Legislature(2011 - 2012)BUTROVICH 205
02/29/2012 06:00 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB192 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 192 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 29, 2012
6:05 p.m.
MEMBERS PRESENT
Senator Joe Paskvan, Co-Chair
Senator Bill Wielechowski, Vice Chair
Senator Bert Stedman
Senator Lesil McGuire
Senator Hollis French
MEMBERS ABSENT
Senator Thomas Wagoner, Co-Chair
Senator Gary Stevens
OTHER LEGISLATORS PRESENT
Senator Cathy Giessel
COMMITTEE CALENDAR
SENATE BILL NO. 192
"An Act relating to the oil and gas production tax; and
providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 192
SHORT TITLE: OIL AND GAS PRODUCTION TAX RATES
SPONSOR(s): RESOURCES
02/08/12 (S) READ THE FIRST TIME - REFERRALS
02/08/12 (S) RES, FIN
02/10/12 (S) RES AT 3:30 PM BUTROVICH 205
02/10/12 (S) Heard & Held
02/10/12 (S) MINUTE(RES)
02/13/12 (S) RES AT 3:30 PM BUTROVICH 205
02/13/12 (S) Heard & Held
02/13/12 (S) MINUTE(RES)
02/14/12 (S) RES AT 3:30 PM BUTROVICH 205
02/14/12 (S) Heard & Held
02/14/12 (S) MINUTE(RES)
02/15/12 (S) RES AT 3:30 PM BUTROVICH 205
02/15/12 (S) Heard & Held
02/15/12 (S) MINUTE(RES)
02/16/12 (S) RES AT 3:30 PM BUTROVICH 205
02/16/12 (S) Heard & Held
02/16/12 (S) MINUTE(RES)
02/17/12 (S) RES AT 3:30 PM BUTROVICH 205
02/17/12 (S) Heard & Held
02/17/12 (S) MINUTE(RES)
02/21/12 (S) RES AT 3:30 PM BUTROVICH 205
02/21/12 (S) Heard & Held
02/21/12 (S) MINUTE(RES)
02/22/12 (S) RES AT 1:30 PM BUTROVICH 205
02/22/12 (S) Heard & Held
02/22/12 (S) MINUTE(RES)
02/22/12 (S) RES AT 3:30 PM BUTROVICH 205
02/22/12 (S) Heard & Held
02/22/12 (S) MINUTE(RES)
02/23/12 (S) RES AT 3:30 PM BUTROVICH 205
02/23/12 (S) Heard & Held
02/23/12 (S) MINUTE(RES)
02/24/12 (S) RES AT 1:30 PM BUTROVICH 205
02/24/12 (S) -- MEETING CANCELED --
02/24/12 (S) RES AT 3:30 PM BUTROVICH 205
02/24/12 (S) Heard & Held
02/24/12 (S) MINUTE(RES)
02/25/12 (S) RES AT 1:00 PM BUTROVICH 205
02/25/12 (S) Heard & Held
02/25/12 (S) MINUTE(RES)
02/27/12 (S) RES AT 3:30 PM BUTROVICH 205
02/27/12 (S) Heard & Held
02/27/12 (S) MINUTE(RES)
02/28/12 (S) RES AT 3:30 PM SENATE FINANCE 532
02/28/12 (S) Heard & Held
02/28/12 (S) MINUTE(RES)
02/28/12 (S) RES AT 6:00 PM SENATE FINANCE 532
02/28/12 (S) Heard & Held
02/28/12 (S) MINUTE(RES)
02/29/12 (S) RES AT 3:30 PM BUTROVICH 205
02/29/12 (S) RES AT 6:00 PM BUTROVICH 205
WITNESS REGISTER
RALPH RENZI
Palmer Chamber of Commerce
Palmer, AK
POSITION STATEMENT: Asked the committee to adopt meaningful tax
reform that would increase Alaska's oil production.
SKIP REIERSON, representing himself
Seward, AK
POSITION STATEMENT: Opposed SB 192 and supported HB 110.
JOHN CHRISTENSEN, representing himself
Seward, AK
POSITION STATEMENT: Did not support SB 192.
JOHN CALLAHAN, representing himself
Fairbanks, AK
POSITION STATEMENT: Liked the current ACES tax regime.
CHUCK WIEGERS
Fairbanks Chamber of Commerce
Fairbanks, AK
POSITION STATEMENT: Urged meaningful tax reform to attract
investment on the North Slope.
CORY BAGGINS, representing herself
Sitka, AK
POSITION STATEMENT: Testified in support of significant tax
reform saying SB 192 didn't go far enough.
CHARLIE POWERS, representing himself
Kodiak, AK
POSITION STATEMENT: Supported making meaningful tax reform and
wasn't sure about SB 192.
PAUL GLAVINOVICH, geologist, representing himself
Anchorage, AK
POSITION STATEMENT: Said that SB 192 doesn't accomplish the goal
of increasing throughput in the TAPS, but he urged passing it to
the Finance Committee for a more expanded debate.
IRA PERMAN, Chair
Institute of the North
Anchorage, AK
POSITION STATEMENT: Asked the committee to include investment
incentive amendments into SB 192 to make Alaska truly
competitive, align us with industry and boost our production.
DENNIS KNEBEL, representing himself
Anchorage, AK
POSITION STATEMENT: Wanted more jobs for Alaskans.
SUZANNE ARMSTRONG, President
Associated Builders and Contractors of Alaska
Seward, AK
POSITION STATEMENT: Said increased oil production should be our
goal and that SB 192 will not drive commitment to the level of
investment that is needed to put a single new barrel of oil in
production.
PETE STOKES, representing himself
Anchorage, AK
POSITION STATEMENT: Stated that Alaska isn't competitive in
attracting oil and gas investment, and progressivity is the
problem. He said to reform ACES.
DICK COOSE, representing himself
Ketchikan, AK
POSITION STATEMENT: Stated that the oil industry is overtaxed at
the higher priced oil and that is limiting production.
ANDREW BOND, representing himself
Anchorage, AK
POSITION STATEMENT: Did not support SB 192 and supported HB 110.
JAMELIA SAIED, representing herself
Anchorage, AK
POSITION STATEMENT: Said ACES is working and that oil taxes
don't need to be lowered or changed. She did not support either
SB 192 or HB 110.
BOB STAFFORD, representing himself
Anchorage, AK
POSITION STATEMENT: Supported SB 192 and Amendment B.14.
LEONTY WILLIAMS, representing himself
Sitka, AK
POSITION STATEMENT: Applauded the Senate for taking a reasoned
approach to this issue and said he supported the approach in SB
192.
LON PUTNAM, representing himself
Bethel, AK
POSITION STATEMENT: Supported SB 192.
JAY QUAKENBUSH, representing himself
Fairbanks, AK
POSITION STATEMENT: Said ACES is the best contract for now.
HUGH FATE, representing himself
Fairbanks, AK
POSITION STATEMENT: Supported changing the oil tax regime.
KEN L. LARSON, representing himself
Fairbanks, AK
POSITION STATEMENT: Said he was against changing ACES at this
late date.
NORM PHILLIPS, Steering Committee member
Make Alaska Competitive Coalition
Fairbanks, AK
POSITION STATEMENT: Said many members supported HB 110 but not
SB 192.
BEAU OBRIGEWITCH, representing himself
Eagle River, AK
POSITION STATEMENT: Did not support SB 192.
CHANCY CROFT, representing himself
Anchorage, AK
POSITION STATEMENT: Stated he thought ACES was working.
JOHN DICKENS, representing himself
Bethel, AK
POSITION STATEMENT: Said Alaska's tax system needs reform now.
AVES THOMPSON, representing himself
Anchorage, AK
POSITION STATEMENT: Supported restructuring Alaska's oil and gas
tax regime making it a more attractive place to invest and
therefore increase oil production. Fix progressivity.
CALEB STEWART, representing himself
Juneau, AK
POSITION STATEMENT: Urged the committee to stick to its guns.
