay, but                                                                    
he  stressed that  Alaskans  should be  working  in the  oil                                                                    
industry  to   keep  the  economy   of  Alaska   strong.  He                                                                    
recommended the bill be written  to state that if there were                                                                    
more Alaskans working  in the oil industry,  the greater the                                                                    
tax breaks.                                                                                                                     
                                                                                                                                
4:43:08 PM                                                                                                                    
                                                                                                                                
DELBERT PARR,  SELF, FAIRBANKS (via  teleconference), voiced                                                                    
support of  SB 21. He remarked  that Alaska had some  of the                                                                    
highest oil tax  rates in the nation.  Corporate capital was                                                                    
limited,  and   only  the  most  profitable   profits  in  a                                                                    
company's  portfolio get  proper funding.  He felt  that oil                                                                    
production investors  were investing  in locations  with the                                                                    
greatest possible  return. He  announced that  Alaska needed                                                                    
new  policy that  encouraged  long-term planning  investment                                                                    
and  new production  in Alaska.  Investment was  the key  to                                                                    
halting the  steeping decline in oil  production and putting                                                                    
more oil in TAPS.                                                                                                               
                                                                                                                                
4:44:28 PM                                                                                                                    
                                                                                                                                
JERRY  AHWINONA,   SELF,  ANCHORAGE   (via  teleconference),                                                                    
testified against SB 21, and  any subsequent versions of the                                                                    
bill.  He believed  that  ACES had  not  received one  audit                                                                    
since 2007, and  remarked that ACES had  generated wind fall                                                                    
profits for the State and  the oil industry. He thought that                                                                    
ACES  had not  contributed to  the downturn  in the  State's                                                                    
business,  profit margins,  and  budget.  He announced  that                                                                    
ACES  had  helped  to   inflate  the  constitutional  budget                                                                    
reserve to  over $14 billion,  with a $45  billion permanent                                                                    
fund. He reiterated  that ACES was a  successful program. He                                                                    
remarked that  North Dakota was  not an attractive  place to                                                                    
live, because  its residents paid  income tax  and statewide                                                                    
sales tax.  He hoped Alaska  could remain flexible  with the                                                                    
oil industry,  while diversifying its budget  income to more                                                                    
than one prominent industry.                                                                                                    
                                                                                                                                
4:47:56 PM                                                                                                                    
                                                                                                                                
CARL   BENSON,   SELF,   ANCHORAGE   (via   teleconference),                                                                    
testified against  SB 21.  He remarked  that the  tax breaks                                                                    
made  to the  oil companies  in  the bill  far exceeded  the                                                                    
education funding  cuts that were  recently proposed  in the                                                                    
current operating budget. He announced  that $3.5 million to                                                                    
the Fairbanks  School District  was 0.17  percent of  the $2                                                                    
billion oil industry  tax reduction. He felt  that the needs                                                                    
of the  state needed to  be addressed before tax  cuts could                                                                    
be made  to the oil  industry. He  pointed out that  the tax                                                                    
system referred  to the "steep  rates", but he did  not feel                                                                    
that  Alaska  had  steep  taxes. He  felt  that  Alaska  had                                                                    
average  oil  taxes.  He  remarked that  it  was  unfair  to                                                                    
compare  Alaska to  North Dakota,  because North  Dakota did                                                                    
not own the land that the  oil is drilled from. He felt that                                                                    
comparing  Alaska to  Norway was  apt. Norway's  earnings on                                                                    
their  permanent  fund  was larger  than  Alaska's,  because                                                                    
Norway did not "give away" millions of dollars each year.                                                                       
                                                                                                                                
