Legislature(2013 - 2014)BELTZ 105 (TSBldg)
01/17/2013 03:30 PM Senate SENATE SPECIAL COMM ON TAPS THROUGHPUT
| Audio | Topic |
|---|---|
| Start | |
| Organizational Meeting: Discussion of Committee's Objectives | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE SPECIAL COMMITTEE ON TAPS THROUGHPUT
January 17, 2013
3:31 p.m.
MEMBERS PRESENT
Senator Mike Dunleavy, Co-Chair
Senator Peter Micciche, Co-Chair
Senator Anna Fairclough
Senator Lesil McGuire
Senator Berta Gardner
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Cathy Giessel
Senator Johnny Ellis
COMMITTEE CALENDAR
OVERVIEW: ORGANIZATIONAL MEETING - DISCUSSION OF COMMITTEE'S
OBJECTIVES
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JOE BALASH, Deputy Commissioner
Office of the Commissioner
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Presented information on the North Slope Oil
Production History and Forecast.
MIKE PAWLOWSKI, Special Assistant
Oil & Gas Development Project Manager
Department of Revenue
Anchorage, Alaska
POSITION STATEMENT: Presented information on the North Slope Oil
Production History and Forecast.
ACTION NARRATIVE
3:31:46 PM
CO-CHAIR PETER MICCICHE called the Senate Special Committee on
TAPS Throughput meeting to order at 3:31 p.m. Present at the
call to order were Senators Gardner, McGuire, and Co-Chairs
Micciche and Dunleavy. Senator Fairclough arrived shortly
thereafter.
^Organizational Meeting: Discussion of Committee's Objectives
3:32:00 PM
CO-CHAIR MICCICHE began the meeting by introducing members of
the committee and their staff. He announced that the first bill
that would come before the committee next week would be SB 21.
He noted the presence of Senator Ellis and Senator Giessel.
CO-CHAIR MICCICHE stated that the purpose of today's meeting was
to discuss the committee's objectives and to invite Alaskans to
hear about the importance of why the committee has been
assembled. He stressed that the committee is not an oil tax
committee, although it is the first committee of reference for
the Governor's SB 21, which will be discussed and passed on to
the Senate Resources Committee by February 7.
He invited Mr. Balash and Mr. Pawlowski to present information
on the economic decline in Alaska due to the oil production
decline in TAPS.
3:35:00 PM
JOE BALASH, Deputy Commissioner, Office of the Commissioner,
Department of Natural Resources, Juneau, Alaska, introduced
himself.
MICHAEL PAWLOWSKI, Special Assistant, Oil & Gas Development
Project Manager, Department of Revenue, Anchorage, Alaska,
introduced himself.
He noted the arrival of Senator Fairclough.
MR. PAWLOWSKI related that the committee requested information
from the Department of Revenue (DOR) Revenue Sources Book (RSB),
Fall 2012, in the form of graphics and tables illustrating
historic and projected oil production on the North Slope of
Alaska (ANS). Also requested were oil revenue projections over
the next ten years. He referred to a handout entitled, "North
Slope Oil Production - History and Forecast.
MR. PAWLOWSKI began with a graph that showed a look back from
1977 to 2022 of ANS oil production broken out by areas of
production as they are aggregated by the RSB. The dotted line at
2012 shows the divide between the historic production record and
the future forecasted data. He noted the size and scale of the
blue area on the graph which shows the production from Prudhoe
Bay. The dark purple area shows the production from the Kuparuk
reservoir. He explained that the graph depicts different sources
of oil production and the flattening of production from 2001 to
2007. During that time period, oil production from Alpine and
Offshore began. Offshore production consists of fields within
the state's three-mile limit.
He referred the committee to Chapter 4 in the RSB for more
information on the production forecast.
3:38:41 PM
SENATOR GARDNER requested that Mr. Pawlowski provide the
committee with a broad understanding of the tax rate structure
and oil prices from 1989 until 2001 and from 2001 to 2004.
