Legislature(2013 - 2014)BARNES 124

03/10/2014 01:00 PM House RESOURCES

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                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         March 10, 2014                                                                                         
                           1:05 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Eric Feige, Co-Chair                                                                                             
Representative Dan Saddler, Co-Chair                                                                                            
Representative Peggy Wilson, Vice Chair                                                                                         
Representative Mike Hawker                                                                                                      
Representative Craig Johnson                                                                                                    
Representative Kurt Olson                                                                                                       
Representative Paul Seaton                                                                                                      
Representative Scott Kawasaki                                                                                                   
Representative Geran Tarr                                                                                                       
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 334                                                                                                              
"An Act  relating to the  qualified oil and gas  service industry                                                               
expenditure credit; and relating to  a credit against oil and gas                                                               
exploration,  production,  and pipeline  transportation  property                                                               
     - HEARD & HELD                                                                                                             
HOUSE JOINT RESOLUTION NO. 30                                                                                                   
Requesting  that the  federal government  and  the United  States                                                               
Secretary of  the Interior reconsider  the Izembek  Land Exchange                                                               
decision  and approve  the Izembek  Land  Exchange, allowing  the                                                               
residents  of King  Cove  to have  road access  to  the Cold  Bay                                                               
Airport for  critical health  and safety  reasons and  to improve                                                               
the quality of their lives.                                                                                                     
     - MOVED HJR 30 OUT OF COMMITTEE                                                                                            
HOUSE BILL NO. 344                                                                                                              
"An Act prohibiting the importation  of, sale of, purchase of, or                                                               
release into the  water of the state of  certain invasive aquatic                                                               
plant species."                                                                                                                 
     - BILL HEARING CANCELED                                                                                                    
HOUSE BILL NO. 351                                                                                                              
"An Act relating to uses that are not incompatible with the                                                                     
purposes of the Nancy Lake State Recreation Area."                                                                              
     - BILL HEARING CANCELED                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 334                                                                                                                  
SHORT TITLE: OIL & GAS TRANSFERABLE TAX CREDIT CERT.                                                                            
SPONSOR(s): REPRESENTATIVE(s) PRUITT                                                                                            
02/24/14       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/24/14       (H)       RES, FIN                                                                                               
03/10/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
BILL: HJR 30                                                                                                                  
SHORT TITLE: IZEMBEK LAND EXCHANGE                                                                                              
SPONSOR(s): REPRESENTATIVE(s) HERRON                                                                                            
02/26/14       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/26/14       (H)       RES                                                                                                    
03/10/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
REPRESENTATIVE LANCE PRUITT                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  As prime sponsor of HB 334, explained the                                                                
changes in proposed committee substitute (CS) for HB 334,                                                                       
Version U.                                                                                                                      
EMILY NAUMAN, Attorney                                                                                                          
Legislative Legal Counsel                                                                                                       
Legislative Legal and Research Services                                                                                         
Legislative Affairs Agency                                                                                                      
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions during the discussion of                                                              
HB 334.                                                                                                                         
DIRK CRAFT, Staff                                                                                                               
Representative Lance Pruitt                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on behalf of the sponsor,                                                                      
Representative Lance Pruitt, during the discussion of HB 334.                                                                   
MATT FONDER, Director                                                                                                           
Tax Division                                                                                                                    
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered questions regarding HB 334.                                                                     
FRED KIGA, Senior Vice President                                                                                                
Vigor Industrial, Inc. - Vigor Alaska                                                                                           
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 334.                                                                          
DOUG WARD, Director                                                                                                             
Shipyard Development                                                                                                            
Vigor Industrial, Inc. - Vigor Alaska                                                                                           
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the discussion of HB 334.                                                               
MIKE PAWLOWSKI, Deputy Commissioner                                                                                             
Office of the Commissioner                                                                                                      
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Answered questions related to HB 334.                                                                    
REPRESENTATIVE BOB HERRON                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified as the prime sponsor of HJR 30.                                                                
SENATOR LISA MURKOWSKI, U.S. Senator                                                                                            
United States Senate                                                                                                            
Washington, DC                                                                                                                  
POSITION STATEMENT:  Testified in support of HJR 30.                                                                          
HENRY MACK, Mayor                                                                                                               
City of King Cove                                                                                                               
King Cove, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HJR 30.                                                                          
MIKE COONS, Director                                                                                                            
Citizen Initiatives, Alaska                                                                                                     
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in support of HJR 30.                                                                          
STANLEY MACK, Mayor                                                                                                             
Aleutians East Borough                                                                                                          
Sand Point, Alaska                                                                                                              
POSITION STATEMENT:  Testified in support of HJR 30.                                                                          
GARY HENNIGH, City Manager                                                                                                      
King Cove, Alaska                                                                                                               
POSITION STATEMENT:   Briefly commented during  the discussion of                                                             
HJR 30.                                                                                                                         
ACTION NARRATIVE                                                                                                              
1:05:44 PM                                                                                                                    
CO-CHAIR  DAN   SADDLER  called  the  House   Resources  Standing                                                             
Committee meeting to order at  1:05 p.m.  Representatives Seaton,                                                               
Johnson,  Olson, P.  Wilson, Tarr,  Kawasaki, Hawker,  Feige, and                                                               
Saddler were present at the call to order.                                                                                      
1:06:41 PM                                                                                                                    
CO-CHAIR  SADDLER began  to discuss  HB 334,  and Co-Chair  Feige                                                               
first  requested an  explanation of  the reason  that HB  344 was                                                               
pulled from the committee's agenda for today.                                                                                   
         HB 344-INVASIVE AQUATIC PLANT SPECIES CONTROL                                                                      
REPRESENTATIVE  OLSON,  sponsor of  HB  344,  explained that  the                                                               
Department of Natural Resources  (DNR) issued a quarantine notice                                                               
on the invasive aquatic plants,  and Elodea [canadensis] could no                                                               
longer be sold  or distributed.  The department  moved forward so                                                               
quickly  with the  quarantine  that  the bill  to  ban import  of                                                               
Elodea [canadensis] was no longer necessary.                                                                                    
REPRESENTATIVE JOHNSON spoke as follows:                                                                                        
     I  was kinda  looking forward  to hearing  this because                                                                    
     we've had some concern about  float planes and when you                                                                    
     say quarantine.   I've spoken  with the  department and                                                                    
     it is  not their  intention to  keep float  planes from                                                                    
     flying in  and out of lakes  that may or not  have this                                                                    
     plant in there.   So, I just want to  be clear that for                                                                    
     my  office  working  on  it, Campbell  Lake  is  in  my                                                                    
     district,  that when  you say  quarantine that  doesn't                                                                    
     mean  that you  won't -  you'll still  be able  to land                                                                    
     your airplane  - as opposed  to having  someone import,                                                                    
      sell, and otherwise.  So I just want to be clear on                                                                       
      that.  We're working with the department to clarify                                                                       
     that quarantine doesn't mean quarantine.                                                                                   
CO-CHAIR  SADDLER also  expressed  his interest  in putting  that                                                               
statement on the record.                                                                                                        
         HB 334-OIL & GAS TRANSFERABLE TAX CREDIT CERT.                                                                     
CO-CHAIR  SADDLER  announced that  the  first  order of  business                                                               
would be  HOUSE BILL NO. 334,  "An Act relating to  the qualified                                                               
oil and gas service industry  expenditure credit; and relating to                                                               
a  credit  against  oil  and  gas  exploration,  production,  and                                                               
pipeline transportation property taxes."                                                                                        
1:08:39 PM                                                                                                                    
REPRESENTATIVE  LANCE PRUITT,  Alaska  State Legislature,  stated                                                               
that  he will  speak to  the  work draft  for HB  334, Version  U                                                               
[labeled  28-LS1407\U,  Nauman, 3/4/14  and  not  yet before  the                                                               
committee].  Relating  the reason for his introducing  HB 334, he                                                               
said he visited the [Alaska Ship  and Dry Dock, Inc. shipyard] in                                                               
Ketchikan this past summer.   During this visit he discovered the                                                               
