Legislature(1997 - 1998)

04/15/1997 01:07 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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            
 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                    

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