BARBARA HUFF TUCKNESS, Director
Governmental and Legislative Affairs
Teamsters Local 959
Anchorage, AK
POSITION STATEMENT: Opposed the current draft of SB 192.
RACHEL PETRO, President and CEO
Alaska State Chamber of Commerce
Anchorage, AK
POSITION STATEMENT: Did not support SB 192. Supported HB 110,
because it brings the additional $5 billion investment.
STUART COHEN, Owner
Invisible World Imports
Juneau, AK
POSITION STATEMENT: Opposed HB 110 and advised avoiding any
unilateral giveaways and untargeted cuts as they move into the
amendment process on SB 192.
KIM BURROWS, representing herself
Palmer, AK
POSITION STATEMENT: Agreed with the gentleman who spoke about
Norway's oil tax and that there should be oil tax reform, but it
should be in the form of oil companies paying corporate income
taxes in the same way other businesses in Alaska do, on their
earnings in Alaska.
KELLY WALTERS, representing himself
Anchorage, AK
POSITION STATEMENT: Supported keeping ACES intact and opposed HB
110.
MERRICK PIERCE, representing himself
North Pole, AK
POSITION STATEMENT: Said before fixing the tax rates, fix the
obvious problems the committee has heard about that limit
competition and oil throughput: transparency, honest tariffs and
common carrier regulations.
RENEE SCHOFIELD, representing herself
Ketchikan
AK
POSITION STATEMENT: Supported Ms. Petro's testimony opposing SB
192 and supporting HB 110.
JERRY HAUGEBERG
Fairbanks Chamber of Commerce
Fairbanks, AK
POSITION STATEMENT: Opposed SB 192.
DOUG ISAACSON, Mayor
City of North Pole
North Pole, AK
POSITION STATEMENT: Didn't support SB 192 as written.
KARM SINGH, representing himself
Fairbanks, AK
POSITION STATEMENT: Urged them keep ACES in place.
LISA HERBERT, Executive Director
Fairbanks Chamber of Commerce
Fairbanks, AK
POSITION STATEMENT: Said SB 192 doesn't go far enough to make
Alaska more competitive and attractive to the oil and gas
industry.
ROGER BURGGRAF, representing himself
Fairbanks, AK
POSITION STATEMENT: Supported restructuring the oil tax, but he
had reservations about both SB 192.
KAREN GORDON, representing herself
Fairbanks, AK
POSITION STATEMENT: Said SB 192 has the potential of being
economically suicidal to Alaska. She asked them to provide oil
development friendly tax incentives.
BUZ OTIS, representing himself
Fairbanks, AK
POSITION STATEMENT: Stated that oil prices are killing people
and oil company needs to be supported; we need their business.
KIM MCDANIEL, representing herself and her family
Anchorage, AK
POSITION STATEMENT: Stated that Alaska is no longer competitive
and something needs to be done to change that quickly.
RICHARD BALES, representing himself
Anchorage, AK
POSITION STATEMENT: Opposed SB 192 and said HB 110 offers
meaningful reform.
STEVE ROBUSTELLINI, representing himself and his family
Port Lions, AK
POSITION STATEMENT: Said Alaska needs to have a globally
competitive tax structure. Advised working in partnership with
the oil companies.
MARK BAGGETT, representing himself
Anchorage, AK
POSITION STATEMENT: Stated oil companies are in business to make
the most money.
MIKE KENNY, representing himself
Anchorage, AK
POSITION STATEMENT: Said he trusts what the Senate is doing with
SB 192.
ALLEN DOLYNNY, representing himself
Anchorage, AK
POSITION STATEMENT: Supported lowering the tax structure,
creating jobs in Alaska and creating the profits for the
hundreds of companies that get spent in our state every day.
LYNN JOHNSON, representing himself
Anchorage, AK
POSITION STATEMENT: Said ACES needed to be changed in a
meaningful way, particularly the progressivity; SB 192 is too
little too late.
JIM DUFFIELD, representing himself and his family
Anchorage, AK
POSITION STATEMENT: Said "No on SB 192."
VINCE BELTRAMI, President
Alaska AFLCIO
Anchorage, AK
POSITION STATEMENT: Said the Senate should not follow the House
and pass an oil tax rollback without determining that it will
truly make a difference and lead to more production.
GEOFFREY HUMPHREYS, representing himself
Anchorage, AK
POSITION STATEMENT: Said that Alaska is stuck with the risks
involved in operating here and to keep those in proportion to
the rewards we expect to get.
RADA KHADJINOVA, representing herself
Anchorage, AK
POSITION STATEMENT: Said she has no doubt that there have to be
incentives that make Alaska competitive in terms of increasing
new production.
DAVID FLIPPO, representing himself
Anchorage, AK
POSITION STATEMENT: Said there needs to be significant
legislative change.
EMILY CROSS, representing herself
Anchorage, AK
POSITION STATEMENT: Said Alaska's tax policy does have an effect
on the oil and gas industry and Alaska's just isn't competitive.
JANET PLATT, representing herself
Anchorage, AK
POSITION STATEMENT: Said the tax regime has to have meaningful
reform.
ANDY ROGERS, representing himself and his family
Anchorage, AK
POSITION STATEMENT: Congratulated the committee for recognizing
there is a problem with the current tax structure by proposing a
solution, but he didn't think SB 192 was it and didn't support
it.
PEGGY SPITTLER, representing herself
Anchorage, AK
POSITION STATEMENT: Opposed SB 192.
CRIS OSOWSKI, representing himself
Anchorage, AK
POSITION STATEMENT: Supported adopting a tax policy that
encourages investment.
TIMOTHY TREUER, representing himself
Anchorage, AK
POSITION STATEMENT: Supported SB 192 and said HB 110 was a
giveaway.
BARBARA GAZAWAY, representing herself
Anchorage, AK
POSITION STATEMENT: Opposed HB 110.
GREGORY KUCERA, representing himself
Anchorage, AK
POSITION STATEMENT: Supported SB 192 saying HB 110 gives too
much away.
GRANT JOHNSON, representing himself and his three children
Anchorage, AK
POSITION STATEMENT: Stated SB 192 is not the solution.
DEBORAH WILLIAMS, representing herself
Anchorage, AK
POSITION STATEMENT: Stated that the lessons the state learned
from the Amerada Hess case strongly support rejecting HB 110 and
pursuing SB 192.
MATT FENNEL, representing himself
Anchorage, AK
POSITION STATEMENT: Supported SB 192 and opposed HB 110.
BRIAN HOVE, representing himself
Anchorage, AK
POSITION STATEMENT: Stated the future of the state is based on
oil and it's not that bright. SB 192 is a distraction and HB 110
should move forward.
PATRICK FLATLEY, representing himself
Anchorage, AK
POSITION STATEMENT: Said his testimony today would pose
questions knowing that the answers will come at a later date.
DAVE METHENY, representing himself
Anchorage, AK
POSITION STATEMENT: Stated that HB 110 is very bad: SB 192 is
better and the current ACES tax structure is the best.
DEBORAH BROLLINI, representing herself
Anchorage, AK
POSITION STATEMENT: Supported tax reform building upon the
legislation in the Senate Labor and Commerce Committee.
PAUL HOLLEY, representing himself
Anchorage, AK
POSITION STATEMENT: Supported Governor Parnell and urged
providing the incentives for investing here.
RAY METCALF, representing himself
Anchorage, AK
POSITION STATEMENT: Suggested a President Reagan slogan: "Trust
but verify." Offer producers $10 per barrel to start producing
the heavy oil, but pay them after they have done it and not
before.
BRENT SENETTE, representing himself
Anchorage, AK
POSITION STATEMENT: Stated support for meaningful and
significant oil production tax reform. That means they need to
abandon work on SB 192 and move HB 110 forward.
MAYNARD GATES, President and CEO
Alaska Steel
Anchorage, AK
POSITION STATEMENT: Stated support for HB 110, not SB 192.