shipyard  facility could  not use  a tax  credit the  legislature                                                               
passed last  year [to AS 43.20.049].   He explained that  the tax                                                               
credit requires  the party must be  a taxpayer to qualify,  but a                                                               
government entity,  the Alaska Industrial Development  and Export                                                               
Authority (AIDEA) owns  the actual yard.  He  discussed this with                                                               
Mike  Pawlowski, Department  of  Revenue (DOR),  who suggested  a                                                               
possible  remedy for  an  entity  that is  not  a state  taxpayer                                                               
without providing  a blanket exemption.   After  some discussion,                                                               
he  developed the  work  draft [Version  U].   It  would apply  a                                                               
credit to the state property tax on  the asset by the owner.  The                                                               
owner could  take a credit  over five years, although  the credit                                                               
cannot reduce the  tax to less than zero.   It would also include                                                               
an option for  a municipality to use the credit.   He described a                                                               
scenario that illustrated how Seward's  Ship Dry Dock [and Ship's                                                               
Chandlery]  might also  be  interested  in the  tax  credit.   He                                                               
stated the goal of  HB 334 is to ensure that  as many Alaskans as                                                               
possible have an opportunity to  participate in what he viewed as                                                               
the "renaissance"  from SB 21  and bring manufacturing  back home                                                               
to Alaska.                                                                                                                      
1:13:09 PM                                                                                                                    
REPRESENTATIVE  SEATON  moved  to adopt  the  proposed  committee                                                               
substitute  (CS)  for HB  334,  Version  U, labeled  28-LS1407\U,                                                               
Nauman,  3/4/14,  as  the  working  document.    There  being  no                                                               
objection, Version U was before the committee.                                                                                  
REPRESENTATIVE P. WILSON remarked  that [SB 21] acknowledges that                                                               
North Slope  companies often order  equipment to be built  in the                                                               
Lower 48 or another country.  The  goal of [SB 21] was to provide                                                               
an incentive  that would  provide jobs for  Alaskans and  that if                                                               
the product  was produced in  Alaska, the company could  obtain a                                                               
tax credit.                                                                                                                     
1:15:02 PM                                                                                                                    
REPRESENTATIVE  HAWKER  related  his understanding  that  HB  334                                                               
would allow  a transferable  tax credit  for improvements  to the                                                               
tangible  personal  property under  AS  43.20.049  to be  applied                                                               
against taxes under  AS 43.56.  He asked the  reason to allow the                                                               
tax  credit  to property  tax  since  the broader  interpretation                                                               
would  allow  the  tax  credit   against  corporate  income  tax,                                                               
production tax, or property tax liabilities.                                                                                    
REPRESENTATIVE PRUITT deferred to the bill drafter.                                                                             
EMILY  NAUMAN, Attorney,  Legislative Legal  Counsel, Legislative                                                               
Legal and Research Services,  Legislative Affairs Agency, replied                                                               
the  question raised  by Representative  Hawker  is completely  a                                                               
policy call.                                                                                                                    
1:16:36 PM                                                                                                                    
REPRESENTATIVE HAWKER,  referring to  the difference  between the                                                               
original  version  of the  bill  and  Version  U, said  that  the                                                               
original version of HB 334 limited  the tax credit to the initial                                                               
purchaser  of the  tangible personal  property.   He offered  his                                                               
belief  that Version  U broadens  this substantially  by allowing                                                               
the tax credit to be traded freely on the open market                                                                           
DIRK  CRAFT, Staff,  Representative  Lance  Pruitt, Alaska  State                                                               
Legislature, stated that the initial  language was more limiting.                                                               
He explained that  Version U was broadened to  make it applicable                                                               
to  anyone  associated  with  the   property.    He  related  his                                                               
understanding  that the  tax credit  is still  limited to  anyone                                                               
associated with the property.                                                                                                   
1:17:49 PM                                                                                                                    
REPRESENTATIVE  HAWKER questioned  whether that  allowance is  in                                                               
the [bill].  He read from AS 43.20.052 (a), as follows:                                                                         
     A person  that is  entitled to take  a credit  under AS                                                                    
     43.20.049 that wishes to transfer  the unused credit to                                                                    
     another  person  may  apply to  the  department  for  a                                                                    
     transferable tax credit certificate.                                                                                       
REPRESENTATIVE  HAWKER  said  that any  restriction  to  "another                                                               
person" would not exist.                                                                                                        
MR. CRAFT replied correct.                                                                                                      
1:18:37 PM                                                                                                                    
REPRESENTATIVE  SEATON asked  for  further  clarification on  the                                                               
reason  to  allow  the  credit  to be  applied  to  property  tax                                                               
liability instead of limiting the  tax credit to corporate income                                                               
tax liability.   He didn't think  the language in the  bill would                                                               
limit the tax credit to the construction.                                                                                       
REPRESENTATIVE PRUITT answered that  the genesis for allowing tax                                                               
credits against the property tax  liability was to avoid creating                                                               
a  tax credit  similar  to  the film  tax  credit  that could  be                                                               
applied  by  someone  without  an existing  tax  liability.    He                                                               
related  a  scenario to  illustrate  how  a company  might  build                                                               
something yet  not have a  tax liability.   This would  allow not                                                               
only  the  major  investors  but also  the  service  industry  to                                                               
benefit.  These parties may own the  asset but not have a tax yet                                                               
Version  U  would  allow  them  to apply  tax  credits  to  their                                                               
personal property tax liability.                                                                                                
1:21:05 PM                                                                                                                    
REPRESENTATIVE SEATON  said it  seems like the  tax credit  is so                                                               
broadly  applied that  it doesn't  limit  the tax  credit to  the                                                               
party  who owns  the  asset.   The  tax  credits  could apply  to                                                               
someone who builds something but  if the company doesn't have any                                                               
corporate tax liability,  the tax credit could  be transferred to                                                               
anyone who  has a  property tax liability.   Further,  it doesn't                                                               
seem to be limited  just to oil and gas properties.   He asked if                                                               
the tax  credit will be limited  to oil and gas  properties or if                                                               
it will include other properties as well.                                                                                       
REPRESENTATIVE PRUITT answered  that the intent was  to apply the                                                               
tax credit to  the oil and gas industry, although  it is a policy                                                               
call if the committee wants to  go beyond the industry.  The bill                                                               
evolved  due  to  recognition  of some  limitations  to  the  tax                                                               
credit.  He hoped that  companies in places like Southeast Alaska                                                               
and Seward could  participate in the oil  development that occurs                                                               
in other parts of the state.                                                                                                    
1:22:50 PM                                                                                                                    
REPRESENTATIVE  HAWKER understood  that,  as  written, Version  U                                                               
would allow  the tax  credit to be  applied against  taxes levied                                                               
under AS 43.56.  He said the title  of the chapter is oil and gas                                                               
exploration,  production,  and pipeline  transportation  property                                                               
taxes, which  provides a  broad scope for  the industry  since it                                                               
includes pipeline transportation.                                                                                               
REPRESENTATIVE PRUITT agreed.                                                                                                   
1:23:33 PM                                                                                                                    
REPRESENTATIVE SEATON understood the tax  credit could be used by                                                               
someone building modules,  but it will have to  be transferred to                                                               
the oil companies or to someone with pipeline taxes.                                                                            
REPRESENTATIVE  PRUITT  replied yes.    He  explained that  Vigor                                                               
Industrial and  Alaska Ship and  Dry Dock,  Inc. do not  have any                                                               
tax liability  to the state.   Thus, the bill would  make the tax                                                               
credits transferable to any company producing their products.                                                                   
1:25:00 PM                                                                                                                    
REPRESENTATIVE   KAWASAKI  understood   that  an   oil  and   gas                                                               
corporation  that is  making money  under AS  43.20 would  have a                                                               
transferable tax credit  that could be purchased by  a company in                                                               
the  same  field to  apply  towards  the company's  property  tax                                                               
REPRESENTATIVE PRUITT believed it would be applicable.                                                                          
REPRESENTATIVE KAWASAKI surmised  that a North Slope  oil and gas                                                               
company could go to a Fairbanks  or Anchorage company and use the                                                               
tax   credit  to   reduce  property   taxes  for   their  related                                                               
REPRESENTATIVE PRUITT  acknowledged that  he raises a  good point                                                               
that a company in Fairbanks might  be able to reduce its property                                                               
tax liability.                                                                                                                  
1:26:41 PM                                                                                                                    
REPRESENTATIVE SEATON recalled that  often small companies cannot                                                               
use the  tax credit, unless  they are  oil and gas  companies, so                                                               
the parties  must transfer these  credits.  He wondered  how this                                                               
would  stimulate  in-state  manufacturing  if  the  parties  must                                                               
transfer their  tax credits -  probably at  a discount -  to gain                                                               
any benefit.                                                                                                                    
REPRESENTATIVE  PRUITT suggested  Vigor Industrial,  Inc. may  be                                                               
able to address the question.                                                                                                   