4:51:08 PM                                                                                                                    
                                                                                                                                
PAUL D.  BERAN, SELF,  JUNEAU, testified  against SB  21. He                                                                    
stressed that he  was in support of the  progressive tax and                                                                    
against  the governor's  proposed  tax  reform. He  remarked                                                                    
that  Alaska should  not become  "captive" to  out of  state                                                                    
companies. He announced that the  oil industry had cried for                                                                    
stability and consistency  when ACES was passed  in 2007. He                                                                    
felt  that  the  voice  for consistency  and  stability  was                                                                    
currently silent,  because the oil industry  was begging for                                                                    
more tax breaks. He pointed  out that the McDowell Group had                                                                    
recently reported that the North  Slope oil and gas industry                                                                    
had added more  than 5000 new jobs from 2000  to 2010, which                                                                    
was double its previous employment  rate. From 2007 to 2011,                                                                    
North Slope  oil spending had  increased an average  of $1.3                                                                    
billion per year.  He felt that the large  oil companies did                                                                    
not care  about the people  of Alaska. He remarked  that the                                                                    
court mandated  fine for the  Exxon Valdez oil spill  was $5                                                                    
billion  in 1989;  but after  repeated litigation,  the fine                                                                    
had been reduced to $7.5  million, but were reluctant to pay                                                                    
any   interest.   He   explained  that   ConocoPhilips   was                                                                    
advertising  itself  as  "Alaska's oil  company",  but  that                                                                    
Alaska had  no oil company.  He encouraged the  committee to                                                                    
keep the progressive tax. He  stressed that the oil belonged                                                                    
to the state and its people.                                                                                                    
                                                                                                                                
4:55:15 PM                                                                                                                    
                                                                                                                                
BARBARA   HUFF  TUCKNESS,   DIRECTOR  OF   GOVERNMENTAL  AND                                                                    
LEGISLATIVE AFFAIRS,  TEAMSTERS LOCAL 959, spoke  in support                                                                    
of SB  21. She expressed  concern about the decrease  in oil                                                                    
production.  She  stressed that  jobs  in  the oil  industry                                                                    
should be  focused towards Alaskans.  She remarked  that oil                                                                    
was a  product that was  in great  demand, and did  not feel                                                                    
that there needed to be a  high price only to sell less. She                                                                    
remarked  that  the three  main  issues  that the  teamsters                                                                    
focused  on  were oil  and  gas  tax reform,  public  school                                                                    
funding, and  the cost  of health  care. She  reiterated the                                                                    
importance of hiring Alaskan workers.                                                                                           
                                                                                                                                
4:58:51 PM                                                                                                                    
                                                                                                                                
BILL  CORBUS,  MEMBER,  MAKE ALASKA  COMPETITIVE  COALITION,                                                                    
JUNEAU, testified in support of  SB 21. He announced that he                                                                    
was  the former  commissioner of  the Department  of Revenue                                                                    
from  2003  to  2006  in the  Murkowski  administration.  He                                                                    
participated directly  in the formulation of  Economic Limit                                                                    
Factor (ELF),  in the formulation  of the  Petroleum Profits                                                                    
Tax (PPT).  He was against  the progressive tax  as outlined                                                                    
in ACES. He understood that  modifying the credit system was                                                                    
necessary.  He felt  that  the  legislation would  encourage                                                                    
investment in order to stem the declining oil production.                                                                       
                                                                                                                                
5:01:12 PM                                                                                                                    
                                                                                                                                
CRYSTAL   NYGARD,  MATSU   BUSINESS  ALLIANCE,   MATSU  (via                                                                    
teleconference), spoke in support of  SB 21. She shared that                                                                    
she was  as small business  owner and one of  the cofounders                                                                    
of the  Matsu Business  Alliance. She was  also a  parent of                                                                    
three  teenage  boys.  She  shared   that  there  were  many                                                                    
colleges outside of the state  that were recruiting her sons                                                                    
for their engineering and  business departments She stressed                                                                    
the importance of her children  attending college in a state                                                                    
with a  thriving economy, long-term employment  options, and                                                                    
a good  education. She  felt that Alaska  needed to  paint a                                                                    
picture of a thriving oil  and gas operations. She felt that                                                                    
leadership  with  long-term  investment  in  the  state  was                                                                    
necessary to  become an attractive environment  for business                                                                    
and economic  investment. She urged the  committee to listen                                                                    
to the market and future generations.                                                                                           
                                                                                                                                
5:03:58 PM                                                                                                                    
                                                                                                                                
MARVIN   YODER,   MATSU   BUSINESS  ALLIANCE,   MATSU   (via                                                                    
teleconference), testified in support  of SB 21. He stressed                                                                    
that many  residents of  the Matsu  were focused  on growing                                                                    
private business.  He felt that  government should  be given                                                                    
less money in order to support.  He felt that the passage of                                                                    
SB  21 was  a fair  way to  allow more  private business  in                                                                    
Alaska.                                                                                                                         
                                                                                                                                