ACTION NARRATIVE
6:05:02 PM
CO-CHAIR JOE PASKVAN called the Senate Resources Standing
Committee meeting to order at 6:05 p.m. Present at the call to
order were Co-Chair Wagoner and Co-Chair Paskvan. Senator
Stedman arrived during the opening remarks.
SB 192-OIL AND GAS PRODUCTION TAX RATES
6:05:53 PM
CO-CHAIR PASKVAN stated that the purpose of this evening's
meeting was to continue hearing from the public on their
thoughts about SB 192. Comments on the proposed amendments were
welcome. He thanked the people who testified previously and said
that written testimony was welcome via email. He provided his
address.
6:07:43 PM
RALPH RENZI, Palmer Chamber of Commerce, Palmer, AK, asked the
committee to adopt meaningful tax reform that would increase
Alaska's oil production. He said he had seen the results of
complacency when faced with difficult decisions like this and
related an example of how GE couldn't afford to keep its plant
going in Schenectady, New York, because it didn't get an
adjusted tax rate. As a result, the population fell by 25
percent. He said we can't continue to take some of the region's
largest and most reliable employers for granted by assuming
they'll stay here no matter what we throw at them. Making
meaningful changes to the oil tax structure will help insure a
successful future for our economy and the people of the great
State of Alaska.
6:09:34 PM
SKIP REIERSON, representing himself, Seward, AK, opposed SB 192
and supported HB 110. He said the current oil tax structure has
left Alaska in an uncompetitive position and as a result, oil
companies have relocated to more competitive world class finds
around the world. Canada continues to flourish, as well. He
applauded the committee and DNR for their efforts in trying to
better understand this problem, but they need to do something
soon.
6:12:20 PM
JOHN CHRISTENSEN, representing himself, Seward, AK, did not
support SB 192 and supported HB 110. The oil industry will
invest more in Alaska if HB 110 is passed. He said, "If they
pack it in and leave, we will lose what we've got." Taxes will
diminish and we won't have the standard and quality of life
people who moved here several years ago have gotten used to.
SENATOR MCGUIRE and SENATOR FRENCH joined the committee.
6:14:26 PM
JOHN CALLAHAN, representing himself, Fairbanks, AK, said he was
a lifelong Alaskan and retired state highway construction
engineer and did not think ACES should be changed, because it
was only recently put into effect after the state had hired
experts and put a lot of time and effort into it. Further, he
didn't see why oil companies need subsidies so they can profit
even more under "free enterprise."
He stated that the ACES tax rate is in the middle of the major
producers in the world and it just doesn't make sense to push
production to the maximum when considering that our
grandchildren should also benefit from the state's oil reserves.
CHUCK WIEGERS, Fairbanks Chamber of Commerce, Fairbanks, AK,
urged meaningful tax reform to attract investment on the North
Slope. Failing to do so, he warned, will ensure the continued
decline of throughput in the pipeline. High oil prices are
masking the effects of the decline, but it will catch up with us
eventually and the effects will be drastic.
6:16:22 PM
SENATOR WIELECHOWSKI joined the committee.
6:16:32 PM
CORY BAGGINS, representing herself, Sitka, AK, testified in
support of significant tax reform saying SB 192 doesn't go far
enough. She said her family had been in Alaska since the 1900s
and she is now raising six children. She works for an Alaskan-
owned and operated marine transportation company and is
concerned for its future. In the past three years very little
oil field cargo has passed through their terminals and in years
past it was a good portion of their business.
6:17:51 PM
CHARLIE POWERS, representing himself, Kodiak, AK, supported
making meaningful tax reform and wasn't sure about SB 192. He
asked the committee if SB 192 in its current form would sustain
the state for the next 25-50 years given the uncertainties of
markets, the escalating cost of pipeline maintenance and
production and the need to meet growing budgets. If the answer
was no, he wanted to know the legislature's plan to deal with
the "state's line of business." Like other Alaskans, he enjoyed
the benefits that a lucrative oil industry brings to the
communities, and in Kodiak, he has the benefit of talking to the
oil and gas industry people and it sounds like the future is
bleak given the decline in TAPS throughput.
MR. POWERS advised that in business you look at leading
indicators for you organization's success. Management and boards
work together to evaluate different scenarios in an effort to
mitigate risks and assure sustainability and project growth.
6:20:24 PM
PAUL GLAVINOVICH, geologist, representing himself, Anchorage,
AK, said that SB 192 doesn't accomplish the goal of increasing
throughput in the TAPS. But he urged them to pass it on to the
Finance Committee for a more expanded review. He said their
focus must be on continued flow of oil through the TAPS. The
decline is well documented, but what is missing from the
discussion is the continuing increase in the state general fund
spending.
6:22:20 PM
IRA PERMAN, Chair, Institute of the North, Anchorage, AK, asked
them to include investment incentive amendments into SB 192 to
make Alaska truly competitive, align us with industry and boost
our production. He said many went to Norway this year and
learned how it successfully competes for investment capital for
its oil and gas development and now is the opportunity to apply
what they learned.
He explained that Norway competes with Alaska for investment
capital as all of the companies operating on the North Slope
also invest in Norway, along with 60 other companies. Successful
attraction of capital has allowed Norway to stop the decline of
its oil production and they now produce three times the oil
Alaska does and the oil sector employs nine times as many
people. They do this while having a remarkably high tax rate.
They do it by offering investment incentives that result in a
predictable, fast, high rate of return.
He said Norway's tract licensing system reduces risk by
providing 2D seismic data to the industry; it reduces upfront
costs to industry by replacing the bonus bid system with a work
plan competition that drives toward production in six years or
less; they have replaced the royalty payments with equity
ownership that results in more return to the industry in the
short term. Importantly, Norway co-invests with industry; they
provide cash for an ownership position; they take calculated
risks with industry and reap the rewards alongside it. This
aligns the state and industry's financial interests resulting in
fields coming into production in as little as two years.
MR. PERMAN said without these investment incentives, return on
investment in Alaska will be insufficient to encourage
significant development of its medium-sized and smaller fields
or encourage significant development of its heavy viscous and
shale oil.
DENNIS KNEBEL, representing himself, Anchorage, AK, wanted more
jobs for Alaskans. He was a journeyman electrician and had
worked everywhere and hadn't seen as many out-of-state workers
as on the North Slope.
6:25:43 PM
SUZANNE ARMSTRONG, President, Associated Builders and
Contractors of Alaska, Seward, AK, said increased oil production
should be our goal and that SB 192 will not drive the level of
investment that is needed to put a single new barrel of oil in
production. She said her members are primarily industrial
commercial contractors and subcontractors, and as business
owners they are keenly aware of the economic trends. One member
shared that his company had not worked on a project on the North
Slope in the past four years that has added or that would lead
to one new barrel of oil production. Others say the industry is
in a "sustain and maintain mode" and production has declined by
40 percent over the past decade. She asked that lawmakers keep
their focus on the long term economic future of our state and
not just on short term monetary gain.
6:27:54 PM
PETE STOKES, representing himself, Anchorage, AK, stated that
Alaska isn't competitive in attracting oil and gas investment,
and progressivity is the problem. Reform ACES! He said Alaska in
going from ELF to PPT to ACES "overshot the sweet spot" and
investment has languished, especially at high oil prices.
Companies will simply not invest here if they can make better
returns in other jurisdictions. He quoted Steve Forbes: "Please
let Alaska become competitive in energy. Cut tax rates."
6:31:02 PM
DICK COOSE, representing himself, Ketchikan, AK, stated that the
oil industry is overtaxed at the higher priced oil and that is
limiting production. Alaska has to be competitive in the world
market or we're going to lose out.