1:29:02 PM                                                                                                                    
REPRESENTATIVE  P.  WILSON  related her  understanding  that  the                                                               
company  will obtain  a discount  by having  the product  made in                                                               
Alaska, which could  encourage manufacturing in Alaska.   It will                                                               
provide the  indirect benefit by  creating manufacturing  jobs in                                                               
Alaska   even  though   it  might   not   directly  benefit   the                                                               
REPRESENTATIVE  TARR  offered  her  understanding  that  the  tax                                                               
credit would only apply to oil  and gas property taxes due to the                                                               
state and not to municipal tax liabilities.                                                                                     
REPRESENTATIVE PRUITT said yes, but said  the goal is to allow an                                                               
option to use the tax credits for municipal property taxes.                                                                     
1:31:02 PM                                                                                                                    
CO-CHAIR FEIGE  related a scenario  to illustrate the  tax credit                                                               
limitations for  an oil and  gas company when contracting  with a                                                               
manufacturer  to produce  something  for a  North Slope  project.                                                               
The oil  and gas  company would  be limited to  no more  than $10                                                               
million  in tax  credits in  any year,  although the  company can                                                               
hold  the  tax  credits  in  up to  five  successive  tax  years.                                                               
However, under Version U, the  question is whether the tax credit                                                               
is transferrable and  if an oil and gas company  can transfer tax                                                               
credits in excess of $10 million to another company to use.                                                                     
1:33:12 PM                                                                                                                    
REPRESENTATIVE SEATON asked for  clarification on the language in                                                               
Version  U  that   allows  an  option  for   taxpayers  in  other                                                               
communities to use the tax credit.                                                                                              
MR. CRAFT replied that the option  is under discussion but is not                                                               
yet in the bill.                                                                                                                
REPRESENTATIVE  PRUITT  agreed.    He acknowledged  that  is  the                                                               
intent, but the bill is a work in progress.                                                                                     
1:34:12 PM                                                                                                                    
REPRESENTATIVE TARR  referred to page  2 of the fiscal  note that                                                               
states the department cannot determine  the amount of tax credits                                                               
that may be claimed by  taxpayers as the department currently has                                                               
no information about  the amount of this type of  activity in the                                                               
state.   She  wondered  whether the  department  could provide  a                                                               
general idea  of the impact  since this could amount  to millions                                                               
of dollars in tax credits.                                                                                                      
MATT  FONDER,  Director,  Tax  Division,  Department  of  Revenue                                                               
(DOR),   responded  that   Representative   Tarr's  question   is                                                               
difficult to answer.  He  explained that the manufacturing credit                                                               
under discussion was adopted under SB  21, which has not yet been                                                               
in effect  for a  full year  so the  department doesn't  have any                                                               
solid information on the proposed tax credit.                                                                                   
REPRESENTATIVE PRUITT  remarked that  currently the  state hasn't                                                               
been looking  in-state for manufacturing, especially  in terms of                                                               
maritime oil  and gas development.   He said if the  state allows                                                               
someone to  manufacture offshore platforms or  other equipment in                                                               
the  state,   it  could  then  potentially   impact  the  state's                                                               
1:37:03 PM                                                                                                                    
REPRESENTATIVE  HAWKER  recalled  prior  discussions  during  the                                                               
legislative process  on SB  21, about who  would be  qualified to                                                               
take  the corporate  income tax  credit.   It was  envisioned the                                                               
credit would seldom  be used.  He  further recalled conversations                                                               
about limiting the applicability  of the front-loaded tax credits                                                               
that had  unbalanced the tax  system.   He wondered if  this bill                                                               
would  change the  intent of  SB 21.   He  proffered that  HB 334                                                               
would substantially  increase applicability  of this  tax credit,                                                               
but seems to go against the philosophy for development of SB 21.                                                                
REPRESENTATIVE  PRUITT   remarked  that  he   didn't  necessarily                                                               
disagree.   He introduced HB  334 since  some areas of  the state                                                               
currently cannot  participate in  the development of  the state's                                                               
oil and gas  resources.  Certainly, it's important  not to burden                                                               
the state in the capacity the  state had under Alaska's Clear and                                                               
Equitable  Share (ACES),  but this  seemed  to create  a way  for                                                               
people  to potentially  use  this  tax credit,  even  if it  only                                                               
allows a  few people  in Southeast Alaska  to participate  in oil                                                               
and gas development in Alaska.   Additionally, it would allow the                                                               
state to use the shipyard, one of its assets, on a larger scale.                                                                
REPRESENTATIVE  HAWKER absolutely  agreed.   One reason  he liked                                                               
the  original  version  of  HB   334  is  that  he  envisioned  a                                                               
participant in the North Slope  might have a corporate income tax                                                               
liability.  However,  taking the corporate income  tax and making                                                               
it transferable to property taxes  also creates some complexities                                                               
due to the interplay between state  and local property taxes.  He                                                               
suggested that  the sponsor may  wish to ensure the  bill targets                                                               
the parties it intends to benefit in the most efficient way.                                                                    
REPRESENTATIVE PRUITT answered "duly noted."                                                                                    
1:43:18 PM                                                                                                                    
REPRESENTATIVE KAWASAKI shared some  of the concerns mentioned in                                                               
terms  of   local  taxation  issues.     He  asked   for  further                                                               
clarification on what constitutes a modification.                                                                               
REPRESENTATIVE PRUITT deferred to the DOR.                                                                                      
1:44:19 PM                                                                                                                    
REPRESENTATIVE SEATON  said his reading  of this is that  the oil                                                               
service industry  could build  a pipeline from  the west  side of                                                               
Cook Inlet  to the  Tesoro Refinery  to use the  tax credit.   He                                                               
asked for further  clarification on whether this  bill would mean                                                               
10 percent of the pipeline would be eligible.                                                                                   
REPRESENTATIVE PRUITT  answered no;  the intent  is not  any work                                                               
that is done,  but whether the asset is  manufactured or modified                                                               
at the  facility in-state,  pointing out  a pipeline  wouldn't be                                                               
manufactured in-state.                                                                                                          
REPRESENTATIVE  SEATON  said  he  will go  back  and  review  the                                                               
constraints on SB 21 expenditure  credits.  He was unsure whether                                                               
a  service  industry would  qualify  for  tax  credits if  a  gas                                                               
treatment plant was built on the North Slope.                                                                                   
REPRESENTATIVE  HAWKER  clarified  the  credits  relate  only  to                                                               
tangible personal property.                                                                                                     
1:46:28 PM                                                                                                                    
REPRESENTATIVE  JOHNSON recalled  the  purpose of  SB  21 was  to                                                               
apply against corporate income tax.   He recalled the goal was to                                                               
encourage companies to become  corporations, which could increase                                                               
the tax rolls.   However, he wondered if this  would run afoul of                                                               
the interstate commerce  if the state offers a  discount beyond a                                                               
normal discount for in-state purchase.                                                                                          
REPRESENTATIVE  P.  WILSON  suggested  there  could  be  optional                                                               
language  inserted to  avoid  problems  with interstate  commerce                                                               
since she didn't currently see that language in the bill.                                                                       
1:48:27 PM                                                                                                                    
REPRESENTATIVE JOHNSON,  recalling the state couldn't  go above a                                                               
certain  number for  local hire,  wondered whether  the threshold                                                               
was at  10 or  15 percent  or 50 percent  before the  state would                                                               
have issues with  federal interstate commerce.  He  said he would                                                               
be curious how that relates to projects.                                                                                        
REPRESENTATIVE PRUITT  deferred to the legislative  attorney.  In                                                               
terms  of encouraging  companies to  become corporations  and pay                                                               
corporate income  tax, he suggested  the bill was another  way to                                                               
allow LLCs to benefit.   He did not see a  way for companies like                                                               
Vigor Alaska  to qualify for tax  credits which is the  reason he                                                               
was  looking  towards  using  tax   credits  to  offset  personal                                                               
property taxes.                                                                                                                 
1:50:25 PM                                                                                                                    
CO-CHAIR SADDLER opened public testimony on HB 334.                                                                             
1:50:51 PM                                                                                                                    
FRED   KIGA,  Senior   Vice   President,   Vigor  Alaska,   Vigor                                                               
Industrial,  Inc., testified  in support  of HB  334 and  thanked                                                               
members for considering the concept embodied  in HB 334.  He said                                                               
that Vigor reviewed  SB 21 last year in terms  of ways to enhance                                                               
tangible  personal  property  for  oil and  gas  development  and                                                               
production.   Over  a six-month  period,  Vigor held  discussions                                                               
with  Mike Pawlowski  of DOR  to consider  a variety  of ways  to                                                               
frame  tax credits  designed to  enhance employment  for Alaskans                                                               
and  economic  development  in   Alaska.    Ultimately,  using  a                                                               
property  tax credit  under  AS 43.56  seemed to  be  the way  to                                                               
develop  that  concept.   He  acknowledged  that  "it's  somewhat                                                               
squishy" when  considering the production  income tax  credit and                                                               
whether companies have tax nexus for purposes of using it.                                                                      
