Legislature(2017 - 2018)BARNES 124

03/01/2017 06:00 PM RESOURCES

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06:01:27 PM Start
06:01:56 PM HB111
08:20:00 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Please Note Time Change --
Heard & Held
-- Public Testimony --
**Streamed live on AKL.tv**
        HB 111-OIL & GAS PRODUCTION TAX;PAYMENTS;CREDITS                                                                    
6:01:56 PM                                                                                                                    
CO-CHAIR TARR announced that the  only order of business would be                                                               
HOUSE  BILL  NO.  111,  "An  Act relating  to  the  oil  and  gas                                                               
production tax,  tax payments, and credits;  relating to interest                                                               
applicable  to  delinquent  oil   and  gas  production  tax;  and                                                               
providing for an effective date."                                                                                               
6:02:07 PM                                                                                                                    
CO-CHAIR TARR made announcements regarding public testimony.                                                                    
6:02:49 PM                                                                                                                    
REPRESENTATIVE BIRCH shared his  concern that testifiers have had                                                               
extended waits  in the past.   He  suggested that the  chair keep                                                               
testifiers apprised of the agenda and estimated times.                                                                          
CO-CHAIR  TARR  listed  communities from  which  testifiers  were                                                               
6:04:49 PM                                                                                                                    
JIM PLAQUET  stated he is  a 43-year member of  the International                                                               
Union of Operating  Engineers and a longtime  resident of Alaska.                                                               
He told  the committee that  it is time  for Alaskans to  come to                                                               
grip  with the  environment of  future declining  oil production.                                                               
He opined  that HB 111  goes too far,  would raise the  basic oil                                                               
tax rate, and hurt investment in  Alaska, when the state needs to                                                               
be  attracting investment.   He  stated that  Alaskans should  be                                                               
looking for  ways to  make the development  of Alaska's  oil more                                                               
economical,   rather  than   seeking   ways   to  thwart   future                                                               
development.    He said  Alaska  should  be  open and  ready  for                                                               
business as  well as be willing  to provide a regulatory  and tax                                                               
climate  in  which the  industry  can  reinvest  in Alaska.    He                                                               
declared  that  [Senate] Bill  21  [passed  in the  Twenty-Eighth                                                               
Alaska  State Legislature]  made  Alaska more  competitive and  a                                                               
more  attractive  place to  invest.    Alaska saw  no  production                                                               
decline  in 2014,  only  a  slight dip  in  2015, and  production                                                               
increase in  2016 - which he  noted was the first  increase in 14                                                               
years.  He  shared his optimism that as long  as Alaska makes the                                                               
production  of   oil  economically  attractive,   industry  would                                                               
aggressively pursue  development of new  and older fields  on the                                                               
North Slope.  In fact,  the question legislators should be asking                                                               
in Juneau  is not how much  tax revenue the state  could get, but                                                               
how much future investment could the state attract.                                                                             
6:07:12 PM                                                                                                                    
CAROLINE PETERSON  stated her belief  that although the  taxes in                                                               
HB 111  would provide  shortsighted relief, in  the long  term HB
111  would be  severely  damaging to  Alaska  because the  United                                                               
States does not  depend on Alaska's oil.  She  said oil companies                                                               
would not be  penalized but would instead follow the  money.  She                                                               
opined that HB  111 would be a disincentive for  the oil industry                                                               
from  investing  in Alaska,  and  Alaska's  reality is  that  the                                                               
economy depends  on the oil industry.   She argued that  while it                                                               
seems  just and  fair  to  target the  oil  companies with  their                                                               
seemingly  deep  pockets,   the  harm  would  not   fall  on  the                                                               
companies,  but instead  on Alaskans.   She  noted that  each oil                                                               
company  job supports  20 other  jobs  in the  state economy  and                                                               
concluded that  HB 111  would force oil  companies out  of Alaska                                                               
and destroy the state's economy.                                                                                                
6:08:50 PM                                                                                                                    
DAVID OTNESS  opined that since  Senate Bill 21  passed, disaster                                                               
has  befallen  Alaska.   He  recalled  four  years ago  [the  oil                                                               
industry]  promised one  million barrels  of production  per day;                                                               
however, shortly  after Senate  Bill 21 passed,  BP laid  off 200                                                               
employees.  He  said the investments that have been  made are not                                                               
new investments, but  were already online before  Senate Bill 21.                                                               
Alaska is constantly  being taken advantage of  compared to other                                                               
places  in the  world where  the  industry must  work under  more                                                               
difficult circumstances.   Mr. Otness  inquired as to  the actual                                                               
numbers  regarding   oil  tax  credits  and   whether  they  make                                                               
financial  sense  for  the  state   or  just  for  the  companies                                                               
receiving benefits.   He  urged for the  committee to  assess the                                                               
results of Senate Bill 21.                                                                                                      
6:11:38 PM                                                                                                                    
BILL WARREN said he has been  an Alaska resident for 65 years and                                                               
worked on  the Trans-Alaska Pipeline  System (TAPS) as  a welder.                                                               
He expressed  support for HB 111  with one caveat:   a net system                                                               
does  not work.    He explained  that Alaska  has  tried the  tax                                                               
systems of Senate Bill 21  and Alaska's Clear and Equitable Share                                                               
(ACES) [passed in the Twenty-Fifth  Alaska State Legislature] but                                                               
remains confused and  insecure because the state  doesn't get the                                                               
needed  information  from  the oil  companies  to  be  confident.                                                               
However, oil  producers run on  confidentiality and  secrets, and                                                               
[regimes] with "open data" have more  clarity.  He stated that he                                                               
is in  favor of a  gross barrel  tax, which is  simpler, although                                                               
there would  still be "heavy  lifting."  Mr. Warren  reminded the                                                               
committee  explorers are  the risk-takers  and the  producers are                                                               
the investors and pointed out  Alaska has 2.5 times more resource                                                               
than Texas.   He urged legislators to think big  instead of small                                                               
and complete their work.                                                                                                        
6:13:29 PM                                                                                                                    
REPRESENTATIVE  DRUMMOND  asked Mr.  Warren  to  repeat the  last                                                               
sentence of his testimony.                                                                                                      
6:13:45 PM                                                                                                                    
MR. WARREN  said the  legislature should work  on oil,  an income                                                               
tax, cuts, and the [Alaska] Permanent Fund Dividend (PFD).                                                                      
6:14:03 PM                                                                                                                    
KELLY  DROOP said  she is  a lifelong  Alaskan.   Her family  has                                                               
benefitted  from  the  oil  industry and  what  it  has  afforded                                                               
Alaska,  including the  elimination  of a  state  income tax  and                                                               
significantly improved infrastructure, and  is opposed to HB 111.                                                               
She  opined that  production  must be  incentivized  in order  to                                                               
attract the  investment and significant capital  dollars it takes                                                               