MR. PAWLOWSKI said he would be happy to provide that
information.
CO-CHAIR MICCICHE agreed that any information committee members
wanted would be requested.
MR. PAWLOWSKI presented information on "Forecast Alaska ANS
Price, Production, State General Fund Unrestricted Revenues"
from two periods - FY 2012 to FY 2017 and FY 2018 to FY 2022. He
said that the information was broken up into two periods for
presentation purposes. He explained that the first row depicts
the forecast ANS West Coast (WC) oil price in dollars per barrel
($/bbl) that revenue forecasts are based on. Revenues are a
function of the combination of price and production.
He said the second row shows the forecast total ANS production,
which includes state and federal barrels, based on a thousand
barrels per day (ths bbls/day) analysis. For example, in FY 2012
579,100 barrels per day are projected. He stressed that these
are an average of total production numbers. He noted the
variance in production numbers between summer and winter.
He explained that the third row shows general fund unrestricted
revenues in millions of dollars. In FY 2012 the total amount is
$9,485,000,000. He noted the decline in revenue going forward.
He stressed the importance of considering price and production
lines when considering revenue. He referred the committee to
price sensitivity charts located in the RSB.
3:42:28 PM
MR. PAWLOWSKI concluded that DOR's forecast includes a projected
decline in production from 579,100 bbls/day in FY 2012 to
338,500 bbls/day in FY 2022.
CO-CHAIR MICCICHE asked if anyone could doubt that ANS
production is in decline based on these numbers.
MR. PAWLOWSKI turned to the production history and forecast
graph to point out that from 1988, or the peak in production,
there has been a steady decline in ANS production. Based on what
is known today, including reasonable projects under development,
DOR's current forecast is predicted to decline. He offered to
have production forecasters testify before the committee.
3:44:31 PM
SENATOR GARDNER requested information about the general fund
unrestricted revenues under SB 21.
MR. PAWLOWSKI agreed to provide that information. He pointed out
that he was requested to only provide the base revenue forecast
as published by DOR, including the price of oil.
CO-CHAIR MICCICHE clarified that the purpose of the meeting was
to define why the Senate TAPS Throughput Decline Committee was
formed.
CO-CHAIR MICCICHE reminded Alaskans that the state receives 90
percent of its revenue from one source - the production of North
Slope oil. He further stated that 90 percent of the roads,
universities, schools, ferries, and public buildings are funded
by the oil business. Ninety percent of every public employee's
salary and benefit dollar, public safety, social programs, and
education are funded by oil. He suggested until the state is
able to diversify the economy, it is in every Alaskan's best
interest to flatten the decline of production through TAPS.
CO-CHAIR MICCICHE stated that the committee's primary objective
is to stop the decline and eliminate obstacles to increasing
production in the future. He said that the committee would be
taking a look at the substantial operational hurdles and cost
increases associated with running the system below design.
He pointed in recognition of Alaska's Constitution, in Article
8, Section 1, which requires natural resources to be managed for
maximum use consistent with public interest, it is incumbent
upon the legislature to assess the reality surrounding the
decline of ANS oil production and to take an active role in
increasing TAPS throughput by all reasonable means. It is
imperative that the legislature manages to the best interest of
Alaskans and never to the industry that elects to extract the
blessings which are Alaska's natural resources. In order for
Alaskan resources to best serve Alaskans, they must be
responsibly produced and brought to market. The primary job
description of legislators honored to have been sent to
represent their constituents is to determine a responsible
balance to reach flattened or enhanced levels of ANS oil
production.
CO-CHAIR MICCICHE remarked that the Special Committee on TAPS
Throughput was formed by resolution with a specific task of
defining opportunities designed to flatten the decline or
increase the flow through TAPS and to take appropriate action
related to increasing TAPS throughput.