MR.  KIGA  said  parties  with tangible  property  are  generally                                                               
subject to  the state property  taxes.  In terms  of out-of-state                                                               
oil  and gas  companies, the  provisions  of AS  43.56 provide  a                                                               
credit  against expenses  going forward.   From  the 10,000  foot                                                               
level, this  concept could  help oil  and gas  companies evaluate                                                               
the  economic  cost of  whether  to  invest  or use  an  in-state                                                               
manufacturer to create  an asset.  He stated this  as the goal of                                                               
HB 334 and the direction he hoped the legislature would take.                                                                   
1:53:55 PM                                                                                                                    
DOUG WARD,  Director, Shipyard  Development, Vigor  Alaska, Vigor                                                               
Industrial, Inc. (Vigor), stated he  has been associated with the                                                               
Ketchikan Shipyard  for over twenty  years.  He lauded  the pride                                                               
and joy that young workers have  in building ships in Alaska.  He                                                               
highlighted some  challenges his  company faces as  a shipbuilder                                                               
in Alaska. He offered his belief  that Alaska has one of the most                                                               
modern  shipbuilding  factories  in  North  America  due  to  the                                                               
partnership  that   exists  between   AIDEA,  the   community  of                                                               
Ketchikan, and  industry.  Certainly,  that's true  in Ketchikan,                                                               
given  the size  of the  Ketchikan shipyard.   This  facility not                                                               
only  focuses  on  the  best practice  for  facility  design  and                                                               
infrastructure,  but  also  on the  human  workforce  development                                                               
plan.   As of 2013,  the company employs 161  productive workers,                                                               
of which 13 percent are women.   The shipyard project began as an                                                               
economic development project  through AIDEA.  It  initially was a                                                               
DOT&PF maintenance facility, but  ship building and repairs began                                                               
once AIDEA took it over.                                                                                                        
1:55:42 PM                                                                                                                    
MR. WARD  advised that the shipbuilding  component provides year-                                                               
round stability for the workforce  and a stable economic base for                                                               
seasonal  boat   repairs.    He  detailed   shipbuilding  at  the                                                               
facilities, such that the shipyard  built two airport ferries for                                                               
the Ketchikan airport, a marine  fueling station for the Olympics                                                               
in Vancouver,  the Susitna ferry,  and an  ice-strength twin-hull                                                               
vessel destined for  service in Cook Inlet,  which may ultimately                                                               
operate on the  North Slope serving the oil and  gas industry due                                                               
to  the ice-breaking  capabilities.   Additionally, the  shipyard                                                               
has completed building a longliner destined for the Bering Sea.                                                                 
MR. WARD  said as  Vigor looks forward,  HB 334  could accelerate                                                               
the state's return on its investment  in the shipyard.  He stated                                                               
that  an influx  of businesses  are moving  to Ketchikan,  noting                                                               
that  two naval  architecture  firms recently  opened offices  in                                                               
Ketchikan.   Additionally,  two international  marine electronics                                                               
firms  are looking  to open  shops  in Ketchikan.   However,  the                                                               
vendor  base is  lacking in  Alaska as  compared to  the Gulf  of                                                               
Mexico or Puget Sound.  He  emphasized that Vigor believes HB 334                                                               
will help to  move the company to participate in  the oil and gas                                                               
industry sooner and it will  encourage additional customers to do                                                               
business in  Alaska, such as  marine operators who buy  ships and                                                               
operate  vessels.   Further, HB  334 could  be valuable  to those                                                               
types of customers, he said.   Vigor has also been looking at the                                                               
Seward shipyard since Cook Inlet has begun taking off.                                                                          
1:58:18 PM                                                                                                                    
MR.  WARD anticipated  that  HB 334  could  help small  liquefied                                                               
natural gas (LNG)  projects in the future.  He  clarified that it                                                               
could  potentially   reduce  costs   by  20-30  percent   in  the                                                               
distribution of the small LNG  projects by using marine transport                                                               
to  move  products throughout  the  state,  which in  turn  could                                                               
stimulate more  manufacturing in  Southeast Alaska.   Since these                                                               
assets are  expensive and time-consuming  to build, HB  334 could                                                               
be a useful financing tool for shipbuilding in Alaska.                                                                          
1:59:31 PM                                                                                                                    
REPRESENTATIVE  TARR  recapped  that  current  projects  wouldn't                                                               
qualify but this bill might encourage more activity to occur.                                                                   
MR.  WARD  answered  absolutely.    Currently  the  oil  and  gas                                                               
industry defaults to the Gulf of  Mexico, with nearly 60 years of                                                               
oil  and gas  experience.   He characterized  the Gulf  of Mexico                                                               
area as  a very mature  industry with competitive shipyards.   As                                                               
the state  works towards building  industrial activity,  it faces                                                               
obstacles in  Alaska, such as great  distances between population                                                               
bases,  the lack  of a  vendor base,  more onerous  environmental                                                               
regulations than in  the Gulf of Mexico, and  higher labor rates.                                                               
He  surmised  that  the  workers  are paid  40  percent  more  in                                                               
Southeast Alaska than in the Gulf  of Mexico region.  Thus, these                                                               
types of  tax credits could  help encourage people to  use Alaska                                                               
manufacturers  in  the  future,   noting,  of  course,  that  the                                                               
activity would  need to  meet the  definition of  modification or                                                               
manufacturing as defined by the DOR.                                                                                            
2:01:23 PM                                                                                                                    
REPRESENTATIVE  TARR understood  some physical  limitations could                                                               
exclude Alaska from being involved in  some of the projects.  She                                                               
asked  for  further  clarification   on  Alaska's  shipyard  size                                                               
MR. WARD responded that those  with manufacturing capacity in the                                                               
state  need to  be selective  on projects  as the  industry moves                                                               
into the oil and gas arena.   For example, the Ketchikan shipyard                                                               
is limited to  building an optimal 250-foot  vessel, although the                                                               
shipyard  could accommodate  a 500-foot  vessel.   Considerations                                                               
companies will make  will be to assess services  available in any                                                               
community  and  what the  facility  is  designed  to build.    He                                                               
anticipated  significant  opportunities  in shipbuilding  in  the                                                               
next  10-20 years.    Once  Alaska reaches  the  vendor base  and                                                               
scale, the state could be looking at larger projects, he said.                                                                  
2:03:22 PM                                                                                                                    
REPRESENTATIVE  FEIGE inquired  what types  of projects  does the                                                               
shipyard envision manufacturing and  how would these projects fit                                                               
under the  definition of qualified  oil and gas  service industry                                                               
expenditures [under HB 334].                                                                                                    
MR.  WARD said  representatives of  ExxonMobil Corporation,  Inc.                                                               
will visit  the shipyard in  the near future to  discuss projects                                                               
for  Point Thomson.    One opportunity  could  be to  manufacture                                                               
1,000 gallon  double-walled storage tanks.   Additionally, on the                                                               
main transportation side, small LNG  carriers - cryogenic ships -                                                               
are  being  developed  in  Norway  to  distribute  gas  to  small                                                               
communities.   He  suggested a  series of  barges with  cryogenic                                                               
containers  could be  dropped  off in  coastal  communities on  a                                                               
monthly  basis.   He anticipated  that Vigor  will also  consider                                                               
articulated  tug and  barge setups,  potentially performing  some                                                               
work at  liquefaction plants or  re-liquefaction plants,  as well                                                               
as providing the marine  transportation component of distributing                                                               
gas in the state.                                                                                                               
MR. KIGA  added that as oil  and gas exploration develops  on the                                                               
Chukchi and  Beaufort Seas,  the likelihood  exists that  some of                                                               
the supply vessels  that accompany the drill rigs  could stop for                                                               
service at Ketchikan  or Seward shipyards.   He acknowledged this                                                               
assumes the  activity will meet  the definition  of modifications                                                               
or  manufacturing under  the  existing statutes.    If so,  these                                                               
activities could also qualify for the tax credits.                                                                              
2:05:51 PM                                                                                                                    
CO-CHAIR SADDLER asked for the size of the small LNG carriers.                                                                  
MR. WARD  anticipated that the ship  sizes range from 250  to 650                                                               
foot LNG carriers, although he  was unsure of the exact capacity.                                                               
He characterized them as being  relatively small LNG carriers and                                                               
within his company's range to build in Ketchikan.                                                                               
2:07:04 PM                                                                                                                    
REPRESENTATIVE  HAWKER thanked  the  committee  for furnishing  a                                                               
copy  of AS  43.20.049.    He said  that  this  statute allows  a                                                               
taxpayer  to  apply a  credit  against  the  tax due  under  this                                                               
chapter,  which  relates to  corporation  income  tax, against  a                                                               
qualified oil  and gas service  industry expenditure  incurred in                                                               
the state.   He  said the  definition of  "qualified oil  and gas                                                               
service  industry  expenditure"  means  an  expenditure  directly                                                               
attributable to an in-state  manufacture or in-state modification                                                               
of  tangible  personal  property  used in  the  exploration  for,                                                               
development of,  or production of  oil or gas deposits,  but does                                                               
not include  components or equipment  used for or in  the process                                                               
of that manufacturing or modification.                                                                                          
REPRESENTATIVE HAWKER  questioned layering  this tax credit.   He                                                               