to maintain and  increase production on the North  Slope.  Senate                                                               
Bill  21  not  only  benefited   oil  and  gas  contractors  with                                                               
increased opportunities,  but also helped other  businesses.  She                                                               
advised against  continuing to change  the rules on  industry; in                                                               
fact,  HB 111  discourages investment,  would have  serious long-                                                               
term implications  for state  funding, and  does not  address the                                                               
state's budget  deficit.  Ms.  Droop urged the committee  to find                                                               
another  way   to  cut  costs  and   preserve  opportunities  for                                                               
6:15:44 PM                                                                                                                    
MIKE  MILLIGAN stated  he worked  on  TAPS and  has followed  the                                                               
issue of  oil taxes for  over 30 years.   He referred to  a chart                                                               
found  in  the committee  packet  that  shows the  percentage  of                                                               
private  [oil]  industry worldwide  [chart  not  provided].   Mr.                                                               
Milligan  related 75  percent of  worldwide oil  production comes                                                               
from  state-owned facilities.    He stressed  oil companies  have                                                               
never indicated  where they  would go if  taxes are  increased in                                                               
Alaska; further,  he questioned where  else in the  world private                                                               
industry  controls   transportation  as  private   oil  operators                                                               
control  access to  TAPS  and  make it  difficult  for any  other                                                               
operators to  begin operations.   He urged  the committee  to ask                                                               
the  oil industry  where it  would  go if  Alaska's oil  industry                                                               
6:18:25 PM                                                                                                                    
MARK MORRIS stated Alaska is  approaching either 30 more years of                                                               
prosperity  or  a  long  lackluster   recovery  once  oil  prices                                                               
rebound.  Mr. Morris said he was  raised in Juneau and he and his                                                               
family operate  an engineering  firm which  was reduced  from ten                                                               
fulltime employees  to one fulltime  and two  part-time employees                                                               
at  the  time  of  the  crash   in  oil  prices.    According  to                                                               
economists, every job created by  a source outside of a community                                                               
creates five to  nine new jobs within a  community; further, like                                                               
so many other  Alaskans, his firm and family are  waiting for the                                                               
price of oil to rebound and  trying to survive until then because                                                               
capital budgets,  both state and local,  are down.  He  asked the                                                               
committee to picture hundreds of  Alaska families, like his, just                                                               
hanging  on  waiting  for  the  price  of  oil  to  rebound,  and                                                               
cautioned that  HB 111 would take  away any hope of  a prosperous                                                               
future; in fact,  when the oil industry sees  increased taxes and                                                               
reduced  or eliminated  oil tax  credits they  simply take  their                                                               
billions  of dollars  elsewhere  to develop  someone else's  oil.                                                               
Speaking  from  his  personal experience,  he  said  private  oil                                                               
corporations have  ongoing projects all over  the world involving                                                               
foreign  governments.    He stated  that  [former]  Governor  Jay                                                               
Hammond  and  the Alaska  State  Legislature  foresaw a  boon  in                                                               
prosperity  followed by  fluctuating oil  prices and  created the                                                               
Alaska  Permanent Fund  and the  Alaska  Permanent Fund  Dividend                                                               
(PFD).  He  urged the committee to use the  rainy day fund during                                                               
the current crisis instead of costing Alaskans their jobs.                                                                      
6:21:32 PM                                                                                                                    
REPRESENTATIVE  PARISH asked  Mr.  Morris which  high school  his                                                               
sons attended.                                                                                                                  
[Due  to technical  difficulties,  the following  portion of  the                                                               
recording contains intermittent breaks in the audio recording.]                                                                 
MR. MORRIS [indisc.] but his  boys play for Thunder Mountain High                                                               
6:21:55 PM                                                                                                                    
REPRESENTATIVE DRUMMOND asked Mr. Morris  whether he was aware of                                                               
discussion  in the  House Finance  Committee about  other revenue                                                               
sources besides the [Alaska] Permanent Fund.                                                                                    
MR.  MORRIS answered  yes.   He opined  it is  unfair to  suggest                                                               
imposing  an income  tax when  Alaska has  already established  a                                                               
rainy day  fund in  the amount of  $55 billion.   He urged  for a                                                               
return  to leadership  similar  to what  was  provided by  former                                                               
President Reagan  during times of "terrible  trouble."  (Indisc.)                                                               
Americans  were joining  hands across  the  political aisle,  and                                                               
across social and  economic lines, while interest  rates were sky                                                               
high for  four years (indisc.)  because he  had the vision  for a                                                               
bright  future for  America.   Alaska needs  leadership that  can                                                               
explain  to its  citizens the  need  to forfeit  the PFD  program                                                               
instead  of losing  more  jobs.   Mr. Morris  shared  that he  is                                                               
looking for work outside of Alaska  because his firm is in danger                                                               
of closing.  [Indisc.]                                                                                                          
6:23:55 PM                                                                                                                    
REPRESENTATIVE DRUMMOND  asked Mr.  Morris if he  supports giving                                                               
up [Alaska] Permanent Fund Dividends for a few years.                                                                           
MR. MORRIS responded absolutely.                                                                                                
6:24:13 PM                                                                                                                    
ALEXANDER GUDSCHINSKY  said he is  a lifelong Alaskan  and stated                                                               
his support  for the  elimination of oil  tax credits.   Although                                                               
tax  credits  support  investment,  the state  has  only  paid  a                                                               
limited amount  because if all of  the tax credits that  are owed                                                               
were paid,  there would be  no money for  roads and schools.   He                                                               
said that oil tax credits are  a good idea, but if Alaska doesn't                                                               
have the capital to pay them the credits should not continue.                                                                   
6:26:07 PM                                                                                                                    
BILL JEFFRESS shared that he has  spent over 40 years in resource                                                               
development and is currently in  the mining industry.  He pointed                                                               
out all  resource development relies  on a stable  regulatory and                                                               
tax system.  He noted that  taxes have changed seven times in the                                                               
past twelve years and voters said  Senate Bill 21 should be given                                                               
a chance to work,  which it has.  After job  losses in the state,                                                               
the  oil industry  is  "just holding  on,"  and because  resource                                                               
industries rely  on out-of-state investors,  HB 111 is  the worst                                                               
message the state  could send to industry.   Mr. Jeffress advised                                                               
the mining industry relies on  exploration dollars and investment                                                               
capital to bring  new projects online in a similar  manner to the                                                               
oil industry,  and the message  would spread across  all resource                                                               
industries that  Alaska is  not a  stable environment  to support                                                               
industry in the long-term.                                                                                                      
6:28:28 PM                                                                                                                    
DEBORAH  LIMACHER said  she has  been an  Alaska resident  for 41                                                               
years.  She  expressed her opposition to tax credits  for oil and                                                               