6:32:15 PM
ANDREW BOND, representing himself, Anchorage, AK, opposed SB 192
and supported HB 110 that will make Alaska's fiscal policy more
competitive with the Lower 48. He was an engineer with Pioneer
Natural Resources and had been working in the Alaska oil
industry for 25 years; he had raised his family here and calls
it home. His concern was that he will not be able to stay here,
because Pioneer is fighting to get investment dollars for their
Alaska projects while huge amounts of money are going to
developing projects in Texas. The economics of their Alaska
projects are challenged compared to the Texas projects not only
due to the high cost of operating in Alaska but because the
progressivity takes away the upside at current prices.
He advised that the best way for new projects to occur is to
maintain appropriate tax credits for new investment and reduce
progressivity at current oil prices. New technology and huge
shale developments are driving investment dollars into places
like Texas and North Dakota. If that continues, he may be forced
to move to where the work is being done. He supported the
changes to ACES as outlined in HB 110 and didn't support SB 192
as introduced.
6:34:08 PM
JAMELIA SAIED, representing herself, Anchorage, AK, said the
evidence is now in; ACES is working and the oil taxes don't need
to be lowered or changed. She did not support SB 192 or HB 110.
When oil prices are high companies do pay more in taxes, but
they are also making more in profits. More exploration and
development is being done in this state now than has been done
in the last 25 years. The big three oil companies are trying to
hold the state hostage and we should not allow that to happen.
HB 110 is simply a giveaway to the oil companies and the state
gets nothing in return.
6:35:41 PM
BOB STAFFORD, representing himself, Anchorage, AK, supported SB
192 and Amendment B.14. He supported Amendment B.14 for the
following reasons:
1. The separate accounting method is used worldwide by
a majority of the oil producing sovereigns.
2. The separate accounting method was upheld by the
Alaska Supreme Court and the U.S. Supreme Court by way
of denying oil companies the standing as plaintiffs.
3. Separate accounting would have captured $13.4
billion, which went to the foreign oil industry.
4. The current method, UMWA accounting, will cause the
state to lose over $100 million when BP factors in a
$14 billon judgment for their part in the Gulf of
Mexico disaster.
MR. STAFFORD said he had been an Alaskan for over a half century
and his vested interest is on behalf of the three generations of
Alaskans following him. He thanked them for their work and said
he was grateful that someone was standing between us and special
interests.
6:37:38 PM
LEONTY WILLIAMS, representing himself, Sitka, AK, applauded the
Senate for taking a reasoned approach to this issue and said he
supported the approach in SB 192. He was a student at UAS
working on a business degree and intends to run his own business
in Sitka.
MR. WILLIAMS noted that much had been said about the decisions
made today impacting the next generation of Alaskans, but little
has been said about what the next generation of Alaskans thinks
about it. He attended the Conference of Young Alaskans in
January this year in which 55 people came to Juneau to discuss
critical issues facing Alaska; one of them was oil taxes.
Ninety-six percent of the delegates voted that changes to the
oil tax structure should be based on research and knowledge.
He said HB 110 would give away billions of dollars to the oil
industry when the research hadn't shown definitively at what
point the current system is broken. The next generations of
Alaskans want increased production to sustain the state's
economy and simply giving away billions without any guarantees
will hurt us the most. He said to keep up the good work and
asked them to please not give away their future.
6:39:38 PM
LON PUTNAM, representing himself, Bethel, AK, supported SB 192.
He said his fuel bill "just about broke my heart this last
winter." When oil companies are making record high profits and
at the same time trying to get Alaska to bribe them to take its
oil, SB 192 at least has a reasoned approach and provides some
guarantees in return for some incentives. He couldn't see
handing the oil industry "bunches of money" on the hopes that
they might do something, because their track record has not been
extremely good in keeping any type of promises or commitments.
People are still trying to get some compensation for an oil
spill many years after the fact.
6:41:27 PM
JAY QUAKENBUSH, representing himself, Fairbanks, AK, said ACES
is the best contract for now. He thanked each legislator who had
looked at the governor's tax legislation and said "not so fast."
Giving large tax breaks to oil companies will not maximize the
benefits to the people of Alaska as the Constitution states. The
governor's bill uses hope as a strategy to increase the flow of
oil in the pipeline and he prefers staying with ACES.
6:43:48 PM
HUGH FATE, representing himself, Fairbanks, AK, supported
changing the oil tax regime. Any tax regime in Alaska must be
more than competitive, he said. Alaska has high costs,
tremendously difficult logistics, land acquisition problems,
seasonal delays and regulatory problems that are mitigated in
the Lower 48 states. He said changing the tax regime is going to
be difficult, but it must be done.
He recalled 11 other sedimentary basins besides Cook Inlet and
the North Slope that hadn't been mentioned much, but if they
chase industry away today because of being uncompetitive, what
makes us think they'll come back to help develop those other 11
basins in the future? He thanked them for their work and said
"God speed in your deliberations."
6:45:26 PM
KEN L. LARSON, representing himself, Fairbanks, AK, said he is a
retired engineer and was against changing ACES at this late
date. He described his high heating and utility bills saying he
is one of many Alaskans who feel disenfranchised and totally at
the mercy of big oil and their various lobbyists and shills who
work for and with them and some elected officials in Juneau and
Washington, D.C. He said the high fuel price at the pump is not
due to any oil shortages, but to big oil's speculation caused by
Iran's threatened current status in the straits.
MR. LARSON added that ACES was strongly debated and analyzed by
the Palin administration and he thought the bills before them
now should be withdrawn. To make Alaska more competitive, he
suggested getting the north coast drilling restrictions removed
and getting ANWR, Prudhoe Bay and other known deposits going. He
said their time would be better spent on getting a natural gas
bullet line to Fairbanks and Valdez.
6:47:44 PM
NORM PHILLIPS, Steering Committee member, Make Alaska
Competitive Coalition, Fairbanks, AK, did not support SB 192. He
stated that the Coalition was created because of their concern
about the potentially serious consequences of declining oil
production on both the state economy and the state operating and
capital budget. They believe the best way to reduce the decline
or reverse it is to reduce the state's share of the taxes on the
oil industry to the point that it encourages the large amount of
private investment that is necessary to achieve that objective;
many of the members support HB 110.
6:50:15 PM
BEAU OBRIGEWITCH, representing himself, Eagle River, AK, did not
support SB 192. He said most people don't realize that once TAPS
is shut down the party is over. It doesn't matter how high oil
and gas go; TAPS will be gone and Alaska's oil and gas will be
stranded forever. He said lawmakers were elected "to lead and
make tough decisions and not be the harbingers of bad news." He
will leave when it no longer makes financial sense to live here.
6:52:45 PM
CHANCY CROFT, representing himself, Anchorage, AK, said he
thought ACES was working. He said he was a member of the
legislature in 1969 to 1978 when the basic structure and all of
the existing programs were established. He observed that the
State of Alaska has benefited whenever it stood up to the oil
industry and that you don't have to go much further than the
first rule of negotiation, which is "if you have something
concrete, do not give it up for a promise."
MR. CROFT said ACES is a fair plan and it has not resulted in
any reduction in production or in competition. If they are going
to engage in meaningful reform, he urged them to adopt separate
accounting; that would ensure what the state receives is
measured by the oil companies' actual profit.
MR. CROFT said the reason new companies are not interested in
coming to Alaska is because in the 1980s the state created a
monopoly with ConocoPhillips, ExxonMobil and British Petroleum.
6:55:57 PM
JOHN DICKENS, representing himself, Bethel, AK, said Alaska's
tax system needs reform now. The State of Alaska warned in its
most recent forecast that half of the revenue stream in 2020
will depend on oil industry investments that have yet to be
made. The bottom line is that people invest capital to get a
return on it, and Alaska is known throughout the world as the
land of the "raw deal."
6:58:18 PM
AVES THOMPSON, Executive Director, Alaska Trucking Association,
representing himself, Anchorage, AK, supported restructuring the
oil and gas tax regime with the intent of making Alaska a more
attractive place to invest in order to increase oil production.