related a scenario to illustrate the  point that not only does an                                                               
oil and gas  operator incur expenditures with  vendors, but those                                                               
vendors are  doing business with  other vendors, who in  turn are                                                               
conducting business with yet other  vendors.  He wondered whether                                                               
the language  in SB 21 or  HB 334 clearly states  that the intent                                                               
is to  offer one tax  credit against tangible  personal property.                                                               
Although this  question might be considered  rhetorical, he would                                                               
like the record to be clear that  HB 334 intends to offer one tax                                                               
credit  to a  single tangible  personal property.   He  suggested                                                               
that the language in HB 334 might need to be clarified.                                                                         
MIKE PAWLOWSKI, Deputy Commissioner,  Office of the Commissioner,                                                               
Department of  Revenue (DOR), offered  to discuss  the underlying                                                               
statute.    First,  the  nexus  to  the  definition  of  tangible                                                               
personal property  used in the  exploration for,  development of,                                                               
or  production of  oil or  gas was  written specifically  because                                                               
it's a nexus to the property tax  statute.  He said that AS 43.56                                                               
levies  oil  and gas  property  taxes  at  a statewide  level  on                                                               
tangible  personal property  used so  it was  the manufacture  of                                                               
something that  was going to  create a tax  base in the  state to                                                               
begin  with.    Secondly,  he  referred to  the  language  in  AS                                                               
43.20.049(c), which prevents the  expenditure from being used for                                                               
a  deduction against  the  tax  levied under  this  chapter or  a                                                               
credit or  deduction under another  provision of this title.   In                                                               
Representative Hawker's  example of an exploration  company, with                                                               
the  "loss  carry  forward"  which   he  reminded  the  committee                                                               
retained in  SB 21 for  the benefit  of new entrants,  along with                                                               
the exploration credits  "on the books, at least  in middle earth                                                               
for a little  while," the use of that expenditure  for a producer                                                               
or  explorer  is  more  valuable as  a  deduction  or  qualifying                                                               
expenditure for  one of the  other credits  in this chapter.   He                                                               
summarized  that this  was the  limiting utility  in the  way the                                                               
underlying statute was  drafted.  This narrowly would  apply to a                                                               
group that  really is  a corporate income  taxpayer who  might be                                                               
the service  company working with  the producer or explorer.   He                                                               
offered a willingness  to continue to work with  the committee to                                                               
develop  "sideboards" on  the language.    However, the  limiting                                                               
factor in  the development  of the credit  was to  recognize that                                                               
the expenditures  are more valuable  in other places  in statute,                                                               
he said.                                                                                                                        
2:12:47 PM                                                                                                                    
REPRESENTATIVE  HAWKER  appreciated  the  relative  value  of  an                                                               
individual expenditure.   He said  that someone claiming  the tax                                                               
credit will  be limited to  a one-time credit; however,  a person                                                               
contracting with the company couldn't  also claim the credit.  He                                                               
suggested that  at some point it  will be necessary to  fine tune                                                               
who actually is eligible for tax credit.                                                                                        
MR. PAWLOWSKI answered correct.                                                                                                 
2:13:18 PM                                                                                                                    
REPRESENTATIVE  HAWKER  returned  to [AS  43.20.049]  (c),  which                                                               
      An expenditure that is the basis of the credit under                                                                      
     this section may not be the basis for                                                                                      
       (1) a deduction against the tax levied under this                                                                        
      (2) a credit or deduction under another provision of                                                                      
     this title; or                                                                                                             
     (3) any federal credit claimed under this title.                                                                           
REPRESENTATIVE HAWKER asked to parse  through the language noting                                                               
subsection  (c)   relates  to  the  corporate   income  tax,  but                                                               
paragraph (1)  clarifies that  the taxpayer  can't take  a credit                                                               
and deduction  at the  same time.   However, paragraph  (2) would                                                               
preclude using  the credit  under AS 43.20.049  (c) as  the basis                                                               
for a credit or deduction under another provision of this title.                                                                
He questioned whether a specific  exemption is necessary in order                                                               
to allow the  expenditure to be applied to AS  43.56.  He pointed                                                               
out that  the language in  AS 43.20.049  (c) may have  embedded a                                                               
prohibition against what HB 334 is doing.                                                                                       
MR. PAWLOWSKI responded by acknowledging  that SB 21 was narrowly                                                               
crafted last year  and the decision to broaden  the capability is                                                               
something the department must carefully think through.                                                                          
REPRESENTATIVE HAWKER  commented on  how difficult  it can  be to                                                               
interpret statutes over time.                                                                                                   
2:16:04 PM                                                                                                                    
REPRESENTATIVE  SEATON said  if an  oil company  orders something                                                               
built for them,  but the ten percent tax credit  can't be used as                                                               
a  deduction  for anything  else,  it  would have  absolutely  no                                                               
relative value.   He asked for  an example of how  the tax credit                                                               
[under AS 43.20.049] could be  applied.  Certainly an oil company                                                               
wouldn't  give  away  a  25 percent  tax  credit  to  manufacture                                                               
something for the field to  subsequently receive a 10 percent tax                                                               
REPRESENTATIVE TARR  stated the  as introduced  included language                                                               
that  limited  the  transfer  to the  initial  purchaser  of  the                                                               
tangible personal  property, but  Version U doesn't  contain that                                                               
language.    She  asked whether  the  committee  should  consider                                                               
including that provision.                                                                                                       
2:17:29 PM                                                                                                                    
CO-CHAIR SADDLER held public testimony open on HB 334.                                                                          
[HB 334 was held over].                                                                                                         
                  HJR 30-IZEMBEK LAND EXCHANGE                                                                              
2:17:45 PM                                                                                                                    
CO-CHAIR SADDLER announced that the  next order of business would                                                               
be HOUSE  JOINT RESOLUTION  NO. 30,  Requesting that  the federal                                                               
government  and  the  United States  Secretary  of  the  Interior                                                               
reconsider  the Izembek  Land Exchange  decision and  approve the                                                               
Izembek Land  Exchange, allowing  the residents  of King  Cove to                                                               
have road access to the Cold  Bay Airport for critical health and                                                               
safety reasons and to improve the quality of their lives.                                                                       
2:18:07 PM                                                                                                                    
REPRESENTATIVE BOB  HERRON, Alaska State  Legislature, testifying                                                               
as  the  prime sponsor,  stated  that  HJR  30 dissects  the  "no                                                               
action" decision by  now U.S. Secretary [of the  Department of th                                                               
Interior (DOI)] Sally  Jewell.  He asserted  that the Environment                                                               
Impact  Statement  (EIS)   did  not  follow  the   law,  and  the                                                               
resolution  points that  out and  seeks to  have the  legislature                                                               
endorse  this resolution  and send  it  to Washington,  D.C.   He                                                               
explained that this refers to  the Omnibus Public Land Management                                                               
Act of  2009, endorsed  unanimously by  the legislature  [in 2010                                                               
with passage  of House Bill  210].   The federal act  required an                                                               
EIS, which was worked  on for four years.  As  you know, he said,                                                               
former  U.S.   Secretary  [of  DOI]  Ken   Salazar  rejected  the                                                               
proposal, affirmed by Secretary  Jewell, essentially blocking the                                                               
land swap and  the public safety corridor from King  Cove to Cold                                                               
2:19:37 PM                                                                                                                    
REPRESENTATIVE  HERRON  explained  that   federal  case  law  and                                                               
Congressional actions  have reinforced  the principle  that trust                                                               
responsibilities  to  Alaska  Natives   applies  to  all  federal                                                               
officials,  all federal  decisions, and  all federal  activities.                                                               
He  offered his  belief  that USFWS  conveniently  decided it  is                                                               
exempt from  this [Act],  but of  course they are  not.   He said                                                               
that the DOI likes the situation,  such that the Bureau of Indian                                                               
Affairs had the  trust responsibility for Alaska  Natives, and by                                                               
custom the Assistant  Secretary of the Interior  - Indian Affairs                                                               
- has been an American Indian  or an Alaska Native.  However, the                                                               
U.S. Office  of Management &  Budget (OMB) reduced  their funding                                                               
and  the  administration moved  the  office  to the  White  House                                                               
Domestic Policy Council.  Now  it is conveniently housed, in most                                                               
part, by the Senate Committee on  Indian Affairs.  Thus, the role                                                               
of trust  responsibility has gotten  farther and  farther removed                                                               
from the DOI.                                                                                                                   
REPRESENTATIVE HERRON indicated that  the U.S. Courts have warned                                                               
the  federal  officials  they  are   bound  by  every  moral  and                                                               
equitable  consideration to  discharge this  trust responsibility                                                               
in  good faith  and fairness.    Although everyone  can read  the                                                               
resolution,  substantial background  exists, in  particular, that                                                               
the U.S. Fish and Wildlife  Service (USFWS) believes it is exempt                                                               
and does not have a  responsibility for public safety and people.                                                               
Still,   the    Congress   has   explicitly    associated   trust                                                               
responsibility with six federal  departments - Education, Energy,                                                               
Health  and  Social  Services,  Housing  and  Urban  Development,                                                               