gas  exploration,   and  her  support   for  HB  111   and  other                                                               
legislation  proposed  to  lower  tax credits  for  tax  and  oil                                                               
exploration.   She questioned  what it would  take for  Alaska to                                                               
stop its  dependence on revenue  sourced from  gas and oil.   Ms.                                                               
Limacher advised  that many countries are  turning to alternative                                                               
energy sources  and the days  of oil  are waning; in  fact, Texas                                                               
has created more jobs and  revenue from wind generation than from                                                               
oil  production,   and  she  suggested  HB   111  should  include                                                               
incentives for  alternative energy  exploration.  Speaking  as an                                                               
Alaskan and  thereby an  owner of  the state's  oil and  gas, she                                                               
said, "Leave  it in the ground."   Until the time  of alternative                                                               
energy comes, she urged increased  taxes from the oil industry to                                                               
protect  the state  from  bankruptcy.   Her  experience has  been                                                               
companies come  to the state,  destroy their  operations, declare                                                               
bankruptcy, and  leave, which  leads to  an uncertain  future for                                                               
the local residents.                                                                                                            
6:31:30 PM                                                                                                                    
DANIEL PATE  shared that he is  a lifelong Alaskan with  a career                                                               
in the  oil and gas industry.   He said  he is opposed to  HB 111                                                               
and wants  to see  the oil industry  flourish.   His grandparents                                                               
and parents worked in the oilfields  and he would like to see the                                                               
industry continue for future generations.                                                                                       
6:33:07 PM                                                                                                                    
JIM UDELHOVEN,  CEO, Udelhoven Operating Companies,  informed the                                                               
committee that  two years  ago his  firm employed  800 employees,                                                               
two months  ago that number dropped  to 400 employees, and  as of                                                               
this  week he  has 299  employees.   Following the  recent severe                                                               
recession, oil prices have now  stabilized at the national level,                                                               
and  the state  can  move  forward with  optimism  if  HB 111  is                                                               
opposed.   Increased taxes at  this time would  slow exploration;                                                               
in fact,  developing "new  oil" will bring  in more  revenue than                                                               
raising  taxes on  existing production.   Mr.  Udelhoven reported                                                               
the oil industry seeks a  stable tax structure which would ensure                                                               
further investment  in Alaska.   He noted  that the  industry has                                                               
increased  production in  the  past few  years,  even during  the                                                               
recession, and  with stable  oil prices  the existing  tax system                                                               
would prove successful.  He  restated his strong opposition to HB
6:35:50 PM                                                                                                                    
DAVE HANSON expressed  his support for reductions in  the oil tax                                                               
credits  program brought  forth in  HB 111;  however, he  said he                                                               
does not  support the tax increase  from 4 percent to  5 percent,                                                               
noting the following three points:   1. Reducing oil industry tax                                                               
credits does  not indicate  opposition to  the oil  industry just                                                               
like reducing the  capital budget did not  indicate opposition to                                                               
the construction  industry, but although  there has been  a long,                                                               
mutually   beneficial  business   partnership  with   the  state,                                                               
subsidies must be  decreased; 2. Alaska can no  longer afford the                                                               
oil tax  credit program,  as the  oil industry's  contribution to                                                               
the  state's revenue  has  been  reduced from  85  percent to  26                                                               
percent  and  there  have  been   cuts  to  all  areas  of  state                                                               
government; 3. Subsidies  must be reduced to  control the state's                                                               
existing debt  to the industry which  is over $900 million.   The                                                               
passage of HB 111 would  reduce payments and debt accumulation by                                                               
$200  million  annually   over  the  long  haul,   which  is  the                                                               
equivalent of  paying the  5 percent income  tax proposed  by the                                                               
6:38:30 PM                                                                                                                    
JAKE   JACOBSEN  stated   he   is  a   50-year  Alaska   resident                                                               
representing himself  and family  members.  He  opined HB  111 is                                                               
too timid  and the committee's  goals should be to  revise Senate                                                               
Bill 21, stop the oil tax  credits, simplify the system, make the                                                               
system  more transparent,  hire aggressive  auditors, and  assess                                                               
the tax on  barrels going down the  line per day -  on the gross.                                                               
He discounted threats that the  oil companies would leave because                                                               
oil companies cannot afford to  leave Alaska.  Also, Mr. Jacobsen                                                               
spoke against  efforts to  "seize the  PFD," as  gas and  oil are                                                               
held in common  for all Alaskans, but a PFD  is private property.                                                               
He expressed his support for both an income tax and a sales tax.                                                                
6:40:10 PM                                                                                                                    
ROBIN  SOLFISBURG  stated  her  support   for  HB  111  and  said                                                               
increasing the tax rate on  oil and curtailing Alaska's system of                                                               
giving money to  the oil industry should be first  on the list of                                                               
solutions  to Alaska's  financial problems.   She  encouraged the                                                               
committee to  stand for Alaska,  and not oil  companies; schools,                                                               
public  safety,  and  dividends  are  equally -  if  not  more  -                                                               
important than oil company tax subsidies.                                                                                       
6:41:23 PM                                                                                                                    
JOSH HALL  said he  is a  lifelong Alaska  resident of  the Kenai                                                               
Peninsula  and informed  the committee  that careers  in the  oil                                                               
industry have deeply impacted him and  his family.  He stated his                                                               
opposition to HB 111, noting  that his experience in the industry                                                               
is the basis  for his belief that HB 111  would make planning for                                                               
future projects  difficult, and  increasing the  oil and  gas tax                                                               
would  make  further exploration  and  growth  difficult for  the                                                               
6:42:49 PM                                                                                                                    
CATHY  DUXBURY stated  her opposition  to HB  111.   She observed                                                               
legislators  repeatedly seek  to increase  taxes on  the industry                                                               
that supplies  most of the revenue  and jobs for the  state.  The                                                               
company she works for has  recently made many cuts including cuts                                                               
to charitable donations,  pay, and the number of  employees.  Ms.                                                               
Duxbury said she  is optimistic when she hears of  new finds, but                                                               
then  state  raises  taxes  again,  which  will  be  the  seventh                                                               
increase  in the  past twelve  years  and the  third increase  in                                                               
three years.   She suggested  that if the legislature  spent half                                                               
the  amount  of  time  trying  to  figure  out  ways  to  attract                                                               
investment and get  more oil down the pipeline as  it does trying                                                               
to figure out  ways to raise taxes, the state  would not have the                                                               
problems that it does.                                                                                                          
6:45:15 PM                                                                                                                    
CYNTHIA HENRY said she has  operated a retail family business for                                                               
over 35 years that is not  oil industry related, but is dependent                                                               