TAPS could be nonfunctional within five to ten years with the
current decline rate, he said, and while lower tax rates could
reduce revenue flowing into state coffers in the short term, in
the long term this reduction will make the state a more
attractive place in which to invest and ultimately lead to
higher revenues. He said progressivity must be fixed.
MR. THOMPSON said two of the oil producers announced they would
invest $5 billion if the production taxes were reduced. This
looks like a fair trade off since that level of investment will
produce thousands of good paying, private sector jobs.
7:00:33 PM
CALEB STEWART, representing himself, Juneau, AK, urged the
committee to stick to its guns. He said he had been here all his
life and the tax rate hasn't changed oil production. It's been
high, low, good and bad, but here we are! The Big Three haven't
developed a single new stand-alone field since 1977. No matter
how much we give them, it won't affect their behavior.
7:01:56 PM
BARBARA HUFF TUCKNESS, Director, Governmental and Legislative
Affairs, Teamsters Local 959, Anchorage, AK, opposed the current
draft of SB 192. She commended the committee for the time and
effort they have put in on this issue. She said she represents
members in every single industry within the State of Alaska with
the exception of fishing: mining, telecommunication, hospitals,
railroad workers, water carriers and truck drivers. They are all
touched by the ultimate decisions made by this committee and
other committees as this bill moves through.
MS. TUCKNESS said they believe this bill doesn't create any new
production, and that is exactly what is needed. Alaska needs the
smaller companies that are coming into the state to stay in the
state and also produce. Exploration is going on, but long term
commitments aren't being made.
She stated that this bill doesn't create new jobs either and
part of her job is representing employees. During the pipeline
days, the Teamsters had 25,000 members working on in. Today
their numbers are in the hundreds. She urged that they continue
their due diligence and hopefully come up with a bill that
promotes job stability in the industry and long term financial
viability for the State of Alaska.
7:04:31 PM
RACHEL PETRO, President and CEO, Alaska State Chamber of
Commerce, Anchorage, AK, said they do not support SB 192. They
support HB 110, because it brings an additional $5 billion
investment. She said each fall Alaska Chamber members gather
during their legislative policy forum to decide priorities for
the upcoming session; this year less than 7 percent of the
members participating in the forum were companies with any
direct ties or relationship with the oil and gas industry.
Despite this, they overwhelmingly prioritized reforming oil tax
policy to encourage new production.
CSSB 192 does little to fundamentally change the investment
climate in Alaska and change is needed, she said. As an owner
state, Alaska has the responsibility to properly market its
resources and receive a fair return. Marketing includes being
competitive and for Alaska that means being a trustworthy
business partner and providing an environment that invites
investment.
She said there has been discussion about an oil tax reduction
bankrupting the state in a few years, but the reality is without
increasing production, diversifying the economy and reigning in
government expenditures, we're going to be in fiscal hot water
in a matter of time. You have to spend money to make money and
this involves calculated risk for calculated potential return.
There are no guarantees. She concluded: "Making and keeping
Alaska competitive nationally and globally is simply an
investment in Alaska's long term sustainability."
7:07:11 PM
STUART COHEN, Owner, Invisible World Imports, Juneau, AK,
advised that as they move into the amendment process on SB 192,
to avoid any unilateral giveaways and untargeted cuts; and he
opposed HB 110. He agreed with all the testimony today: oil is
our life blood and he wanted his children to have a job in the
state, but the question they are looking at is how to increase
production and maximize benefits to the people of Alaska. HB 110
certainly does not do that. All the tax cuts in it are
"untargeted." If they want to develop new fields and felt taxes
were the problem, they could conceivably cut taxes for
production in those new undeveloped fields, which is what some
of the proposed amendments to SB 192 suggest."
But the governor's bill cuts taxes on Prudhoe Bay, a field that
is already mature and in which there won't be new discoveries no
matter how low taxes go. It rewards oil companies not for
exploring but for sitting back and milking Prudhoe Bay. His
second problem with the governor's bill was that it gives away a
huge amount without getting anything in return. It would cut the
state's revenue from ACES by 37 percent, but nothing in it says
any oil company will do any new exploration, drill a single well
or create a single job. As a citizen, he was incredulous that
anyone would propose a plan that would cut the state's income by
nearly $2 billion. The jobs and infrastructure that would be
lost by the cut would not be worth whatever hypothetical jobs
might be picked up on the North Slope.
MR. COHEN said the Department of Labor and Workforce
Development's (DOLWD) own documents say that oil field
employment is at an all-time high and more new wells are being
drilled next year than in the last decade; and Alaska is still
very profitable. As they move into the amendment process on SB
192, he asked them to avoid any unilateral giveaways and
untargeted cuts.
7:09:56 PM
KIM BURROWS, representing herself, Palmer, AK, agreed with the
gentleman who spoke about Norway's oil tax and that there should
be oil tax reform, but it should be in the form of oil companies
paying corporate income taxes in the same way other businesses
in Alaska do - on their earnings in Alaska. Norway has high
taxes and the oil companies are still making billions of
dollars. They don't have to reinvent the wheel. The state should
also have guarantees of more oil production, more investment on
the North Slope and more jobs for Alaskans.
7:11:31 PM
KELLY WALTERS, representing himself, Anchorage, AK, supported
keeping ACES intact. He thanked the Senate bi-partisan coalition
for their great efforts in protecting Alaska's interests and
fulfilling their constitutional duty to secure the maximum
benefit of our resources for all Alaskans. Maybe an argument
could be made to tweak progressivity, but if they do that, he
agreed with Lazy Mountain Jim who talked about a rebate program
yesterday that would provide tax incentives as the pipeline
incremental production targets were hit. "The governor's plan,
HB 110, is a one-sided entitlement program for the oil industry,
and, as I see it, nothing in it for Alaskans."
He said while the oil companies are good partners in our state
and necessary, and we all benefit from development of our
resources, they have not been the most trustworthy business
partners. You only need to look back to 2006 and the scandal
that landed some of their colleagues in jail as well as the
Amerada Hess case from 1977 to 1992 in which oil companies were
found guilty of deliberate falsification in computing the price
paid to Alaska for its royalty oil. At the time, the judge said
"the state was guilty of inexcusable trustfulness in dealing
with the oil companies."
7:14:32 PM
MERRICK PIERCE, representing himself, North Pole, AK, said
before fixing the tax rates, fix the obvious problems the
committee has heard about that limit competition and oil
throughput: transparency, honest tariffs and common carrier
regulations. He thanked them for working so hard to really
understand oil taxation saying that HB 110 is a terrible bill
and neither the House nor the administration did their due
diligence on it. He thanked some of them individually.
MR. PIERCE said with a conservative TAPS throughput of 600,000
barrels per day and current ANS price of $125 per barrel, the
gross value of oil leaving Alaska per year is about $27 billion.
From that $27 billion, the multinationals will take about $20
billion and Alaskans, the owners of the oil, will only take
about $7 billion. Yet some believe we should give away even
more.
He said that more transparency is critically needed for the
public and the legislators, so everyone can make informed
decisions. At all costs, they need to prevent inflated and
fraudulent tariffs in TAPS and a common carrier type regulation
of oil field infrastructure and gathering facilities to ensure
independents are not shut out and to build a large diameter gas
line, which helps oil explorers monetize the gas they find. That
could be paid for with the $2 billion a year that HB 110 would
have given away.
7:16:35 PM
RENEE SCHOFIELD, representing herself, Ketchikan, AK, supported
Ms. Petro's testimony opposed to SB 192 and supporting HB 110.
MS. SCHOFIELD said she is a small business owner, and while her
company doesn't provide direct services to the oil industry, it
provides services to agencies that benefit from the direct
funding in the state budget. It's extremely important to keep
oil in the pipeline; something is needed that will increase
throughput significantly and quickly.
7:17:59 PM
JERRY HAUGEBERG, Fairbanks Chamber of Commerce, Fairbanks, AK,
opposed SB 192. He supported modifying ACES saying that the
current tax structure inhibits development and new production on
the North Slope. They should do whatever they can to remove
those restrictions this session.