Labor, and the DOI.                                                                                                             
2:21:46 PM                                                                                                                    
REPRESENTATIVE HERRON  related the  background of  this decision.                                                               
He referred to  page 2, line 4, that  highlighted the legislature                                                               
unanimously  passed   House  Bill  210,  approving   the  state's                                                               
participation in the Omnibus Public  Land Management Act of 2009.                                                               
The state wants the land exchange,  he said.  He referred to page                                                               
2,  lines 29-31,  in  which the  USFWS  publicly stated,  "safety                                                               
considerations are important, but they  were not a factor in this                                                               
decision--  at least  not a  factor  we analyzed,  since we  only                                                               
analyzed the environmental impacts, which  is what we were called                                                               
upon to do since we are  not a public safety organization", ...."                                                               
He reminded  members everyone  has seen  USFWS employees  "pack a                                                               
weapon" and in fact, they take actions to protect public safety.                                                                
REPRESENTATIVE HERRON, fast  forwarding to 2013, noted  he was in                                                               
King Cove when  the Assistant Secretary of  Indian Affairs, Kevin                                                               
Washburn, visited  the community.   He said  he was  also present                                                               
with U.S.  Senator Lisa Murkowski  when Secretary  Jewell visited                                                               
the community.   He emphasized  what the agencies have  chosen to                                                               
leave  out is  that  the  federal agencies  have  not produced  a                                                               
public interest finding  that is required.  He  further said that                                                               
the process  requires the federal  government to state  why there                                                               
isn't a need  for medical evacuations of Alaska  Natives and also                                                               
to remove members of the community from a dangerous situation.                                                                  
2:24:17 PM                                                                                                                    
REPRESENTATIVE HERRON, referring to language  on page 4, lines 3-                                                               
6,  related that  HJR 30  states the  federal government  and the                                                               
Secretary  of the  Interior purposefully  ignored biological  and                                                               
technical  information   concerning  environmental   justice  and                                                               
transportation considerations.   He referred to page  4, line 15,                                                               
and  noted  Secretary  Jewell's  decision  did  not  provide  the                                                               
required reports.   After listening to all of  the K-12 students,                                                               
Secretary Jewell  said, "I've  listened to  your concerns,  now I                                                               
must  listen to  the  animals."   He  reported that  subsequently                                                               
Secretary Jewell did essentially the  same thing at the community                                                               
REPRESENTATIVE  HERRON  concluded that  the  USFWS  thinks it  is                                                               
exempt from a  trust responsibility to the Alaska  Natives.  This                                                               
resolution  addresses how  the USFWS  purposefully and  willingly                                                               
did not follow the Act or the Congressional Case Law.                                                                           
REPRESENTATIVE  HERRON related  that when  he was  in Washington,                                                               
D.C., last week, Senator Lisa  Murkowski personally requested she                                                               
be able to  testify on HJR 30.   He said this  issue is important                                                               
to  her because  it is  an  example of  how callous  the DOI  has                                                               
become in its responsibilities to Alaska.                                                                                       
2:26:16 PM                                                                                                                    
REPRESENTATIVE  HERRON pointed  out  members'  packets contain  a                                                               
photograph entitled  "U.S. Fish &  Wildlife Service -  Your Guide                                                               
to Hunting on National Wildlife  Refuges" that depicts three bird                                                               
hunters.  One  reason given for the USFWS's  "no action decision"                                                               
was due to the impact on black brant  and the eel grass.  He read                                                               
an  excerpt from  the guide,  as follows,  "... it  appears hardy                                                               
water  fowlers can  hunt in  the eelgrass  to pursue  and achieve                                                               
their  daily  bag limit  of  black  brant,  and then  search  for                                                               
ptarmigan on the upland year-round."                                                                                            
REPRESENTATIVE HERRON  said that the trust  responsibility is not                                                               
a limitation on  Alaska Natives freedoms and  rights; instead, it                                                               
is  a limit  on the  federal government  over Alaska  Natives and                                                               
Alaskans,  specifically the  DOI's  authority over  Alaska.   The                                                               
most  recent  Izembek  [National Wildlife  Refuge]  decision  has                                                               
utterly ignored the responsibilities  that the federal government                                                               
is required to maintain, he stated.                                                                                             
2:27:36 PM                                                                                                                    
REPRESENTATIVE HAWKER  thanked the  sponsor for  bringing forward                                                               
HJR 30.  He said:                                                                                                               
     This whole issue  has brought me personally  as a state                                                                    
     legislator to  a slow burn.   And I mean that  burn has                                                                    
     gone beyond  smoking and, I  mean, it's just,  it ought                                                                    
     to be  a raging  fire with every  single person  in the                                                                    
     state  legislature and  every  person in  the State  of                                                                    
     Alaska.  And this foolishness  from the feds has got to                                                                    
     end.   It is completely  and totally  irresponsible for                                                                    
     them to  stand in  the way  of what  truly is  a public                                                                    
     safety measure.                                                                                                            
REPRESENTATIVE HAWKER said  if he could he  would personally take                                                               
a  bulldozer and  start building  the road  and let  [the federal                                                               
government] stop  the state.  He  offered his belief that  it has                                                               
reached  that point  in dealing  with the  "feds" on  this issue.                                                               
It's  time  to stop  sending  these  strongly worded  letters  of                                                               
support for  something they are  obviously not  going to do.   He                                                               
suggested it  may be time  to take  matters into "our  own hands"                                                               
and just do it.  He said that he is happy to support HJR 30.                                                                    
REPRESENTATIVE  HERRON reported  that  all three  members of  the                                                               
Alaska Congressional  Delegation are  fired up about  this issue.                                                               
He acknowledged that  they are strident about the  way Alaska has                                                               
been treated.  He hoped U.S.  Senator Lisa Murkowski will be able                                                               
to testify.                                                                                                                     
2:29:25 PM                                                                                                                    
REPRESENTATIVE KAWASAKI  noted that  proposed road  projects have                                                               
project alternatives.   He asked what  the next step is  in a "no                                                               
action alternative" from the state's perspective.                                                                               
REPRESENTATIVE   HERRON  related   that   for   four  years   the                                                               
coordinating  agencies   determined  that  there  was   no  other                                                               
alternative  but  a   road.    However,  the   EIS  ignored  this                                                               
determination  even though  the federal  agency EIS  document was                                                               
complete.  He  offered his belief that this  was a pre-engineered                                                               
decision to  say "no action," and  he surmised it was  a decision                                                               
that was made above Secretary Jewell's "pay grade."                                                                             
2:30:49 PM                                                                                                                    
REPRESENTATIVE  JOHNSON remarked  that he'd  like to  put on  the                                                               
record what Alaska is  prepared to give up as a  state.  He asked                                                               
for further clarification on the  amount of acreage "swap" in the                                                               
proposed Izembek Land Exchange.                                                                                                 
REPRESENTATIVE  HERRON  explained  the federal  government  would                                                               
receive 60,000  acres and  in return the  state and  local region                                                               
would receive 206 acres.                                                                                                        
REPRESENTATIVE JOHNSON answered that it speaks for itself.                                                                      
REPRESENTATIVE SADDLER acknowledged it was a considerable ratio.                                                                
REPRESENTATIVE HERRON  remarked what  is incredible is  that even                                                               
though the DOI  and USFWS are required to consider  the human and                                                               
public sector factors, those factors were irrelevant to them.                                                                   
2:32:01 PM                                                                                                                    
CO-CHAIR SADDLER  inquired whether other examples  exist in which                                                               
the  federal government  has  agreed  to be  bound  by the  trust                                                               
REPRESENTATIVE HERRON  answered yes; case law  throughout history                                                               
exists  in   terms  of  the  government's   responsibility  under                                                               
[Article]  16 of  the Constitution.   However,  similar instances                                                               
also  happen, which  he characterized  as  being an  indifference                                                               
that seems  prevalent.  He  surmised that the  federal government                                                               
is geographically removed and feels  that Congress has taken over                                                               
the  trust responsibilities  of the  Alaska Natives  and American                                                               
Indians, although  that somehow  doesn't occur.   He  suggested a                                                               
broader  fear of  the eight-mile  road  representing the  public-                                                               
safety corridor  exists such that  the DOI  is afraid that  if it                                                               
agrees  to  this  it  will  set  precedent  for  a  public-safety                                                               
corridor in every wilderness and every refuge.                                                                                  
2:33:31 PM                                                                                                                    
CO-CHAIR SADDLER said that the point  is it means people can't be                                                               
safe in refuges.                                                                                                                
REPRESENTATIVE HAWKER  suggested that the land  Alaska would give                                                               
in the  Izembek Land  Exchange is  an amazing  ratio, and  if his                                                               
math is  correct it would consist  of "34 to 10,000"  in terms of                                                               
the land the federal government would receive.                                                                                  
2:33:59 PM                                                                                                                    
REPRESENTATIVE   TARR   asked   whether   other   public   safety                                                               
improvements have been considered that  might address some of the                                                               
health care needs.                                                                                                              