on Alaska's  economy.   She expressed her  opposition to  HB 111,                                                               
noting  the   challenge  to  the  state   government's  financial                                                               
position is  due to low  oil prices  and lower throughput  in the                                                               
pipeline.   However, new oilfields  have been announced  and last                                                               
year throughput increased  after years of decline.   Further, the                                                               
price of  oil is inching up,  thus she and others  are cautiously                                                               
optimistic.  The  structure of Senate Bill 21 is  working and she                                                               
warned that  it would be a  big mistake to raise  oil taxes which                                                               
would lead to  less investment, less production,  fewer jobs, and                                                               
a deepening recession.  Ms. Henry  urged the committee to vote no                                                               
on HB 111.                                                                                                                      
6:47:11 PM                                                                                                                    
ROGER BURGGRAF said he has been  a resident of Alaska for over 64                                                               
years  and  worked   on  the  pipeline  and   in  other  resource                                                               
industries.  He  stated his opposition to HB 111  because it does                                                               
nothing to  encourage oil  companies to invest  time or  money to                                                               
get more oil  in TAPS, but encourages the oil  industry to invest                                                               
elsewhere.    He  recognized  the   need  to  diversify  Alaska's                                                               
economy, however, there  is no upcoming industry  to replace lost                                                               
oil  revenue.    Mr.  Burggraf  said  he  has  submitted  written                                                               
testimony  for the  committee's review,  and further  observed 71                                                               
percent of all  profits derived from oil produced  in Alaska goes                                                               
to  state  and/or federal  governments  and  only 21  percent  is                                                               
retained by  the oil  companies.   He urged that  HB 111  not get                                                               
6:50:24 PM                                                                                                                    
CHRISTINE RESLER  (ph) said  that she  works in  the oil  and gas                                                               
industry and  is very opposed to  HB 111.  Ms.  Resler stated the                                                               
importance  to Alaska's  economy  to  remain competitive,  noting                                                               
that it  is more expensive for  oil and gas companies  to produce                                                               
in Alaska than  many other places around the  world, thus keeping                                                               
Alaska competitive  should be  a key focus.   She  cautioned that                                                               
there clearly are other places for  oil companies to go, and even                                                               
a couple of dollars per  barrel could mean the difference between                                                               
development  and   no  development   of  some  of   the  recently                                                               
discovered oil reserves in Alaska.   She urged Alaskans to gain a                                                               
perspective of how  the state compares to the rest  of the world,                                                               
and the  implications to Alaska's  government and economy  if oil                                                               
production becomes uneconomic.                                                                                                  
6:51:55 PM                                                                                                                    
BRUNI  WARRICK  (ph) stated  her  opposition  to HB  111,  noting                                                               
raising taxes  would make Alaska less  competitive for investment                                                               
dollars and  would result  in lower  production, fewer  jobs, and                                                               
ultimately less  value to  the state.   She  opined the  state is                                                               
already  taking  a hit  from  the  [Alaska] Permanent  Fund,  and                                                               
restated her strong opposition to HB 111.                                                                                       
6:53:01 PM                                                                                                                    
ERIC TREIDER said two years  ago an economist predicted the state                                                               
would owe  oil producers  more in  the form  of tax  credits than                                                               
what  was received  in production  taxes, and  he questioned  the                                                               
prediction  because he  couldn't believe  lawmakers would  "craft                                                               
such a  terrible bill."   However,  HB 111 is  an effort  to make                                                               
corrections.   He  recognized that  many  testifiers have  shared                                                               
concern that HB  111 would prompt oil producers  to leave Alaska,                                                               
and remarked:                                                                                                                   
     During  the  debate  over Senate  Bill  21,  Dr.  Scott                                                                    
     Goldsmith was  unable to identify any  state or country                                                                    
     that  offers more  competitive profit  opportunities to                                                                    
     oil companies  than Alaska.   Not long ago BP  signed a                                                                    
     contract with Iraq which obligated  them to produce 2.9                                                                    
     million barrels of oil per  day in return for cost plus                                                                    
     $4  million per  day.   Now you're  considering a  bill                                                                    
     that  would  cut  BP's,  ConocoPhillips',  and  Exxon's                                                                    
     share  of Alaskans'  profits  to  reimbursement of  all                                                                    
     costs plus 27 percent. ...   Had we Alaskans had Iraq's                                                                    
     deal ...  and we placed  the additional revenue  in the                                                                    
     permanent  fund,  our  dividends would  have  grown  to                                                                    
     $10,000 per citizen  per year and Alaska would  be in a                                                                    
     position to fund government for  the next hundred years                                                                    
     from the  permanent fund  earnings.  ...   I  would ask                                                                    
     the legislators to  take deep breath and  reflect for a                                                                    
     few minutes on  who really needs the help  the most ...                                                                    
     here in Alaska or the folks in Houston and London.                                                                         
6:55:49 PM                                                                                                                    
GRETCHEN NELSON said she is  a 35-year resident and expressed her                                                               
support for HB  111, which has a number of  provisions of benefit                                                               
to  the state.   She  urged  for the  resolution of  the oil  tax                                                               
credit  issue  and  said  the  state needs  to  stop  paying  oil                                                               
companies for their  work in the state.  Further,  Senate Bill 21                                                               
may  need to  be revised.   The  bill would  be a  step toward  a                                                               
solution  to the  state's fiscal  problems along  with an  income                                                               
tax, some  budget cuts, and restructuring  the [Alaska] Permanent                                                               
Fund.  Ms. Nelson asked the committee to support HB 111.                                                                        
6:57:59 PM                                                                                                                    
BILL REINER expressed his opposition to  HB 111, and said the oil                                                               
tax credits should  be stopped before the state is  bankrupt.  He                                                               
pointed out  the oil and  gas tax  credits were designed  to best                                                               
function at [oil]  prices of around $100 per  barrel, however, HB
111 continues the credits to 2020, which is not acceptable.                                                                     
CO-CHAIR TARR asked Mr. Reiner to clarify why he opposed HB 111.                                                                
MR.  REINER  said HB  111  does  not  go  far enough  and  delays                                                               
diversification of the economy to a later date.                                                                                 
7:00:49 PM                                                                                                                    
KATIE  CAPOZZI said  she understands  the  challenges before  the                                                               
legislature to solve the state's  fiscal crisis; however, turning                                                               
to the  industry that has  largely funded the  state's government                                                               
and  provided  well-paying  jobs  and the  state's  savings,  and                                                               
increasing  taxes on  that industry  - which  is experiencing  an                                                               
economic downturn  - for  the second  time in  as many  years, is                                                               
perilous and  shortsighted.   The oil and  gas industry  has made                                                               