CO-CHAIR MICCICHE reviewed the committee's objectives. The first
was to increase throughput in TAPS. He emphasized that the
committee is not an oil tax committee, even though it is the
first committee of reference for SB 21. The committee will
continue to work on operational issues associated with obstacles
to increasing production, after it passes SB 21 to the Senate
Resources Committee.
CO-CHAIR MICCICHE listed operational issues:
· water and gas handling limits to production
· access to existing production and future exploration
production locations
· efficient permitting
· protecting the environment without waste and redundancy
· the Alaska Lease Program
· TAPS Tariff and the effects on cost to the state
· leveling the Arctic environment and conditional challenges
· limited available equipment
· workforce and support industry
· limited and aging infrastructure
· TAPS water and wax issues
· the Alaska Severance and Production Tax structure under SB
21
· state and federal regulatory hurdles
· environmental litigation
· narrowing the time between new discoveries and production
· global competition for industry investment capital
· understanding the effects of past incentives and improving
future incentives
· the potential for Alaska hire
· Alaska investment performance incentives
· effects of decoupling heavy oil and gas from traditional
North Slope oil production
· incentivizing specifically new oil and middle earth
exploration and production (south of 68 degrees and north
of Cook Inlet)
· investigating AG transitional zone incentives (where the
state receives 27 percent in the area 3 to 6 miles
offshore)
· the potential for resolving a greater percentage of Outer
Coastal Shelf (OCS) revenues more similar to OCS stakes in
the Gulf of Mexico
3:50:44 PM
CO-CHAIR MICCICHE stated that the committee would be operating
under a set of tenets. He asked Co-Chair Dunleavy to review
them.
CO-CHAIR DUNLEAVY explained that policy must seek a balance
between maintaining a competitive economic environment for
Alaska and its global industry, while at the same time showing a
reliable, long-term revenue stream to fund vital state services.
He emphasized that the end goal is to ensure long-term
sustainable revenue for Alaska. He reviewed the tenets that the
committee will follow while trying to achieve that goal:
· recognition of the history and reality of Alaska being a
resource state
· management of Alaska's oil and gas resources for the
maximum benefit of the people for today as well as into the
future
· recognize and nurture the relationship between the state as
an owner and the industry as producers of Alaska's oil and
gas resources
· provide consistent sources of revenue to the state over the
long term
· increase responsible exploration, development, and
production of oil and gas
· promote commercialization of challenged resources - gas,
viscous, and heavy oil
· increase jobs for Alaskans
· work to ensure a fair take for Alaskans while competing
globally to track industry investment in Alaska
· promote advances in technology efficiency
· respond to environmental conditions and concerns
· secure a future of economic growth, not economic decline
· work to provide predictable terms and rules for industry
parks
3:52:38 PM
CO-CHAIR MICCICHE announced future meeting dates:
January 22 - presentations by the Departments of Revenue and
Natural Resources on SB 21
January 24 - continuation of presentations on SB 21 including
Barry Pulliam from EconOne
January 29 - invited and public testimony; 3:30 p.m. - 7:30 p.m.
January 31 - invited and public testimony; 3:30 p.m. - 7:30 p.m.
CO-CHAIR MICCICHE noted a key element in that the committee
represents all of the people in Alaska and their future. He
hoped that the members of the committee could leave party issues
aside and make the best choices for moving Alaska forward toward
a sustainable economy. He added that another key element is to
allow enough time so that all Alaskans have a say in the
process. He put forth an open invitation for Alaskans to
testify.
He concluded, "We are in the oil business, but we are partners
in this business - we are partners with all the people in
Alaska."
3:55:01 PM
SENATOR GARDNER thanked Co-Chair Micciche for his comments. She
said she agrees that this is an issue that is of critical
importance to the state of Alaska.
3:55:55 PM
There being no further business to come before the committee,
Co-Chair Micciche adjourned the Senate Special Committee on TAPS
Throughput Committee at 3:55 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| OTR SST Production History and Forecast 1-17-2013.pdf |
SCRA 1/17/2013 3:30:00 PM STTP 1/17/2013 3:30:00 PM |