5:05:25 PM                                                                                                                    
                                                                                                                                
DAVID  TRANTHAM, SELF,  BETHEL  (via teleconference),  spoke                                                                    
against SB  21. He  felt that the  legislation was  not fair                                                                    
for  all Alaskans.  He  remarked that  ACES  had helped  the                                                                    
State  build a  $19  billion savings  account,  and all  oil                                                                    
revenue had  helped the  permanent fund  grow. He  felt that                                                                    
ACES needed minor changes, but  did not need overall reform.                                                                    
He  remarked that  the native  corporations may  be able  to                                                                    
assist  in  getting  more  oil   into  TAPS.  He  urged  the                                                                    
committee to  take time with  the legislation,  and converse                                                                    
with  as   many  Alaskans  as  possible.   He  reminded  the                                                                    
committee that they were accountable for their actions.                                                                         
                                                                                                                                
5:09:04 PM                                                                                                                    
                                                                                                                                
TROY MCALLISTER, SELF, KENAI  (via teleconference), spoke in                                                                    
support of SB 21. He remarked  that TAPS flow was the lowest                                                                    
it  had   ever  been,   so  immediate  oil   production  was                                                                    
imperative.  North  Slope  oil production  had  declined  by                                                                    
almost 70 percent since its  peak of 2.1 billion barrels per                                                                    
day in  1988, which  accounted for more  than 20  percent of                                                                    
domestic oil  production. He felt  that there new  oil field                                                                    
production  was  too  many  years  away,  so  immediate  oil                                                                    
production  from existing  fields was  necessary. He  stated                                                                    
that  Alaska needed  to focus  on  investment into  existing                                                                    
fields, so  production could come  online in a  shorter time                                                                    
frame as part  of an overall development  strategy. He noted                                                                    
that Alaska had strong energy  resources, but had one of the                                                                    
highest  petroleum tax  structures in  the country.  He felt                                                                    
that   Alaska    had   lost   many    qualified   craftsmen,                                                                    
professionals, and  valuable equipment to more  tax friendly                                                                    
location.  He  shared that  his  company  had recently,  but                                                                    
reluctantly, began pursuit of  operations in Texas and North                                                                    
Dakota  in order  to remain  in business.  He stressed  that                                                                    
Alaska  needed  to  demonstrate to  investors  that  it  was                                                                    
willing and  ready to work  cooperatively with  business and                                                                    
industry  to  create a  more  robust  investment climate  as                                                                    
deployment of new expensive technology  would be required to                                                                    
recover  and  fully  develop  significant  portions  of  the                                                                    
remaining state resources.                                                                                                      
                                                                                                                                
5:13:04 PM                                                                                                                    
                                                                                                                                
MONTE DAVIS, SELF, HOMER  (via teleconference), testified in                                                                    
favor  of SB  21.  He explained  that  there were  extensive                                                                    
financial benefits  of the  oil industry.  He felt  that the                                                                    
bill was fair  to Alaskans and fairly  simple. He profoundly                                                                    
disagreed with  progressivity. He remarked that  if TAPS did                                                                    
not  have oil  running  through it,  Alaska's economy  would                                                                    
greatly  suffer. He  stressed that  tax policy  had a  great                                                                    
effect on  the oil and  gas industry. The number  of barrels                                                                    
of  oil  running through  TAPS  was  rapidly declining,  and                                                                    
remarked  that  oil and  gas  tax  reform was  relevant  and                                                                    
imminent.                                                                                                                       
                                                                                                                                