thousands  of layoffs  in the  past two  years affecting  Alaskan                                                               
friends,  neighbors, and  colleagues.    Ms.  Capozzi stated  her                                                               
opposition to HB 111.                                                                                                           
7:02:12 PM                                                                                                                    
KATIE KENNEDY  stated her strong  opposition to all  tax credits;                                                               
in fact,  Alaskans did fine before  the oil companies came.   She                                                               
said [Hilcorp's pipeline] has been  leaking gas for six weeks and                                                               
has been  allowed to  utilize infrastructure  in Cook  Inlet that                                                               
was  built  in  the  '50s.    Ms.  Kennedy  said  officials  from                                                               
BlueCrest  told  her it  could  continue  operations without  tax                                                               
credits, so they  need to do that.  She  questioned the wisdom of                                                               
using fracking  techniques in  an area  of seismic  activity, and                                                               
urged the  state to be progressive  and leave the oil  and gas in                                                               
the  ground  to be  the  state's  "true"  savings account.    Tax                                                               
credits are a  giveaway and, because of profits,  the "big three"                                                               
in  the oil  industry will  never pull  out of  Alaska, thus  the                                                               
state should not continue giving  tax credits.  She recalled that                                                               
other industries, such as commercial  fishing, have had to adjust                                                               
to changes,  and suggested  the state  should focus  on renewable                                                               
sources  of energy  such as  geothermal  and tidal  energy.   Ms.                                                               
Kennedy expressed  her opposition to  HB 111 because all  oil and                                                               
gas tax credits should be eliminated.                                                                                           
[Due to  intermittent technical difficulties some  discussion and                                                               
testimony were lost.]                                                                                                           
CO-CHAIR TARR [indisc.]                                                                                                         
MS. KENNEDY  opined that  it is  ridiculous to  allow legislators                                                               
who work  for industry to  vote on  bills [regarding oil  and gas                                                               
tax credits].                                                                                                                   
7:06:40 PM                                                                                                                    
JAMES SQUYRES  stated his  opposition to  refundable oil  and gas                                                               
tax credits and questioned why  the program is still in existence                                                               
knowing the governor's intention to  veto the amounts paid to the                                                               
statutory  minimum.    He recommended  a  "streamlined"  bill  to                                                               
address  the  refundable  credits   without  any  additional  tax                                                               
changes.   Mr. Squyres  opined the  "refundable gas  tax program"                                                               
has been  de facto shut  down for some  time, but the  state will                                                               
still have  to pay  100 cents  on the  dollar whether  tax credit                                                               
holders wait for refunds, or  transfer their credits to major oil                                                               
companies.   He restated it  is better to address  the refundable                                                               
oil and  gas tax credits without  changes to tax rates  or to the                                                               
"good effects of SB 21," and expressed his opposition to HB 111.                                                                
7:09:16 PM                                                                                                                    
DONALD BULLOCK  informed the committee  he was familiar  with the                                                               
state's  history  of  production  tax  due to  his  work  in  the                                                               
Department  of  Revenue during  hearings  on  the Economic  Limit                                                               
Factor  (ELF)   formula  [passed   in  the  Tenth   Alaska  State                                                               
Legislature and modified  in 2005] that was applied  to the Milne                                                               
Point Unit, resulting in the  two-year shutdown of Milne Point in                                                               
the late  '80s.  Mr.  Bullock said HB  111 was rushed,  and there                                                               
are some basic  concepts missing, as well  as significant errors,                                                               
one  of which  provides  for no  minimum  tax after  2021.     He                                                               
cautioned that  every credit  and every  allowed deduction  is an                                                               
investment of state money, whether  in refundable credits paid or                                                               
credits  deducted from  future  tax revenue.    Both credits  and                                                               
investments are  very important; in  fact, the wellhead  value at                                                               
Prudhoe  Bay,  which   is  the  gross  value  at   the  point  of                                                               
production,  is  the netback  from  the  sales price,  therefore,                                                               
Alaska has  the lowest wellhead  value in the country.   Further,                                                               
[hydrocarbon] is a non-renewable  resource, unlike farm equipment                                                               
or seed,  and easily accessible  oil has mostly been  found, thus                                                               
"new oil" will  require more investment.  For  example, the jack-                                                               
up rig credit  in Cook Inlet was expensive for  the state, but it                                                               
brought  results, and  on the  North Slope  producers must  start                                                               
looking at  deeper wells, new  areas, and heavier oil  that costs                                                               
more to  produce and has less  market value.  Mr.  Bullock stated                                                               
his opposition to  HB 111 because the bill does  not take all the                                                               
aforementioned  factors into  consideration  and,  along with  an                                                               
increase in the  gross tax and a reduction to  the credits, it is                                                               
a  new scheme  for taxes  since the  Petroleum Profits  Tax (PPT)                                                               
[passed  in  the  Twenty-Fourth  Alaska  State  Legislature]  was                                                               
enacted  in 2006.   The  minimum  tax already  rejects any  lease                                                               
expenditures,  and he  said he  is in  favor of  applying credits                                                               
against the minimum  tax because legitimate credits  will lead to                                                               
more production.   Mr.  Bullock cautioned that  TAPS does  have a                                                               
minimum throughput and  was almost lost when Pump  Station 1 went                                                               
down a few years ago.  Further,  with the loss of the refinery in                                                               
Fairbanks, there is  no longer an increase of heat  as the oil is                                                               
transported in the coldest part of  the pipeline.  He advised the                                                               
committee  to slow  down, look  at the  big picture,  and at  the                                                               
resource being  taxed.  Regarding  the "it's our oil  mantra," he                                                               
pointed out  lessees have the right  to all the oil  they produce                                                               
except for royalty due the state:   production taxes are the same                                                               
as  taxes imposed  by a  municipality,  although in  the case  of                                                               
natural resources, there  may be impacts that  continue after the                                                               
resource is gone.                                                                                                               
7:14:15 PM                                                                                                                    
CO-CHAIR  JOSEPHSON noted  that some  components of  HB 111  were                                                               
heard in  over 25 hearings  last year,  and asked Mr.  Bullock to                                                               
clarify whether he thought the bill was rushed.                                                                                 
7:14:45 PM                                                                                                                    
MR.  BULLOCK recalled  industry  has testified  that whether  the                                                               
current tax system  is working is unknown at this  time, thus the                                                               
sponsors of  the legislation  are "approaching  it with  one hand                                                               
behind  your back  and the  other hand  over one  of your  eyes."                                                               
Furthermore, the  tax system has  been changed; tax  stability is                                                               
important to taxpayers  and also to the  state, particularly when                                                               
revenues are  low and a  predicable source of revenue  is needed.                                                               
Without  complete  understanding  of  the  existing  tax  system,                                                               
changes  should be  approached carefully.   Mr.  Bullock restated                                                               
his opposition to HB 111.                                                                                                       