REPRESENTATIVE  HERRON  responded  that the  environment  is  the                                                               
limitation since  the airport is designated  "zero-zero" 100 days                                                               
per year, noting that King  Cove represents an important port for                                                               
the  fishing industry.   Although  King Cove  has a  safe harbor,                                                               
once  boats  are out  of  the  harbor the  seas  are  rough.   He                                                               
emphasized  that  this issue  really  becomes  an issue  of  safe                                                               
medical evacuation.   He  pointed out that  18 people  have died,                                                               
including members  of the U.S. Coast  Guard.  He referred  to the                                                               
press  release  in  members' packets  dated  February  14,  2014,                                                               
noting the  difficulty of medavac evacuations,  yet the community                                                               
of approximately  1,000 people  lives 25 miles  away from  one of                                                               
the  largest  airport  runways  in Alaska.    He  emphasized  the                                                               
runway's size  by mentioning that  it was considered as  a second                                                               
alternative for space  shuttle landings.  He  stressed that every                                                               
alternative  was  considered  and   vetted  by  the  coordinating                                                               
agencies.   One  alternative was  to use  hovercraft, but  it was                                                               
deemed  to  be  too  expensive   and  not  reliable  due  to  the                                                               
challenging weather conditions in the region.                                                                                   
2:36:29 PM                                                                                                                    
CO-CHAIR SADDLER opened public testimony on HJR 30.                                                                             
2:36:51 PM                                                                                                                    
SENATOR LISA MURKOWSKI, U.S. Senator,  United States Senate, said                                                               
she  appreciated the  opportunity to  support  HJR 30.   She  has                                                               
previously  submitted written  testimony; however,  she asked  to                                                               
supplement her  testimony.  This resolution  outlines the history                                                               
and long  fight that  the 953  residents of  King Cove  have been                                                               
engaged in  over a decades  in order to  gain access to  a safety                                                               
corridor to allow  access to the second-longest  runway in Alaska                                                               
for purposes of  life-safety.  She emphasized it  is important to                                                               
reinforce that  Secretary [Jewell's]  decision on December  23 to                                                               
reject  the road  alternative also  rejected the  legislative act                                                               
that  reflected  the  work  of   all  respective  agencies  since                                                               
legislation passed through  the U.S. Senate, was  concurred in by                                                               
the  House  of  Representatives,  and  signed  into  law  by  the                                                               
President of  the United States.   The one remaining thing  was a                                                               
best interest  finding from the  Secretary of the Interior.   Her                                                               
actions  effectively ignored  the will  of the  Congress to  move                                                               
forward with  the land exchange  and the safety corridor  for the                                                               
people of  King Cove.   She has  shared the fact  that this  is a                                                               
300-to-1 land exchange  in which the Alaska Natives  in King Cove                                                               
were  willing to  give up  land they  received as  part of  their                                                               
Native  land settlement.   The  state  also had  agreed that  the                                                               
exchange  would  allow for  new  wilderness  areas in  the  state                                                               
despite  the typical  resolve against  adding  new wilderness  in                                                               
Alaska.   She  said, "Still,  this was  not good  enough for  the                                                               
Secretary of the Interior, a 300-to-1 exchange."                                                                                
SENATOR MURKOWSKI  remarked that  the action  defies logic.   She                                                               
characterized  the   land  exchange  rejection  as   "a  stunning                                                               
injustice"  to  the  people  of  King Cove  and  beyond  that  an                                                               
injustice to the people of Alaska.                                                                                              
2:40:44 PM                                                                                                                    
SENATOR MURKOWSKI  related that  Alaska hears  far too  often the                                                               
frightening   circumstances  in   which  medical   evacuation  to                                                               
Anchorage is necessary.   She said the  community faces dangerous                                                               
life-threatening  circumstance,  one  of   which  played  out  on                                                               
February 14,  2014.   If not  for the heroics  of the  U.S. Coast                                                               
Guard, who  knows what  might have happened  to the  woman facing                                                               
the medical  emergency.  Besides  the residents of King  Cove not                                                               
able to gain safety, it also  places the men and women serving in                                                               
the  USCG  in dangerous  circumstances.    The pilots  and  crews                                                               
willingly attempt rescues at considerable  risk to themselves and                                                               
at considerable  financial cost to  the taxpayers, she said.   In                                                               
this instance  the dangers could  all be avoided with  a 10-mile,                                                               
one-lane, non-commercial use road.                                                                                              
2:42:14 PM                                                                                                                    
SENATOR MURKOWSKI said at the  time Secretary Jewell rejected the                                                               
road, she  indicated that she  would work  to help the  people of                                                               
King Cove,  but no proposal has  been forthcoming.  In  fact, she                                                               
has not  found one  person at  the DOI who  has moved  forward to                                                               
improve the  situation, and  each day that  passes the  people of                                                               
King Cove  are placed at  risk due  to the decisions  the federal                                                               
government has made.                                                                                                            
SENATOR MURKOWSKI  appreciated that the committee  has advanced a                                                               
resolution which is  strong, clear, and lays forth  the facts and                                                               
reasons why  it is imperative  all Alaskans work to  address this                                                               
wrong brought about by Secretary  Jewell's decision.  She offered                                                               
her belief  that this resolution  will help affirm  that Alaskans                                                               
are united  in opposition to  the Secretary of the  Department of                                                               
the  Interior's  decision and  are  also  united in  desiring  to                                                               
protect the health and safety of those who live in King Cove.                                                                   
CO-CHAIR  SADDLER  advised  that  her written  comments  will  be                                                               
distributed to members.                                                                                                         
2:44:37 PM                                                                                                                    
REPRESENTATIVE  KAWASAKI   thanked  Senator  Murkowski   for  her                                                               
efforts to  help Alaska.   He related  that Secretary  Jewell has                                                               
made overtures to indicate she would  like to speak to the Alaska                                                               
Congressional  Delegation on  this matter.   He  pointed out  the                                                               
language in  HJR 30 is somewhat  inflammatory, more specifically,                                                               
it states  "heartless and cold decision"  [page 4, line 13].   He                                                               
wondered  if this  type of  strongly-worded message  is necessary                                                               
and whether she stands by that language.                                                                                        
SENATOR MURKOWSKI  responded she has  used those exact  terms, in                                                               
fact,  she has  called  Secretary  Jewell's decision  "heartless"                                                               
because she believes the decision  was without regard to Alaska's                                                               
Native people in King Cove.   She said this troubles her greatly,                                                               
particularly   since   the  Secretary   of   DOI   has  a   trust                                                               
responsibility  to Alaska's  Native  people.   She concurred  the                                                               
language  in the  resolution is  direct  and something  Secretary                                                               
Jewell  will not  like to  receive, but  the state  must be  very                                                               
clear and  state in  no uncertain terms  that Alaskans  feel very                                                               
strongly this  decision should not  be allowed since  it directly                                                               
relates to the safety of the people  who live in the region.  She                                                               
deferred  to the  committee to  carefully and  critically examine                                                               
the language; however, she stands  behind the words she has used.                                                               
Ultimately, the legislature  must be certain it  can stand behind                                                               
the words it uses, as well.                                                                                                     
2:47:06 PM                                                                                                                    
SENATOR   MURKOWSKI  recalled   addressing  the   legislature  in                                                               
February.  She  stressed that the King Cove road  issue is not an                                                               
issue where something else can be found  to make it go away.  She                                                               
emphasized it  isn't possible to  trade the health and  safety of                                                               
human  beings for  another  project.   In  fact,  this  is not  a                                                               
project, but  is an  issue that  relates to  people's lives  in a                                                               
remote  part of  the USA.   The  government has  an obligation  -                                                               
where  possible -  to  provide  a level  of  safety  and ways  to                                                               
improve  the  quality  of  people's  lives.   She  said  she  has                                                               
specifically informed  Secretary Jewell that she  does not intend                                                               
to back down  from this and concluded that Alaskans  agree a road                                                               
is the  right decision.   However, she acknowledged that  the way                                                               
Alaska states  its case  is important.   She appreciated  that as                                                               
lawmakers the  legislature is willing  to advance a  detailed and                                                               
direct resolution.                                                                                                              
2:48:45 PM                                                                                                                    
REPRESENTATIVE  JOHNSON   inquired  whether  the   resolution  is                                                               
directed  at the  right person  and if  Secretary Jewell  will be                                                               
making the final  decision since it didn't seem  logical that one                                                               
person could stand in the way.                                                                                                  
SENATOR  LISA MURKOWSKI  answered there  has been  a request  for                                                               
reconsideration  of   Secretary  Jewell's   determination,  which                                                               
clearly rests with  her.  She reported that  the 2009 legislation                                                               
gave responsibility to  the Secretary of Interior  for making the                                                               
best interest determination.   She has used  every tool available                                                               
to  ensure that  the  administration understands  how this  issue                                                               
relates  to  Alaska.   She  related  that  she has  had  repeated                                                               
conversations with  Vice-President [Biden] to ensure  that he was                                                               
aware  of Alaska's  position.   She  believed  that if  Secretary                                                               
Jewell decides  to make the decision  it will be done.   However,                                                               