7:19:57 PM
DOUG ISAACSON, Mayor, City of North Pole, North Pole, AK, didn't
support SB 192 as written. He said last march the North Pole
City Council passed a resolution urging the legislature to
protect jobs in Alaska, ensure longer life of the TAPS and
decrease refining costs in Alaska by making Alaska more
competitive for oil exploration, development, production and
instate refining. He commended the committee for its diligence
in working to define a balance between profits coming into the
state and incentivizing production.
MR. ISAACSON said he testified earlier on the negative impacts
the high cost of energy and, now, how the possible loss of more
than 1,500 immediate jobs and Eielson Air Force Base will impact
Interior Alaska. He said much of the non-government workforce is
oil refining and oil field related. He said North Pole is also
host to the state's largest instate refiner of royalty oil, and
while he didn't support SB 192 as presently written, several
proposed amendments should have greater consideration, including
the bracket provisions for progressivity, because it de-
incentivizes production when the price of oil increases.
He urged the committee to remember that revenue sharing to
municipalities is very beneficial, and they don't want it to
stop. Production decline can be arrested by implementing four
more of their discussion points:
1. Implement a new licensing system that attracts new capital
for developing new fields or when expanding existing fields and
is taxed according to the product whether heavy oil, shale or
the like.
2. The State of Alaska should conduct the initial 2D seismic and
make the results available to the public.
3. Restrict leases to a six-year license that requires a work
plan and active development. Don't allow any company to sit on a
lease indefinitely.
4. The total marginal take should not exceed that of our
northern competitors. Currently, Alberta is at 55 percent and
Norway is at 78 percent, and Alaska exceeds both.
7:22:38 PM
KARM SINGH, representing himself, Fairbanks, AK, urged them keep
ACES in place. The extra taxes we get from ACES should be
invested in state infrastructure for cheap energy like a bullet
line and the Susitna dam. This is the only way we will be able
to break away from the oil companies with cheap energy and
develop our mining, and then smelting and manufacturing to be
shipped off to the Far East and the West Coast of the U.S.,
Canada and Mexico. He said the oil companies already get a $40
billion tax benefit from the federal government; they are the
most profitable companies in the world. He said no one offers
him breaks for the high cost of heating and lighting his house.
7:24:29 PM
LISA HERBERT, Executive Director, Fairbanks Chamber of Commerce,
Fairbanks, AK, said SB 192 doesn't go far enough to make Alaska
more competitive and attractive to the oil and gas industry. She
said she works for the business community of Fairbanks, many of
which are directly and indirectly supported by the oil industry.
7:26:01 PM
ROGER BURGGRAF, representing himself, Fairbanks, AK, supported
restructuring the oil tax, but he had reservations about both SB
192 and HB 110. He said Prudhoe Bay is running out of easy oil
and while it has a lot of heavy oil, getting it out is going to
cost a lot of money. He thought the oil companies need a break
because they go wherever they can make the most money.
7:27:26 PM
KAREN GORDON, representing herself, Fairbanks, AK, said SB 192
has the potential of being economically suicidal for Alaska.
Instead of encouraging investment, SB 192 could send the oil
companies packing. They need to create incentives to encourage
development and attract investments that feed our economy and
contribute to the powerful economic multiplier and jobs that
capital investments provide. Alaska's economic independence
rides on Alaska's ability to compete with other cheaper oil
fields.
7:28:18 PM
BUZ OTIS, representing himself, Fairbanks, AK, stated that oil
prices are killing people and that oil companies need to be
supported; we need their business. In 1976, he started Great
Northwest with $7,000 and a dream and he has reinvested
everything he has made back into Fairbanks.
7:29:52 PM
KIM MCDANIEL, representing herself and her family, Anchorage,
AK, stated Alaska is no longer competitive and something needs
to be done to change that quickly. She has been in Alaska her
whole life and her husband has worked in the oil industry for 33
years. Most of the people who work for her husband's company
live in-state; they are local high school, UAA and UAF
graduates.
She related that a news article about how oil booms are
happening in west Texas and production is predicted to double
within five to seven years. It says that similar booms are
happening in south Texas, North Dakota, Montana and western
Alberta, Canada. But Alaska's headlines tell about how our state
has declining revenues; the North Slope production declined by
6.3 percent last year with a 4.7 percent decrease predicted for
this year.
MS. MCDANIEL said the governor's approval rating is at 75
percent and that is saying we trust him and approve of what he
is doing. He is trying to increase Alaska's oil production.
7:31:09 PM
RICHARD BALES, representing himself, Anchorage, AK, opposed SB
192 and said HB 110 offers meaningful reform. He had been in
Alaska for 38 years; he is a small business owner, father,
husband, grandfather and soon to be a great grandfather and they
have all chosen to stay in Alaska. He likened this issue to a
high stakes poker game that we can ill afford to lose. Fix ACES
now, he said, or the state will be forced into a recession like
nothing we have ever seen before. He thanked them for their
service to Alaskans and for taking this important matter up for
consideration.
7:32:32 PM
STEVE ROBUSTELLINI, representing himself and his family, Port
Lions, AK, said people are leaving Alaska and this doesn't have
to happen. Alaska needs to have a globally competitive tax
structure and to work in partnership with the oil companies.
MR. ROBUSTELLINI related how 12 years ago he came from
California where his family worked in the timber industry, but
it was a dying industry. His work went from harvesting timber in
the forests to moving from one bankrupt mill to another on the
verge of closing. He said oil fuels the Alaska economy and he is
now seeing a lot of the same things happen here. His friends,
fellow workers and neighbors are leaving Alaska for jobs in
other areas. But this does not have to happen. Alaska is
competing globally for investment dollars and it needs a
globally competitive tax structure. More investment will result
in more production, which equals more oil to tax rather than
less oil to tax with higher tax rates. He thanked them for their
efforts in addressing this issue.
7:34:22 PM
MARK BAGGETT, representing himself, Anchorage, AK, stated oil
companies are in business to make the most money. He said he is
a contractor from Port Arthur, Texas, where 6,000 jobs were
created through incentives for the refineries. He said one of
the oil companies brought him up here to do repairs, because he
was told it didn't have the money for upgrades. He likes it here
and actually bought a place and a car. He had $8,500 in receipts
with him and if he leaves he would take it with him. Oil
companies are in the business of making money; they have
shareholders and if they don't make money, the shareholders
aren't going to keep them.
7:35:40 PM
MIKE KENNY, representing himself, Anchorage, AK, said he trusts
what the Senate is doing with SB 192. He had been living,
working and raising his family in Alaska for over 42 years; he
has worked in the oil fields and in executive boardrooms and met
a lot of fine oil company men in Alaska. He recalled the recent
scandals involving Veco and the Corrupt Bastards Club saying
there was no trust in anything the oil companies had to say.
They heard the same arguments during the PPT debates as they are
hearing now.
MR. KENNY said he spoke against the Bipartisan Working Group in
2006 when he thought it wouldn't work and would just be more of
the same, but he was wrong. He trusts what they are doing with
SB 192 and if it needs tweaking at the higher levels, that's
okay with him. He said the oil companies had not earned their
trust.
7:37:40 PM
ALLEN DOLYNNY, representing himself, Anchorage, AK, supported
lowering the tax structure, creating jobs in Alaska and creating
the profits for the hundreds of companies that get spent in our
state every day. He said he's an oil engineer and president of
Nannawilli Parsons and that producing oil is hard. Producing oil
is not equal to taxes; investment is equal to taxes. So, Alaska
needs to have a climate that encourages investment in new
production, like North Dakota and Alberta.
7:39:02 PM
LYNN JOHNSON, representing himself, Anchorage, AK, said ACES
needed to be changed in a meaningful way, particularly the
progressivity; SB 192 is too little too late. He said he was
president of Dowland-Bach Corporation, a 37 year-old
manufacturing business. The environment currently is not healthy
for businesses in Alaska that support the major production
companies. If things don't change, that unhealthy trend will
migrate to most sectors of Alaska's economy including real
estate, hotels, restaurants and banking.