7:15:48 PM                                                                                                                    
BEN MOHR stated that one of  the reasons for his opposition to HB
111 is due to  the number of changes to the  tax credit system in                                                               
recent years;  companies who  have potential  plays need  as much                                                               
certainty   as  possible   to  build   out   programs  and   plan                                                               
appropriately,  and  although  taxes are  inevitable,  the  taxes                                                               
should be a constant - not as  a variable - in order for industry                                                               
to  make good  business  decisions.   In  addition, Alaska's  tax                                                               
credit  program has  little credibility  because the  credits are                                                               
not getting  paid as originally  promised.  Finally, the  oil and                                                               
gas industry has no more to  give and he said he supported asking                                                               
Alaskans  to pitch  in, diversify  Alaska's revenue  sources, and                                                               
make "smart cuts" to government spending.                                                                                       
7:18:16 PM                                                                                                                    
CEAL SMITH,  spokesperson, Alaska  Climate Caucus and  the Alaska                                                               
Center for  Climate and Energy  Policy, shared that  she supports                                                               
HB 111.   She said  for the first time  the state is  paying more                                                               
out than it is taking in from  the oil and gas industry, which is                                                               
unsustainable.   Neither ACES  nor Senate  Bill 21  were adequate                                                               
for Alaska  to get its  fair share; in fact,  Alaska's production                                                               
tax is  among the lowest  in the world.   In addition,  Ms. Smith                                                               
supported  the increase  of  the tax  rate from  4  percent to  5                                                               
percent.    She  referred  to previous  testimony  that  Alaska's                                                               
deficit  is largely  due  to reduced  oil  production taxes,  not                                                               
reduced oil  prices, and if the  state were to receive  roughly a                                                               
one-third profit share,  the deficit problem would  be reduced by                                                               
50-75 percent.  Ms. Smith turned  to the "taboo" issue of climate                                                               
change, and advised  Alaska is warming two to  three times faster                                                               
than  the  rest  of  the  country,  which  is  alarming  and  not                                                               
understood by  scientists.  She  reiterated that Alaska  needs to                                                               
stop  paying oil  companies to  take  Alaska's oil,  and the  oil                                                               
industry  needs to  pay  its  fair share  and  costs to  mitigate                                                               
demands from climate change.                                                                                                    
7:21:57 PM                                                                                                                    
AMY  CHRISTIANSEN said  she has  been an  Alaska resident  for 31                                                               
years and opined  Alaska's reliance on oil as its  sole source of                                                               
income to pay for government and  schools is a tragedy.  She said                                                               
the state  is not  going to  be able to  cut its  way out  of the                                                               
current  fiscal situation  by cuts  to education,  public safety,                                                               
and  the  Department  of   Transportation  &  Public  Facilities.                                                               
Furthermore, the  state is paying  oil companies oil  tax credits                                                               
to "frack  off the coast  of Cook Inlet."   She pointed  out that                                                               
even  after giving  the big  oil  companies what  they wanted  in                                                               
Senate Bill  [21] they  still laid off  employees because  gas is                                                               
cheaper [to  produce] in  Iraq than  it will  ever be  in Alaska.                                                               
The oil and  gas in the ground now belongs  to future generations                                                               
and is basically  Alaska's savings account.   She recalled former                                                               
Governor Hammond was smart and  Norway modeled Alaska's Permanent                                                               
Fund with  better results.   She urged  the committee to  be bold                                                               
and diversify, noting  that the oil industry will  not spend time                                                               
extracting oil in  Alaska during periods of low oil  prices.  Ms.                                                               
Christiansen  stated that  although she  supports HB  111 because                                                               
any decrease  in oil tax credits  is good, she does  not feel the                                                               
bill goes far enough.                                                                                                           
CO-CHAIR TARR encouraged the public  to send written testimony to                                                               
the committee.                                                                                                                  
7:26:11 PM                                                                                                                    
DANIELLE REDMOND  shared with  the committee  the following:   1.                                                               
fixing the oil  and gas tax structure is crucial,  Senate Bill 21                                                               
needs  to  be  fixed,  and  tax  credits  should  be  reduced  or                                                               
eliminated  before changes  are  made to  the [Alaska]  Permanent                                                               
Fund Dividend;  2. she supports  an income  tax over a  sales tax                                                               
because an income tax taxes  workers from out-of-state, whereas a                                                               
sales  tax  disproportionately  affects  low-income  and  working                                                               
families; 3.  she supports HB  111 and  any effort to  remedy the                                                               
oil and gas  tax credit structure; 4. climate change  is an issue                                                               
that is not  being addressed but is directly relevant  to oil and                                                               
gas tax subsidies.   Speaking as a parent, Ms.  Redmond urged the                                                               
committee to  consider the impact  of subsidies on the  future as                                                               
relates to the unknown expense of climate change.                                                                               
7:28:31 PM                                                                                                                    
HARRY K. BROWER JR., Mayor,  North Slope Borough.  Mayor Brower's                                                               
testimony  was read  by Dan  Fauske,  Director, Governmental  and                                                               
External Affairs, North Slope Borough, as follows:                                                                              
     First,  I  want to  begin  by  stating  that it  is  my                                                                    
     privilege  to  serve  the people  of  the  North  Slope                                                                    
     Borough  as  their mayor.    We  are  a unified  and  a                                                                    
     resilient  people.    We  value  family  and  love  and                                                                    
     respect our children and elders,  like many of you.  We                                                                    
     are  also people  that survive  and thrive  in changing                                                                    
     times.   We  as a  people  who live  across the  entire                                                                    
     North Slope  have witnessed  dramatic changes  over the                                                                    
     last 44 years when oil  was first discovered in Prudhoe                                                                    
     Bay it  started a chain  of events that  had tremendous                                                                    
     impacts  to  our  region.   Because  of  the  visionary                                                                    
     leadership of the  people who walked before  us we have                                                                    
     opportunities  to better  the lives  of all  the people                                                                    
     that call  the North  Slope Borough  their home.   That                                                                    
     has been  the primary focus of  my administration since                                                                    
     I  was  sworn  into  office.    The  borough's  economy                                                                    
     continues to  be strong,  however the  borough's fiscal                                                                    
     stability  should  never be  taken  for  granted.   Our                                                                    
     economy  is   predominantly  based   on  oil   and  gas                                                                    
     development  that means  it depends  on global  markets                                                                    
     and economic conditions,  the oil industries investment                                                                    
     development  options   around  the  world,   state  and                                                                    
     federal   policy,  and   the  success   of  exploration                                                                    
     activities on  the North Slope.   Many of  these things                                                                    
     are  beyond our  control but  historically what's  been                                                                    
