Legislature(1993 - 1994)
03/01/1994 04:10 PM O&G
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE SPECIAL COMMITTEE ON OIL & GAS March 1, 1994 4:10 P.M. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Bert Sharp Senator Judith Salo MEMBERS ABSENT Senator Rick Halford Senator Al Adams COMMITTEE CALENDAR Confirmation Hearing for Tuckerman Babcock to the Alaska Oil and Gas Conservation Commission HOUSE BILL NO. 384 "An Act eliminating the temporary character of alternative procedures available to persons who must show evidence of financial responsibility before conducting noncrude oil operations; and providing for an effective date." SENATE BILL NO. 169 "An Act authorizing an extension of the exemption from the levy and collection of the tax imposed on certain oil and gas pipeline transportation property during the period of pipeline construction, and amending the definition of `construction commencement date' applicable to that tax; and providing for an effective date." PREVIOUS ACTION HB 384 - No previous action to record. SB 169 - See Community & Regional Affairs minutes dated 4/20/93. WITNESS REGISTER Tuckerman Babcock Anchorage, Ak. POSITION STATEMENT: Confirmation Hearing. Larry LaBolle c/o Representative Foster State Capitol Juneau, Ak. 99801-1182 POSITION STATEMENT: Commented on HB 384. Ray Gillespie Petro Marine, Crowley Marine, Delta Western 9478 Riverbend Court Juneau, Ak. 99801 POSITION STATEMENT: Supported HB 384. Clyde Benson Oil and Gas Property Tax Assessor Department of Revenue 550 W 7th Ave. Anchorage, Ak. 99501 POSITION STATEMENT: Commented on SB 169. Doug Griffin, City Manager Valdez, Ak. POSITION STATEMENT: Opposed SB 169 Donna Fisher Valdez City Council Valdez, Ak. POSITION STATEMENT: Opposed SB 169. ACTION NARRATIVE TAPE 94-4, SIDE A Number 001 SENATOR LEMAN called the Special Committee on Oil and Gas meeting to order at 4:10 p.m. and announced they would first have the confirmation hearing for Tuckerman Babcock to the Alaska Oil and Gas Conservation Commission. MR. BABCOCK said the Commission's responsibilities relate to the prevention of waste and protection of correlative rights, improving ultimate recovery, and protection of fresh water aquifers. He said he brings to the Commission a general government background. He said his role is to be a judge rather than a technician with the primary qualifications of fairness and discretion. SENATOR LEMAN asked if he thought the non-technical member position was important to the Commission. MR. BABCOCK thought it was important to have one member whose background was with public fairness, in general, and government. Number 163 SENATOR LEMAN asked how the role of the public member impacted decisions like gas flaring. MR. BABCOCK responded that the oil companies themselves have definitions for the categories they use. The Department of Revenue and the Oil and Gas Conservation Commission have statutes and regulations. He would try to bring a uniform approach that wouldn't increase paper work and that everyone would understand. With the gas flaring issue the Commission was mainly concerned with waste and noted they were not dealing with a large percentage of volume. SENATOR LEMAN apologized for interrupting Mr. Babcock's testimony and said the Committee needed to take action on a bill while there was a quorum present. He announced HB 384 (FINANCIAL REQMTS: NONCRUDE OIL OPERATIONS) to be up for consideration. REPRESENTATIVE RICHARD FOSTER, sponsor, said his Aide, Mr. LaBolle, would explain HB 384. LARRY LABOLLE, Aide for Representative Foster said HB 384 eliminated the sunset clause in current statute that requires direct action insurance for non-crude operators. He said DEC did support this concept. RAY GILLESPIE, Petro Marine, Crowley Marine, Delta Western, testified that this legislation is essential to continue their non-crude operations in Alaska. They unanimously support the legislation. Number 284 SENATOR SALO moved to pass HB 384 from Committee with individual recommendations. There were no objections and it was so ordered. SENATOR LEMAN announced they would continue now with Mr. Babcock's testimony. SENATOR SALO asked if he was familiar with the key oil and gas legislation and if he had thoughts regarding it. MR. BABCOCK said the Chairman was their official spokesman and declined to comment on any legislation. He said, however, their concern was with reservoir management. He hoped the legislature would fund their budget to cover hiring an engineer who was an expert in co-mingling issues and the rest of their funding for the CIP who could analyze the impact of gas sales from