He said Alaska's cost structure just isn't competitive with
other basins in the Lower 48, like North Dakota and Texas. He
said the weather or distance to market can't be changed for
those firms producing our oil, but we can and should change the
tax regimes to compete favorably for capital investment dollars.
7:41:03 PM
JIM DUFFIELD, representing himself and his family, Anchorage,
AK, said "No on SB 192." He was a small business owner in Kenai
and Soldotna, chair of the Anchorage Alaska Miners' Association
and on a number of resource development groups. He was "blown
away" that they would even consider something like this. He
chastised the committee for not listening to a word Pedro van
Meurs said. He laid out an entire plan with a structure and
rates that could be tweaked for all types of production. Tax
dollars were spent paying for his advice.
7:42:37 PM
VINCE BELTRAMI, President, Alaska AFLCIO, Anchorage, AK, said
the Senate should not follow the House and pass an oil tax
rollback without determining that it would truly make a
difference and lead to more production. He related Linda Lake
polling information commissioned by the Standup Alaska Coalition
made with 505 voters earlier this month. The following
statements were made to poll participants:
1. Some people say the reality is that we need the oil
companies to do business here and we need tax reform
that keeps us competitive. But this bill is the wrong
way to do it, because it is a giveaway with no
guarantees. We can't just trust oil companies to
invest here and create good paying jobs here. We have
to hold them accountable. The job of oil companies is
to make more money; it is the job of our laws to make
sure that people of Alaska get our fair share, that
the jobs are created here and that we just don't hand
a $2 billion windfall to oil companies.
2. Others say we can't keep overtaxing and driving
away oil producers. Alaska has some of the highest
production costs and oil taxes in the world. Oil
companies go where they can be profitable and are
taking our good paying jobs with them. Over half of
Alaskan jobs are related to oil production. This
reform will create Alaskan jobs and put oil in the
pipeline by reducing the tax burden on production. If
the oil companies go elsewhere, we'll have no oil
revenues to share now or in the future.
He summarized that 63 percent of those polled thought that
statement 1 was closer to their view and only 27 percent said
statement 2 was closer to their view. The bottom line was that
HB 110 was the first offer from the governor and the oil
companies, and any professional negotiator knows that on one
ever takes the first offer, ever. The Senate should not follow
the House and pass an oil tax rollback without determining that
it will truly make a difference and lead to more production. He
concluded with the slogan: no reduction without more production.
7:44:38 PM
GEOFFREY HUMPHREYS, representing himself, Anchorage, AK, said
"As a state we are stuck with the risks involved in operating in
Alaska and we should bear them in direct first order linear
proportion to the rewards we expect." For the past year the
general trend in oil consumption in the U.S. has been downward
as natural gas production and gas production expand. At the
same time, oil exports have been increasing, but the increase in
exports has not kept pace with the reduction in consumption.
7:45:28 PM
RADA KHADJINOVA, representing herself, Anchorage, AK, said she
was from Russia and attending UAA while working for an
engineering company. She had no doubt that incentives would make
Alaska more competitive in terms of increasing new production.
She said Russia did it and built a gas pipeline in her hometown
of Sakhalin.
7:47:02 PM
DAVID FLIPPO, representing himself, Anchorage, AK, said there
needs to be significant legislative change. He was a retired
military officer out of Eielson Air Force Base and after
deciding to stay here, he got hired by BP. But one son, who
graduated magna cum laude from UAA, could not get a job as a
process technology operator and has taken a job in the Lower 48.
His other son, a seven-time state curling champion who has
represented the state in U.S. nationals is currently attending
UAA and looking for a job, but can't find one either. He has had
interviews in North Dakota and will probably go there, too. His
sons are gone and he is trying to convince his wife to stay
here, but it won't happen. Things need to be changed.
7:48:28 PM
EMILY CROSS, representing herself, Anchorage, AK, said Alaska's
tax policy does have an effect on the oil and gas industry and
Alaska's just isn't competitive. She related that she is an
Inupiat Eskimo and a Nenana Regional shareholder. Currently, she
is the community relations manager for CH2M HILL in Alaskan. It
is employee owned and one of the top private employers of the
state with over 2,500 employees. One of their main focuses is to
train Alaskans from throughout the state in future resource
jobs. It takes many years to train and develop people for these
future work opportunities with private employers like CH2M HILL;
it can only happen if the opportunities exist.
Local businesses are not the only ones that benefit from the oil
and gas resources of Alaska she said. Major Alaskan-based
nonprofits' largest source of funds comes from private industry
like oil and gas. Without future development, the charities,
volunteerism and advocacy will suffer greatly and thereby
affecting those Alaskans who need it the most.
7:50:07 PM
JANET PLATT, representing herself, Anchorage, AK, said the tax
regime has to have meaningful reform. She said she is an
environmental scientist and has worked for BP for 29 years, but
that was not why she was testifying. She has four children;
three in college as engineering students and they would like to
come back to Alaska to work. She was speaking, because she wants
them to have jobs in the future and that won't happen without
meaningful tax reform.
She said Alaska is blessed with a large known resource on the
North Slope, but the remaining resource is viscous and heavy oil
that is incredibly costly to develop and get out of the ground.
Future development has potential, but it won't become a reality
unless it can be profitable and compete for capital with other
world class projects. She urged them to look beyond high short
term revenue grabs to a longer more sustainable development
future that benefits all Alaskans.
7:51:52 PM
ANDY ROGERS, representing himself and his family, Anchorage, AK,
congratulated the committee for recognizing the problem with the
current tax structure and proposing a solution, but he was a
little disappointed in SB 192 as well as the array of amendments
that may or may not be incorporated. He watched them take
testimony from industry stalwarts like Pedro van Meurs, Dave
Cruise and Doug Smith, and it gave him hope to see the
legislature "perk up" and "lean forward" and ask really
intelligent questions, but he was baffled that the testimony
that interested them so much didn't make it into the bill. He
thanked them for their dedicated service to the state.
7:53:46 PM
PEGGY SPITTLER, representing herself, Anchorage, AK, opposed SB
192. She said her husband had been working in the industry for
38 years and helped build TAPS; they both love Alaska. Right now
they just talk about selling their home, because they are
concerned about the future. They are perplexed that many of
their elected representatives seem to not listen to them. They
want to spend more, fund more projects, but where is the money
going to come from? Little effort is made to collaborate with
the industry that pays our bills, underwrites the arts and
supports so many programs and other projects throughout Alaska.
She said, "The industry is me; it's my husband; it's our
friends. We're not big, bad evil people; we're hard working
people and we're your neighbors." They both supported HB 110,
but she said "CSSB 192 is a slap in the face," and the status
quo is certain death for Alaska's economy.
7:55:22 PM
CRIS OSOWSKI, representing himself, Anchorage, AK, supported
adopting a tax policy that encourages investment. He said he is
an employee of ConocoPhillips and that he appreciated them
taking up this issue. Adopting tax policies that encourage
development is a crucial investment to make in their children's
future. His family was here well before the pipeline was built
and he recalled clearly the difference it made in their lives.
He said ACES has proven that tax incentives do work. They have
brought new companies to Alaska that are exploring all across
the North Slope, but the progressivity piece has stymied his
company and the producers. The producers need to be allowed to
participate in bringing new production on line similar to the
way the other companies were incentivized. He asked them to
remember that the new companies wouldn't have a chance on the
Slope he first came to or have even tried to make their way here
without the infrastructure the producers have invested in for so
many years. He said he appreciated them looking out for the
state's interests on all sides of the equation.