     good for the borough, is good  for the state.  With the                                                                    
     state's  economic  pressures  and  fiscal  deficit  the                                                                    
     borough  will  be forced  to  make  tough economic  and                                                                    
     financial decisions  to fill  the gap in  providing key                                                                    
     essential services  to our region that  were previously                                                                    
     funded by our state.   The proposed policy and rates in                                                                    
     HB 111  will further limit the  borough's resources and                                                                    
     the state's to providing  such services for North Slope                                                                    
     communities  and  communities  as   a  whole.    Simply                                                                    
     raising taxes on our state  and region's most important                                                                    
     industry during a time of low  oil prices is not a wise                                                                    
     policy.     Oil  companies  across  the   North  Slope,                                                                    
     including service  and support companies,  have already                                                                    
     laid off  thousands of their  work force  and postponed                                                                    
     project development  due to low prices.   By increasing                                                                    
     taxes  the  state runs  the  risk  of seeing  more  job                                                                    
     losses,  less investment,  and  less  production.   The                                                                    
     current oil tax policy  has made significant difference                                                                    
     in the level of activity  in our borough.  It increased                                                                    
     investment,  employment,   and  encouraged  exploration                                                                    
     development across  the North  Slope.  Like  the state,                                                                    
     the  North  Slope  Borough  has a  direct  stake  in  a                                                                    
     vibrant oil  industry.  When  industry is  confident in                                                                    
     the future and  its partner, the State  of Alaska, they                                                                    
     make investments.   These investments lead  to our jobs                                                                    
     for our residents, expand our  tax base, and provide us                                                                    
     with the  financial opportunities  to provide  the same                                                                    
     services taken  for granted by  our fellow  citizens in                                                                    
     more populated areas.  The  reality is when changes are                                                                    
     made to oil and gas  taxes our people, our borough, and                                                                    
     our  Native  corporations are  the  first  to feel  the                                                                    
     impacts.   We  do not  believe that  HB 111  will bring                                                                    
     more jobs,  encourage more investment, or  lead to more                                                                    
     oil flowing down  the pipeline.  Instead  let's work to                                                                    
     fix  our   economic  problems  by  keeping   our  state                                                                    
     economic engine  at maximum capacity.   If  some tweaks                                                                    
     to our  existing tax  structure need  to be  made, then                                                                    
     let's  work together  to find  solutions that  work for                                                                    
     the state and industry.   No ... disrespect to the good                                                                    
     Alaskans  who drafted  this bill,  but  in our  opinion                                                                    
     it's an  overreaction that could  have major  long term                                                                    
     impacts.  We  are all partners in  our state's economy.                                                                    
     It  is  our hope  that  we  can  all work  together  as                                                                    
     Alaskans  to solve  the challenges  we face  so we  can                                                                    
     build a sustainable future for generations to come.                                                                        
7:33:30 PM                                                                                                                    
BOBBY  REDDELL  (ph),  spokesperson,  Udelhoven  Oilfield  System                                                               
Services,  informed the  committee  HB 111  would discourage  new                                                               
exploration while  jeopardizing progress  made under  the current                                                               
tax policy.   The oil  industry needs a stable,  predictable, and                                                               
competitive  tax  policy to  make  investment  decisions for  the                                                               
future.    If  Alaska  continues   to  shift  its  tax  structure                                                               
depending  on the  government's  deficit,  businesses would  find                                                               
other locations in  which to operate.   Udelhoven Oilfield System                                                               
Services has approximately 300 employees  in Alaska who depend on                                                               
the  oil and  gas  industry, and  HB 111  would  have a  negative                                                               
impact on those employees and put their jobs at risk.                                                                           
7:34:51 PM                                                                                                                    
CARL PORTMAN stated  he is a lifelong Alaskan who  worked on TAPS                                                               
while he was  in college.  Like others, he  expressed his concern                                                               
about the state's current fiscal  situation, noting that Alaska's                                                               
economic  lifeblood is  TAPS, but  it  is now  running at  three-                                                               
quarters empty.   He said  he does  not support raising  taxes on                                                               
the oil industry  and suggested the best approach  to raising new                                                               
revenue  from  the  oil  industry  is  to  increase  North  Slope                                                               
production; in  fact, higher taxes  would have a  direct negative                                                               
impact on future industry investment  in Alaska, and therefore on                                                               
future production.   Mr. Portman said at today's  low oil prices,                                                               
approximately 67 percent  of Alaska's revenue comes  from the oil                                                               
industry through various taxes and  royalty.  He pointed out that                                                               
clearly the  industry continues to  pay the majority  of Alaska's                                                               
bills and pay  more than its fair share.    Further, with several                                                               
multibillion barrel oil  fields now on the  horizon, Alaska could                                                               
be on the cusp of an oil  renaissance on the North Slope.  Alaska                                                               
has  the resources  in place  to grow  production, increase  TAPS                                                               
throughput, and grow the state revenue  stream.  In order to pull                                                               
Alaska's economy out of a  worsening recession, a major injection                                                               
of capital is  needed to bring new prospects  online, however, HB
111  would  do nothing  to  attract  the investment  required  to                                                               
develop new  fields and  grow the state's  revenue over  the long                                                               
term.   Given the  urgent need for  new industry  investment, Mr.                                                               
Portman said  he does not support  HB 111, and he  concluded that                                                               
higher taxes  on the industry  would make matters worse  for both                                                               
the public and private sectors.                                                                                                 
7:37:13 PM                                                                                                                    
KEITH SILVER  said that  he is  opposed to HB  111, which  is the                                                               
seventh oil  tax law change in  twelve years and the  third since                                                               
2013.  Furthermore, the  bill  does not  take  into account  that                                                               
under  the current  oil and  gas tax  credit scheme,  several new                                                               
multibillion barrel  oilfields have  been announced.   He pointed                                                               
out  that in  2016, TAPS  had  an increase  in throughput,  which                                                               
positively  benefited  the  state   budget.    In  addition,  the                                                               
decisions  to sanction  the  recent  discoveries were  determined                                                               
under the current tax and credit  law, so changes could cause oil                                                               
companies  to pack  up  and leave,  and some  have.   Mr.  Silver                                                               
informed the committee that Alaska  is already the most expensive                                                               
place  to develop  an oilfield  and  constant fiscal  uncertainty                                                               
makes Alaska an  unattractive place to do business.   The current                                                               
oil tax system  is balanced and sets a higher  minimum floor than                                                               
previous  tax systems,  while setting  a  stable and  predictable                                                               