5:16:12 PM                                                                                                                    
                                                                                                                                
KELLY WALTERS,  SELF, ANCHORAGE (via  teleconference), spoke                                                                    
in opposition of SB 21. He  felt that all Alaskans were part                                                                    
of the oil business. He  remarked that the governor and some                                                                    
legislators  had created  uncertainty, because  many of  the                                                                    
large oil  companies had simply  been waiting for  the taxes                                                                    
to decrease  before they  invest in  Alaskan oil.  He stated                                                                    
that  any new  tax reform  should not  be expensive  for the                                                                    
State,  because  the  modifications  in  the  tax  structure                                                                    
should  be in  line with  creating new  production. He  felt                                                                    
that  any  oil tax  reduction  should  be  tied to  new  oil                                                                    
production.  He remarked  that Alaska  deserved to  reap the                                                                    
benefits of high oil prices.  He pointed out that Alaska did                                                                    
not  have the  highest  oil tax  in  North America,  because                                                                    
Mexico had higher oil tax rates than Alaska.                                                                                    
                                                                                                                                
5:21:36 PM                                                                                                                    
                                                                                                                                
MICHAEL  JESPERSON,  SELF, ANCHORAGE  (via  teleconference),                                                                    
testified in support  of SB 21. He wanted  the oil companies                                                                    
to invest  in Alaska. He  felt that, because of  the decline                                                                    
in TAPS,  his children  would be  forced to  seek employment                                                                    
outside of  the state. He  remarked that the  economy should                                                                    
be changed immediately, in order  to keep jobs and people in                                                                    
Alaska.  He  did  not  feel that  the  current  economy  was                                                                    
healthy, because, as a salesman,  he made less money in 2012                                                                    
than he did in 2008. He shared  that he would like to see an                                                                    
even lower  tax than what  was proposed  in SB 21,  but felt                                                                    
that the legislation was much better than ACES.                                                                                 
                                                                                                                                
5:24:07 PM                                                                                                                    
                                                                                                                                
RACHAEL PETRO, PRESIDENT, ALASKA  STATE CHAMBER OF COMMERCE,                                                                    
ANCHORAGE (via  teleconference), spoke in support  of SB 21.                                                                    
She stressed  that the members  of the Alaska  State Chamber                                                                    
of Commerce  assigned meaningful oil  and gas tax  reform as                                                                    
the greatest legislative issue in  Alaska. She stressed that                                                                    
there were  thousands members of local  chambers of commerce                                                                    
who agreed  that meaningful oil  and gas tax reform  was the                                                                    
most  relevant  issue  facing   Alaskans.  She  thanked  the                                                                    
committee for their focus on oil and gas tax reform.                                                                            
                                                                                                                                
5:26:36 PM                                                                                                                    
                                                                                                                                
GARY  DIXON, MEMBER,  TEAMSTERS  LOCAL  959, ANCHORAGE  (via                                                                    
teleconference),  testified   in  support   of  SB   21.  He                                                                    
supported stability in the current  tax system. He felt that                                                                    
oil  tax reform  would encourage  more oil  production, more                                                                    
oil  in TAPS,  and  more Alaskans  hired  in the  industry's                                                                    
jobs.                                                                                                                           
                                                                                                                                
5:27:54 PM                                                                                                                    
                                                                                                                                
SONYA   FUNARO,   SELF,  ANCHORAGE   (via   teleconference),                                                                    
testified in  support of SB  21. She shared that  she worked                                                                    
in  project performance  management and  was employed  by an                                                                    
oil  services  company  in   Anchorage.  She  remarked  that                                                                    
declining oil  production would result in  a lower permanent                                                                    
fund dividend (PFD).  She shared that she  had recently been                                                                    
a part  of a  construction project on  the North  Slope that                                                                    
included  new  production,   engineering,  fabrication,  and                                                                    
construction  in 2010.  After that  job ended,  many of  the                                                                    
workers on  the project left  the state to find  other jobs.                                                                    
She stressed  that many of  Alaska's industries  depended on                                                                    
the stability  of oil  and gas production.  She felt  that a                                                                    
strong economy would benefit her children.                                                                                      
                                                                                                                                
5:30:05 PM                                                                                                                    
                                                                                                                                
DEANTHA   CROCKETT,   EXECUTIVE  DIRECTOR,   ALASKA   MINERS                                                                    
ASSOCIATION,  ANCHORAGE (via  teleconference), testified  in                                                                    
support of  SB 21. She remarked  that a healthy oil  and gas                                                                    
industry was healthy for the  mining industry. She felt that                                                                    
the  continued decline  in oil  and gas  production and  its                                                                    
effect  on the  economy was  frightening for  the people  of                                                                    
Alaska. Alaska was an expensive  and difficult place for oil                                                                    
and gas operations,  so an accessible oil  tax structure was                                                                    
imperative. She  urged the committee  to focus  on increased                                                                    
oil  production  in  order  to  support  the  financial  and                                                                    
economic benefit of all Alaskans.                                                                                               
                                                                                                                                