she did  not think  it hurts  to direct  this resolution  to both                                                               
Secretary  Jewell  and  the President;  however,  ultimately  she                                                               
believes the decision will be made by Secretary Jewell.                                                                         
2:51:09 PM                                                                                                                    
CO-CHAIR SADDLER opened public testimony on HJR 30.                                                                             
2:51:45 PM                                                                                                                    
HENRY MACK,  Mayor, City of  King Cove,  explained he is  a life-                                                               
long resident  of the City  of King  Cove.  He  thanked committee                                                               
members and the legislature for  the overwhelming support for the                                                               
Izembek Land  Exchange leading  to the  approval of  the one-lane                                                               
gravel road  connecting King Cove  to the  Cold Bay airport.   He                                                               
recognized Representative  Herron who  authored HJR 30  and spent                                                               
considerable time in  King Cove the past few  years becoming very                                                               
familiar with  the transportation  access issues.   This approval                                                               
process  has been  a long  time  in the  making.   He related  he                                                               
served on  the city council in  1976, when the City  of King Cove                                                               
adopted its first  resolution identifying the need  for this road                                                               
to access the  Cold Bay airport.  Since that  time 12 people have                                                               
been  killed  flying  in  and  out of  King  Cove  and  countless                                                               
relatives  and  friends  have  been  adversely  impacted  by  the                                                               
necessity for  medevac evacuation from  King Cove.   He expressed                                                               
astonishment that the  community is still trying  to address this                                                               
basic  quality  of life  issue  for  residents with  the  federal                                                               
government.   He emphasized  the incredible  offer to  trade over                                                               
60,000  acres of  state and  King  Cove Corporation  land to  the                                                               
federal government  for 206  acres of the  Izembek land  to allow                                                               
nine miles of one-lane road access to the Cold Bay airport.                                                                     
2:53:30 PM                                                                                                                    
MR. MACK noted  that two days before  Christmas, Secretary Jewell                                                               
said no to the people of King  Cove.  He reported that the entire                                                               
community  is outraged,  particularly since  it implies  that the                                                               
lives of King  Cove's residents are not very important  to her or                                                               
to the USFWS.                                                                                                                   
MR. MACK  said the  further insult  to the  Aleut people  of King                                                               
Cove  was the  very  flawed  and biased  EIS,  which the  federal                                                               
government  has  used  to  justify  this  unbelievable  decision.                                                               
Secretary  Jewell has  further insulted  the community  by saying                                                               
the  marine  landing craft  could  work  better  than a  road  to                                                               
transport  the sick  and injured  residents  of Cold  Bay.   This                                                               
position shows  a lack of  federal government's awareness  of the                                                               
extreme  weather and  marine navigational  issues at  the Western                                                               
end of  the Alaska Peninsula.   He  pointed out this  decision is                                                               
one  of  the   most  recent  and  extreme   examples  of  federal                                                               
government overreach  in Alaska.   Finally,  he stated  that this                                                               
decision represents a major cultural  insult to the predominantly                                                               
Aleut  residents of  King Cove  since it  completely ignores  the                                                               
government's trust  responsibility to  fairly listen  and include                                                               
the resident's expectations and  concerns when decisions are made                                                               
that affect the  lives of residents.  Although  the community has                                                               
asked Secretary  Jewell to reconsider,  thus far she has  not yet                                                               
responded to the mid-January request.   He has personally advised                                                               
Secretary Jewell and  her staff that the matter will  not go away                                                               
until the  right decision is  made.  In closing,  he respectfully                                                               
asked  members  to approve  HJR  30  that clearly  expresses  the                                                               
community's  needs, frustration,  emotions,  and expectations  on                                                               
this critical  issue to residents of  King Cove.  He  thanked the                                                               
legislature and administration for  standing strong and for their                                                               
commitment to the community on this important Izembek issue.                                                                    
2:56:04 PM                                                                                                                    
MIKE COONS,  Director, Citizen Initiatives,  Alaska, said  he was                                                               
testifying  on behalf  of himself  and as  the state  director of                                                               
Citizen Initiatives, a national  organization.  He has previously                                                               
given a  presentation on the  Izembek land fiasco, which  is also                                                               
available  on  the website  patriotsride.org.    He said  he  has                                                               
previously submitted  written testimony to the  committee, and he                                                               
expressed   outrage  over   Secretary   Jewell's  decisions   and                                                               
frustration with  the federal government  that is  more concerned                                                               
with  politics  and animals  than  Alaskans  and Americans.    He                                                               
expressed  further frustration  that  resolutions  passed by  the                                                               
legislature are read by few and  then forgotten.  During the past                                                               
two years he has  yet to see a resolution have  any impact on the                                                               
Congress  to the  advantage  of  Alaska.   He  said that  Citizen                                                               
Initiatives  has  been  working  on  a  constitutional  amendment                                                               
called  the countermand  amendment to  call for  a convention  of                                                               
states under Article V of  the U.S. Constitution; however, he has                                                               
not been able  to get his resolution introduced and  passed.  The                                                               
countermand amendment  would give  60 percent  of the  states the                                                               
ability  to countermand  actions  like  [the decision]  Secretary                                                               
Jewell made, could put Alaska  and the majority of freedom-loving                                                               
states in the driver's seat,  and would make these resolutions no                                                               
longer needed.   The  countermand amendment  would return  to the                                                               
states the  sovereignty and  power over  that of  an overreaching                                                               
and blind  federal government.   He then offered support  for HJR
30, stating it is all we have for  now.  He asked members to read                                                               
the proposed  countermand amendment  and offered  his willingness                                                               
to discuss this and future Article V calls.                                                                                     
2:58:54 PM                                                                                                                    
STANLEY MACK,  Mayor, Aleutians East  Borough, stated  that Mayor                                                               
Henry Mack  is his  nephew.   He was  born in  King Cove  but now                                                               
lives in Sand Point.  He stated  that he has been a fisherman for                                                               
60 years and thanked members for  the opportunity to testify.  He                                                               
appreciated the strong and consistent  support for the issue.  He                                                               
acknowledged  Representative   Herron's  personal   advocacy  and                                                               
understanding.   He said the  Izembek Land Exchange will  allow a                                                               
one-lane gravel  road to be  built so  the 950 residents  of King                                                               
Cove can finally  reach a safe and dependable access  to the Cold                                                               
Bay airport.   As Mayor Henry Mack previously  testified, he too,                                                               
was appalled and angered by  Secretary Jewell's decision two days                                                               
before  Christmas.   He recognized  that  not all  transportation                                                               
challenges  can  be  resolved,   especially  given  the  weather,                                                               
topography, and  funding issues  throughout Alaska;  however, the                                                               
King Cove  transportation access problem is  different because it                                                               
can be solved.  In fact, it  is one reason that the community has                                                               
been persistent  for so  long.   He reiterated  the unprecedented                                                               
land exchange that would have  given 60,000 acres in exchange for                                                               
200  acres  [to   allow  for  road  access].     He  thanked  the                                                               
legislature  and   the  governor  for  standing   so  strong  and                                                               
committed to the communities on this controversial issue.                                                                       
3:01:20 PM                                                                                                                    
GARY HENNIGH, City  Manager, said that both Mayor  Henry Mack and                                                               
Mayor  Stanley Mack  have nicely  summarized the  testimony.   He                                                               
explained he  gave up his time  to them, but thanked  members for                                                               
the opportunity to testify.                                                                                                     
3:01:36 PM                                                                                                                    
CO-CHAIR SADDLER closed public testimony on HJR 30.                                                                             
REPRESENTATIVE P. WILSON moved to  report HJR 30 out of committee                                                               
with  individual  recommendations  and  the  accompanying  fiscal                                                               
note.   There being no  objection, HJR  30 was reported  from the                                                               
House Resources Standing Committee.                                                                                             
3:02:10 PM                                                                                                                    
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 3:02 p.m.                                                                 

Document Name Date/Time Subjects
HB334 Sponsor Statement.pdf HRES 3/10/2014 1:00:00 PM
HB 334
HB334 Ver U Sectional Analysis.pdf HRES 3/10/2014 1:00:00 PM
HB 334
HB334 Version A.pdf HRES 3/10/2014 1:00:00 PM
HB 334
HB334 Version U Work Draft.pdf HRES 3/10/2014 1:00:00 PM
HB 334
HB334-DOR-TAX-03-07-14.pdf HRES 3/10/2014 1:00:00 PM
HB 334
HB351 AQRC Email.xps HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Charles Email.xps HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Frontiersman Article.pdf HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Gilmore Email.xps HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Map.pdf HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Smith Email.xps HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Sponsor Statement.pdf HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Superior Court SOP v. DNR.pdf HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Supreme Court SOP v. DNR Appeal.pdf HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Supreme Court SOP v. DNR.pdf HRES 3/10/2014 1:00:00 PM
HB 351
HB351 Version A.pdf HRES 3/10/2014 1:00:00 PM
HB 351
HB351-DNR-PKS-3-07-14.pdf HRES 3/10/2014 1:00:00 PM
HB 351
HJR30 Coons Email.xps HRES 3/10/2014 1:00:00 PM
HJR 30
HJR30 EIS ExecSum.pdf HRES 3/10/2014 1:00:00 PM
HJR 30
HJR30 KCA Press Release.pdf HRES 3/10/2014 1:00:00 PM
HJR 30
HJR30 KCG Letter to Sec Jewell.pdf HRES 3/10/2014 1:00:00 PM
HJR 30
HJR30 Map.pdf HRES 3/10/2014 1:00:00 PM
HJR 30
HJR30 Press Release 2.13.14.pdf HRES 3/10/2014 1:00:00 PM
HJR 30
HJR30 Sen Murkowski letter to President Obama.pdf HRES 3/10/2014 1:00:00 PM
HJR 30
HJR30 Sponsor Statement.pdf HRES 3/10/2014 1:00:00 PM
HJR 30
HJR30 Version A.pdf HRES 3/10/2014 1:00:00 PM
HJR 30
HJR30-LEG-SESS-03-04-14.pdf HRES 3/10/2014 1:00:00 PM
HJR 30
HB334 AS43.20.049.pdf HRES 3/10/2014 1:00:00 PM
HB 334
HB351 Schmid Email.xps HRES 3/10/2014 1:00:00 PM
HB 351
HJR30 Sen Murkowski HRES Testimony.pdf HRES 3/10/2014 1:00:00 PM
HJR 30