Legislature(1997 - 1998)
04/15/1997 01:07 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HJR 35 - ENCOURAGE FED TAX CHANGE FOR GAS PIPELINE Number 0410 CO-CHAIRMAN SCOTT OGAN announced the committee would take up House Joint Resolution 35, "Encouraging federal legislation to improve federal fiscal terms for a trans-Alaska gas pipeline." Number 0430 REPRESENTATIVE MARK HODGINS, sponsor, stated that the resolution encourages federal legislation to improve federal fiscal terms for the trans-Alaska gas line. He explained that the report by Pedro van Meurs was commissioned by the state on the economic viability of a trans-Alaska gas line. Pedro van Meurs found that the project would need state and federal fiscal adjustments in order to stimulate the project's investment structure. It would be a $12 billion to $15 billion project to put the capitalization in place. Right now, at $15 billion, the project would not be economically viable. He stated that producers, as well as the state and federal governments, should be encouraged to look at the project with the idea that if it is not economically feasible, it will not go. REPRESENTATIVE HODGINS said there needs to be a fiscal regime that will allow this project to be produced. There is about $150 billion worth of gas going through the pipeline, according to figures of Pedro van Meurs. Out of that $150 billion, the federal government would get $26 to $27 billion in taxation. This pipeline is site-specific to Alaska. The resolution urges the federal delegation to come forward with tax incentives, as state and municipal governments will also have to do in order to see this pipeline built. Number 0601 REPRESENTATIVE BEVERLY MASEK asked how the congressional delegation feels about the resolution. Number 0617 REPRESENTATIVE HODGINS replied that he has not talked with them. However, it is apparent that without some sort of tax incentive, there probably will not be a gas line. He believes they would encourage this because it would create about 10,000 jobs in the state, plus revenue that will enhance the state for many years and provide an energy base to allow industry to grow for the next 50 to 70 years. Number 0662 REPRESENTATIVE MASEK asked how this would be accepted at the congressional level. Number 0681 REPRESENTATIVE HODGINS replied that basically if this project does not go, the federal government will receive zero in taxation on it. They have $26 billion that will be generated. If they can come up with a 10 percent or a 15 percent reduction, that would certainly help, over the course of the life of the pipeline, to initiate building of the pipeline. He indicated both the state and federal government need to give a little, and the producers must come up with a more efficient way of building the pipeline. CO-CHAIRMAN OGAN reported that he had recently spoken with Congressman Young's office to let them know about the resolution; while they had not read it, they were aware of the problem. They had discussed getting some breaks on the front end of the project, and Co-Chairman Ogan believes they are receptive to looking at the project. Number 0789 PAUL FUHS, Lobbyist for Yukon Pacific Corporation (YPC), came forward to testify. He stated that YPC supports the resolution. They feel Pedro van Meurs' study is more pessimistic than their own economic projections, primarily due to the difference in how soon the project will come to full production. The YPC believes the economics of the project could be improved by these federal taxes. MR. FUHS referred to a one-page handout, page 115, which shows that the federal government would get 28 percent in taxes from this project, more than twice what the state would receive. The Pedro van Meurs report also points out that if there are reductions in federal taxes, there will be increases in Alaska state taxes on the project. He stated that there is the issue of balancing the trade deficit with Japan and other Asian countries, as well as the issue of United States jobs. MR. FUHS advised that YPC has spoken to Senator Murkowski's office, and they welcome this. He suggested the Senate Energy Committee would probably be the place where this bill would originate; one reason they really favor this is it will be easier for them if the initiative comes from the state rather than from private companies going for the tax breaks. Mr. Fuhs said the resolution is generic; it does not state specific tax advantages. He believes that is good because there are things they could do in addition to those pointed out in the Pedro van Meurs report. Number 0940 REPRESENTATIVE MASEK suggested including at the bottom of this resolution, where it says "Copies of this resolution shall be sent to", the energy council or whatever congressional committee would be dealing with the issue. She said if the sponsor does not object, she would offer that as an amendment. Number 0990 REPRESENTATIVE GREEN stated that he did not object. However, whatever comes from the energy council must be unanimously approved by all states that are members. He said there may be, by implication, some members of the federal legislature that look at this as a tie between the state of Alaska and the energy council. He expressed concern over unilaterally tying that body with this resolution until they had a chance to look at it. Number 1051 REPRESENTATIVE MASEK replied that maybe it can be rephrased and sent to a committee that deals with the energy council on the congressional level. Number 1072 CO-CHAIRMAN HUDSON asked whether Representative Green is on the energy council and when they meet. Number 1079 REPRESENTATIVE GREEN replied he is on the council, and they meet four times a year. They will be meeting in June. CO-CHAIRMAN HUDSON asked whether this resolution could be brought before them and whether the council could be asked to put their own resolution together. REPRESENTATIVE GREEN replied that they could; however, it probably would not be approved before their December meeting. Number 1112 REPRESENTATIVE MASEK withdrew her amendment. Number 1140 CO-CHAIRMAN HUDSON made a motion to move HJR 35, 0-LSO904\E, with individual recommendations and zero fiscal note. He asked unanimous consent. CO-CHAIRMAN OGAN asked whether there was an objection. There being none, HJR 35 was moved out of the House Resources Standing Committee.