5:31:48 PM                                                                                                                    
                                                                                                                                
AL  CRAMER,  SELF,  ANCHORAGE (via  teleconference),  voiced                                                                    
support of  SB 21.  He stated that  oil tax  and regulations                                                                    
should  be  fair and  simple  to  encourage exploration  and                                                                    
production.                                                                                                                     
                                                                                                                                
5:32:29 PM                                                                                                                    
                                                                                                                                
TOM LAKOSH, SELF,  ANCHORAGE (via teleconference), testified                                                                    
against   SB    21,   because   he   felt    that   it   was                                                                    
unconstitutional.  He   felt  SB  21   was  unconstitutional                                                                    
because  it failed  to provide  for the  maximum benefit  of                                                                    
Alaskans for  the use  of its resources  as mandated  by the                                                                    
constitution. The  legislature must first verify  that SB 21                                                                    
would cause maximum benefit to  Alaskans over the long term.                                                                    
He  felt  that  cost  competitiveness in  the  oil  and  gas                                                                    
industry did not translate to  maximum revenue or utility of                                                                    
the  natural  resources. He  felt  that  the oil  and  other                                                                    
hydrocarbon resources  in Alaska were finite  resources that                                                                    
must  be  apportioned  over  the long  term.  He  felt  that                                                                    
production  should  be  maintained,   in  order  to  prevent                                                                    
importation  of petroleum  products  for use  in Alaska.  He                                                                    
felt  that  lower  production  was  inevitable,  so  maximum                                                                    
revenue must be maintained over the long term.                                                                                  
                                                                                                                                
5:35:51 PM                                                                                                                    
                                                                                                                                
JOHN  LAU, SELF,  ANCHORAGE (via  teleconference), testified                                                                    
in  support of  SB 21.  He  shared the  concern of  previous                                                                    
testifiers related to  the decline in oil  production on the                                                                    
North Slope.  He remarked that  science and  engineering did                                                                    
not  reflect that  it  was possible  to  lessen the  decline                                                                    
slope  without  significant   and  consistent  confusion  of                                                                    
capital. He  pointed out that Alaska  lost approximately one                                                                    
half  the  annual  production,   every  ten  years.  Alaskan                                                                    
prosperity  would surely  change, unless  significant effort                                                                    
was  made to  slow the  decline. He  urged the  committee to                                                                    
consider  the  long term  projections.  He  pointed out  the                                                                    
North Slope  exploration and  production projects  took both                                                                    
time  and  investment with  a  magnitude  much greater  than                                                                    
other domestic oil regions like North Dakota and Texas.                                                                         
                                                                                                                                
5:37:54 PM                                                                                                                    
                                                                                                                                
Co-Chair Meyer handed the gavel to Vice-Chair Fairclough.                                                                       
                                                                                                                                
5:38:30 PM                                                                                                                    
                                                                                                                                
LENNY  RHUDE,  SELF,  CHUGIAK (via  teleconference),  voiced                                                                    
support  of  SB  21.  He  shared  that  his  daughters  were                                                                    
attending college out  of the state, because  the economy in                                                                    
Alaska  was  so poor.  He  remarked  that many  people  were                                                                    
seeking jobs in the oil  and gas industry outside of Alaska.                                                                    
He felt  that oil and gas  tax reform was necessary  for the                                                                    
long  term  support of  Alaskans.  He  announced that  State                                                                    
revenue would decline if oil production declined.                                                                               
                                                                                                                                
5:40:52 PM                                                                                                                    
                                                                                                                                
KATI  CAPOZZI, SELF,  ANCHORAGE (via  teleconference), spoke                                                                    
in support  of SB  21. She  stated that  this was  her third                                                                    
year in  a row testifying before  legislature advocating for                                                                    
meaningful changes to the oil  tax policy. She remarked that                                                                    
since  the first  time she  testified the  supply of  oil in                                                                    
TAPS had dropped  by about 68,000 barrels per  day. She felt                                                                    
that Alaska should  experience increased investment, because                                                                    
oil prices  were at  an all-time  high. She  reiterated that                                                                    
oil  tax reform  conversations  had been  ongoing for  three                                                                    
years, so the  time for meaningful change  was imminent. She                                                                    
urged the committee to act  swiftly and adopt meaningful oil                                                                    
tax legislation.                                                                                                                
                                                                                                                                