7:58:06 PM
TIMOTHY TREUER, representing himself, Anchorage, AK, supported
SB 192, whereas he said HB 110 was a giveaway. He said is he a
life-long Alaskan and grew up in Anchorage. This past January he
was a delegate for the Conference of Young Alaskans in Juneau
where 55 people between the ages of 16 and 25 came together to
discussion their vision for the state. They talked a lot about
oil taxation, but in the end they voted 96 percent in favor of
not changing the current oil tax structure except in minor ways
based on good research and knowledge. He supported the Senate's
approach of only acting when the facts show something must be
done.
7:59:55 PM
BARBARA GAZAWAY, representing herself, Anchorage, AK, said she
was against HB 110. She thanked the members of the majority
coalition for waiting to get all the facts and standing up for
Alaskans. She related an anecdotal story about how she banded
together with schoolmates to take back a school playground from
bullies.
8:02:46 PM
GREGORY KUCERA, representing himself, Anchorage, AK, supported
SB 192 saying HB 110 gives too much away. Basically, he said the
idea behind SB 192 is "show me first: production and
exploration." He said he was a member of the Alaskan Ironworkers
and complimented the Senate on gathering this testimony.
GRANT JOHNSON, representing himself and his three children,
Anchorage, AK, stated SB 192 is not the solution. Alaska must be
competitive with other oil regions around the world or the oil
will stay in the ground. He said, "If our government take
continues to be so high that it inhibits us from providing for
tomorrow, then ours will be the first generation in the history
of this state to leave our children and grandchildren in an
Alaska that is worse off than the one that was handed to us."
8:06:15 PM
DEBORAH WILLIAMS, representing herself, Anchorage, AK, stated
that the lessons the state learned from the Amerada Hess case
strongly support rejecting HB 110 and support pursuing SB 192. A
number of decision makers, including Senator Gary Stevens, had
pointed to the Amerada Hess litigation, in which the state sued
the producers for underreporting royalty, in the context of the
current oil and gas debates. As one of the attorneys who
represented the State of Alaska in that case, she agreed that
this lengthy historic litigation provides numerous important
insights into the action and decision making processes of the
oil and gas industry and the needed actions of the State of
Alaska going forward. The lessons the state learned from Amerada
Hess strongly support rejecting HB 110 and support pursuing SB
192.
MS. WILLIAMS explained that shortly after production began in
1977, the State of Alaska sued all of the oil and gas producers
on the North Slope for significant underreporting of royalty.
The case was exhaustive, expensive and enlightening and lasted
from 1977 to 1992. Ultimately, understanding the strength of the
state's case, all of the oil companies paid the state meaningful
sums, hundreds of millions of dollars, in overdue royalty
payments. The bottom line is that "under numerous
administrations, both Republican and Democratic, we stood
strong, prevailed and benefited Alaskans by insisting on our
fair share," she said. The state cannot afford to be naïve or
rely on "trustfulness" at this time. "Above all, we need to
insist upon fair payment for our resources under our
constitution and not play high risk giveaway games with industry
and with our future..."
MS. WILLIAMS concluded by saying the only thing that has made
her mad in the testimony today is the suggestion that they as
Senators had done anything other than protect the state's best
interests. They have worked hard and diligently and she
encouraged them to continue.
8:08:54 PM
MATT FENNEL, representing himself, Anchorage, AK, supported SB
192 and opposed HB 110. He said we need to continue investing in
Alaska's future and that doesn't mean big tax giveaways to the
oil companies.
8:09:32 PM
BRIAN HOVE, representing himself, Anchorage, AK, stated the
future of the state is based on oil and it's not that bright. SB
192 is a distraction and HB 110 should move forward. He first
acknowledged that he "has a sizeable financial conflict of
interest here," adding that since 1982 he had received a
dividend from the state and also doesn't pay state income tax.
He also pointed out that in calendar year end 2010, 620,000
barrels a day were being pumped through TAPS and now it's down
to 583,000 barrels. A year from now it will be less than 550,000
barrels. He said these are mathematical facts. Another fact is
that public tax policy does impact private sector investment
decisions.
8:11:22 PM
PATRICK FLATLEY, representing himself, Anchorage, AK, said his
testimony today would pose questions knowing that their answers
will come at a later date. When referring to the decline of
crude oil, he said, everyone often refers to the pipeline as
being half or one-third full and that is misleading. A 48-inch
pipe needs to be full in order move the oil. It's the speed at
which the oil travels that determines how much crude oil arrives
in Valdez each day. He has been told the oil has abrasives in
it, which raises his questions:
1. Is the miles per hour of oil flow a factor in seeing to it
that the pipeline lasts as long as possible?
2. Have our oil engineers told us what that optimum speed is and
is there any chance to that 600,000 barrels a day is where they
want it to be today?
8:13:22 PM
DAVE METHENY, representing himself,, Anchorage, AK, stated that
HB 110 is very bad, SB 192 is better and the current ACES tax
structure is the best. He calculated that dividing the $8
billion tax reduction in HB 110 and by the 2010 Alaska census
figure results in $11,268 per person. He said each one of the
representatives who voted to pass HB 110 gave away $200 million
of their constituents' money and he hoped they asked those
people if it was okay to do that. He summarized that it's our
oil and it's our money.
8:14:36 PM
DEBORAH BROLLINI, representing herself, Anchorage, AK, supported
building upon the "shelved" legislation in the Senate Labor and
Commerce Committee. She said Alaska has the highest taxation
rate of any oil region in North America and many of her friends
are moving equipment and personnel to other regions. She grew up
with oil and lived through Alaska's economic crash of 1986 when
she was laid off along with 800 other employees in one day. Home
foreclosures happened for five years. She said her circle of
friends who are running Alaska's largest companies are scared
and they are not interested in reliving another painful economic
downturn with their children.
8:15:48 PM
PAUL HOLLEY, representing himself, Anchorage, AK, supported
Governor Parnell and providing incentives for investment here.
He said he worked in the Alaska oil industry for over 30 years
and is a partner in a small business. He complimented them on
their "stewardship" and all the work they had been doing on
solving this issue, but really the issue is the declining
throughput in TAPS. Without increased investment, that decline
won't stop. He thought having the best tax structure would be
the greatest incentive for companies to come here and invest. If
that doesn't work, they can go back to ACES.
8:17:39 PM
RAY METCALF, representing himself, Anchorage, AK, suggested a
President Reagan slogan "trust but verify." He explained that
there are 30 billion barrels of heavy oil on the North Slope; it
has the consistency of peanut butter full of sand. The oil
companies have been producing the "sweet spot oil" for 30 years
without touching the heavy oil, but the Oil and Gas Conservation
Commission should have never let that happen. Heavy oil needs to
be produced while there is still enough light oil to flush it
down the pipeline he reasoned. He suggested offering producers
$10 per barrel to start producing the heavy oil, but pay them
after they have done it and not before. When they reach 550,000
barrels a day more than they are producing now, that would equal
Governor Parnell's $2 billion. A guarantee is the way to do it.
8:19:22 PM
BRENT SENETTE, representing himself, Anchorage, AK, stated
support for meaningful and significant oil production tax
reform. That means they need to abandon work on SB 192 and move
HB 110 forward. He said he is a 25-year Alaska resident and
works for CH2M HILL. Right now, state and federal taxes create a
combined oil tax rate of greater than 80 percent at today's oil
and gas prices. The majority of that is state mandated. He
asked, "If you wanted to start a business and 80 percent of what
you made was going to go to somebody else, would that be an
incentive to you?"
8:21:19 PM
MAYNARD GATES, President and CEO, Alaska Steel, Anchorage, AK,
stated support for HB 110, not SB 192. He urged them to trust
the business leaders when they say the current tax structure
isn't working.
CO-CHAIR PASKVAN closed public testimony saying the committee
had heard from more than 80 people this evening. He thanked
everyone for taking the time.
8:24:01 PM
There being no further business to come before the committee,
Co-Chair Paskvan adjourned the Senate Resources Standing
Committee meeting at 8:24 p.m.
| Document Name | Date/Time | Subjects |
|---|