Prudhoe Bay and surrounding fields which was only partially funded last year. MR. BABCOCK asked a philosophical question if they thought not developing gas that was in the ground, because of federal or other agency constraints constituted "waste." SENATOR LEMAN answered that he would consider it waste if they brought it to the surface, but couldn't utilize it. MR. BABCOCK said the Oil and Gas Conservation tax is 4 mills per barrel. It raises more money than the budget of the Commission by about $400,000 to $500,000. He suggested the legislature consider appropriating the full amount of the tax to the Commission, but only authorizing that which they predict they will need so the rest of the money would be available for an emergency. Now there is no leeway to investigate reservoir issues. SENATOR LEMAN thanked him for the suggestion and said the legislature would take up confirmations probably in April. SENATOR LEMAN announced SB 169 (TAX EXEMPTION: CERTAIN PIPELINE PROPERTY) to be up for consideration. SENATOR DONLEY said SB 169 was an incentive to get oil and gas pipelines started. It makes sense to exempt oil and gas taxes earlier as this bill does, because of the nature of the oil and gas property tax, he said. When you start stockpiling materials to do the project, you immediately incur tax liability on that property which has to be financed, because there is no revenue stream. Number 459 CLYDE BENSON, State Oil and Gas Property Tax Assessor, explained the fiscal note. Page 1 stated there is no revenue impact, since passage of the bill would not require them to do anything. The second page deals with the amount of tax revenue lost. SENATOR LEMAN noted that Senator Donley contended that the bill would encourage development which could conceivably offset the loss of revenue to the state. MR. BENSON said that might be the case, but they have no way of measuring it. SENATOR DONLEY explained that the guidelines for the Department to approve this exemption require the economic activity attributed to the earlier construction due to the approved exemption would have to be greater than the loss of revenue to the state for them to even consider granting it. DOUG GRIFFIN, City Manager for the City of Valdez and DONNA FISHER, member of the City Council, testified that the city of Valdez passed a resolution in opposition to SB 169. MR. GRIFFIN explained that Valdez has been the beneficiary of an earlier pipeline and would be very supportive of a gas pipeline, but they are concerned with the impacts that would occur on municipal services during a construction phase and their inability, perhaps, to raise adequate revenues to provide necessary public safety and health facilities. He suggested the state could forego its revenues, but not take on the power to exempt municipal ability to raise revenues. MS. FISHER concurred with Mr. Griffin's testimony. She added that one thing they did experience during the pipeline days was the loss of revenue from people moving out. She noted that other funding sources were being cut back, as well. SENATOR SALO asked if Valdez had a sales tax. MS. FISHER said it doesn't. MR. GRIFFIN said they were concerned with the state mandating exemptions and not providing any kind of reimbursement. SENATOR DONLEY suggested that a sales tax would give them a more diverse economy. TAPE 94-4, SIDE B Number 585 SENATOR DONLEY explained that the system is really unfair to the state as it is now, because it doesn't get appropriate revenue for doing some of the functions it does in regulating the industry in their city and the City of Valdez is getting the money from the oil and gas property tax. MR. GRIFFIN replied that argument would have a lot of merit if it didn't go back to the fact that Governor Sheffield entered into this agreement which provided that Valdez would loose its tax base faster without any input from the City of Valdez. He compared their situation to other communities that also rely on one industry, like the fisheries industry. They are not singled out or treated the same way as the oil and gas industry is handled in Valdez. SENATOR LEMAN said they should be able to tax any additional property values resulting from increased population and development. Number 543 SENATOR DONLEY said he was not unsympathetic to their situation and it seems like there should be some middle ground where they could allow for some local taxation, maybe at a reduced level. SENATOR LEMAN said they would look favorably upon something like that. He said they would hold SB 169 in Committee and continue to work on it. He then adjourned the meeting at 5:03 p.m.