5:42:31 PM                                                                                                                    
                                                                                                                                
TONY TENGS, SELF,  JUNEAU, testified against SB  21. He felt                                                                    
that the  governor had  expressed that the  state was  in an                                                                    
economic upturn. He stressed that  this radical change would                                                                    
result  in  a loss  of  many  jobs.  The state  depended  on                                                                    
financial  benefit of  the oil  industry.  He remarked  that                                                                    
some  people may  not understand  that the  benefit for  the                                                                    
State would be  half of the current government  take. He did                                                                    
not feel  that the price  of oil would decrease.  He pointed                                                                    
out  the work  of many  Alaskans to  create ACES,  and noted                                                                    
that  the  creation  of  ACES  was  a  historic  bi-partisan                                                                    
effort.                                                                                                                         
                                                                                                                                
5:45:19 PM                                                                                                                    
                                                                                                                                
ED    GOHR,     DELTA    CONSTRUCTORS,     ANCHORAGE    (via                                                                    
teleconference), spoke in  support of SB 21.  He shared that                                                                    
his company was currently  employing over 100 people working                                                                    
full-time in North Dakota. He  pointed out that North Dakota                                                                    
was  a more  attractive investment  location, because  there                                                                    
was actual capital project work.  He stressed that the focus                                                                    
should be on  job growth, and Alaska was  not competitive in                                                                    
the oil industry.                                                                                                               
                                                                                                                                
5:47:02 PM                                                                                                                    
                                                                                                                                
JASON   BRUNE,   SELF,   ANCHORAGE   (via   teleconference),                                                                    
testified in  support of the concept  of SB 21, but  he felt                                                                    
that  the  legislation  needed   to  go  further  to  employ                                                                    
Alaskans. He  stressed that  the cost  of oil  production in                                                                    
Alaska was  much more  expensive than  the other  oil basins                                                                    
across the world. He felt  that the progressivity portion of                                                                    
ACES needed to be removed in  order to put more oil in TAPS.                                                                    
He  felt that  tax was  an added  cost that  companies would                                                                    
consider when  examining where to  invest. He  stressed that                                                                    
the royalties were  a fair share for Alaska,  but taxes were                                                                    
a choice  of legislators. He  understood that Alaska  was an                                                                    
owner-state,  so  the  money  would  be  given  to  Alaskans                                                                    
through royalties.  He felt that significant  changes should                                                                    
be made  to the tax regime  in order to lure  more companies                                                                    
back to Alaska.                                                                                                                 
                                                                                                                                
5:50:02 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
5:50:55 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair Fairclough  stated that  the committee  would sit                                                                    
and wait  until 6pm to see  if more testifiers signed  up to                                                                    
testify.                                                                                                                        
                                                                                                                                
5:51:29 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
5:56:14 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
5:56:14 PM                                                                                                                    
                                                                                                                                
CAROLINE  BOLAR,   SELF,  ANCHORAGE   (via  teleconference),                                                                    
testified against SB  21. She shared that she  had worked in                                                                    
the oil  industry for TAPS  and Standard Oil. She  felt that                                                                    
British  Petroleum,   ExxonMobil,  and   ConocoPhilips  were                                                                    
fighting     Alaskans    with     misinformation,    massive                                                                    
advertisement,  and political  donations. She  stressed that                                                                    
the   producers  were   contractors.  She   felt  that   the                                                                    
legislature had  an opportunity to  serve Alaskans,  and the                                                                    
legislators should not focus on reelection.                                                                                     
                                                                                                                                
Vice-Chair Fairclough closed public testimony.                                                                                  
                                                                                                                                
SB  21  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
6:00:52 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 6:00 p.m.                                                                                          
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
SB 21 Wettanen Testimony.pdf SFIN 3/12/2013 4:00:00 PM
SB 21