rate  when oil  prices rise  again;  in fact,  at current  prices                                                               
Alaska's oil  tax policy  has brought  hundreds of  millions more                                                               
dollars in tax revenue to the  state than it would have under the                                                               
previous system.  An annual  industry investment of $3 billion to                                                               
$4  billion is  needed to  keep production  levels stable  on the                                                               
North Slope;  in addition, production  stability also  requires a                                                               
durable and  competitive tax policy  that funds  Alaska projects.                                                               
[Indisc.]   Mr. Silver advised  that not changing the  tax system                                                               
for  seven years  would allow  the  state to  fully analyze  what                                                               
needs   to  be   fixed,  what   still  works,   and  what   would                                                               
significantly decrease fiscal uncertainty.                                                                                      
7:40:00 PM                                                                                                                    
LYNN C.  JOHNSON, Chairman, Dowland-Bach Corporation,  stated his                                                               
company  has  been in  business  for  42 years  and  manufactures                                                               
control  and  instrumentation  systems.    He  said  the  current                                                               
slowdown has  limited his company's manufacturing  entities to 32                                                               
hours  per week.    The  bill is  flawed  because it  discourages                                                               
investment in  Alaska, and instead  the state needs  to encourage                                                               
additional  investment   in  facilities  and   infrastructure  to                                                               
prolong oilfield life and facilitate  exploration.  As previously                                                               
stated, HB  111 would be the  seventh major tax change  in twelve                                                               
years.   He pointed out  that a lot  of Alaskans think  that they                                                               
are not affected  by the oil and gas industry,  but the Anchorage                                                               
real  estate  market is  starting  to  feel the  effects  through                                                               
decreases in property assessments by  6-7 percent from 2016.  Mr.                                                               
Johnson  cautioned  now   is  not  the  time   to  raise  minimum                                                               
production taxes  from 4 percent to  5 percent, or to  modify net                                                               
operating  loss  (NOL) credits  and  carry-forward  credits.   He                                                               
questioned whether  lawmakers have compared  transportation costs                                                               
in  a  "post-fracking world,"  and  concluded  HB  111 is  a  bad                                                               
business decision for Alaska.                                                                                                   
7:42:09 PM                                                                                                                    
CHARLES UNDERWOOD spoke in opposition to  HB 111.  He opined that                                                               
Alaska needs  to ensure it  has a  stable fiscal tax  regime, and                                                               
the change that would take place under HB 111 would not do so.                                                                  
7:42:54 PM                                                                                                                    
JEANINE  ST. JOHN,  spokesperson,  Lynden Incorporated  (Lynden),                                                               
stated her  company's opposition to HB  111.  She said  Lynden is                                                               
an Alaska multimodal transportation  company that brings goods in                                                               
and  out of  Alaska  by  road, air,  and  sea.   Lynden  provides                                                               
logistics  and  transportation  for   all  of  Alaska's  resource                                                               
industries - fisheries,  mining, construction, and oil  and gas -                                                               
and employs  over 700  Alaskans providing  service to  Alaska for                                                               
over 60  years.  She  stated that Lynden  wants to make  sure the                                                               
Alaska economy stays healthy, as  the livelihood of its employees                                                               
and  business  is  dependent  upon  it.   She  pointed  out  that                                                               
decisions made this  year would determine the  future of Alaska's                                                               
economy.   Ms. St. John urged  the legislature not to  change the                                                               
fundamental oil  tax structure while  deliberating on  fixing the                                                               
fiscal  situation  and concurrently  adjusting  oil  taxes.   She                                                               
observed  the  changes in  HB  111  cannot  be classified  as  an                                                               
adjustment  to   cashable  tax  credits,  but   are  instead  tax                                                               
increases  proving  Alaska's  investment instability,  and  would                                                               
drive  down  investment,  even though  there  may  be  additional                                                               
revenue  to the  state  in the  short-term.   Ms.  St. John  said                                                               
Lynden has  employees all over  the state and  HB 111 would  be a                                                               
deterrent for good jobs for Alaska's workforce.                                                                                 
7:46:04 PM                                                                                                                    
MICHAEL  JESPERSON expressed  his  opposition to  HB 111,  noting                                                               
that the  proposed 25 percent increase  in minimum tax is  a huge                                                               
increase,  and  the  seventh  tax increase  in  twelve  years  is                                                               
ridiculous.    He  pointed  out  that  by  the  time  a  business                                                               
determines whether  a tax policy  is profitable for  the company,                                                               
the state changes it, and  businesses cannot operate in that type                                                               
of environment.   Mr. Jesperson  said the existing  system should                                                               
be given  a chance to work;  the best way to  fix Alaska's fiscal                                                               
problems would  be to put  Alaskans to work  and put more  oil in                                                               
the  pipeline.   He  opined recent  discoveries  will provide  an                                                               
opportunity to  put more oil  into the  pipeline, and if  so, the                                                               
price of oil per barrel doesn't matter.                                                                                         
7:48:44 PM                                                                                                                    
ROGER JENKINS  asked the committee  not to change horses  in mid-                                                               
stream,  because no  one thought  the price  of oil  would "tank"                                                               
again.   He opined the  process to refuel the pipeline has begun,                                                               
and if  the flow into TAPS  is too low  it will be torn  down and                                                               
North Slope production  will cease.  Mr.  Jenkins said additional                                                               
subsidies and  time will  be required  for production  from Smith                                                               
Bay, Armstrong, Greater Mooses Tooth,  and Willow, thus HB 111 is                                                               
the wrong bill at the wrong time.                                                                                               
7:50:15 PM                                                                                                                    
JOHN SONIN said he  is a 17-year resident of Juneau.   He said HB
111 is  complicated but the big  picture is that the  state needs                                                               
to get  its priorities  straight - Alaskans  before profits.   He                                                               
stated  that  Alaska  is  currently  jeopardizing  the  lives  of                                                               
children, for  profits, by cutting  teacher positions  and wages.                                                               
In response to  Co-Chair Tarr, he said he is  for reneging on the                                                               
tax credits which are destroying the economy.                                                                                   
7:53:03 PM                                                                                                                    
SANDRA LEMKE said she is a  40-year resident of Alaska and worked                                                               
for  ARCO and  now ConocoPhillips  Alaska, Inc.  (ConocoPhillips)                                                               
for  almost 30  years.   She said  she supports  the geosciences,                                                               
geophysicists, and  reservoir engineers, and opined  Alaska needs                                                               
a  predictable fiscal  framework for  industry while  it searches                                                               
for new  sources of oil.   Ms. Lemke expressed her  opposition to                                                               
HB 111,  specifically to the  increase in  taxes and not  the tax                                                               
credits, because she agreed with  a previous speaker that the two                                                               
issues should be  addressed in separate bills.   Furthermore, the                                                               
state  should "step  back" and  let  the new  discoveries on  the                                                               
North  Slope  stabilize, so  industry  can  evaluate and  rebuild                                                               
geoscience teams.  She urged that the committee not pass HB 111.                                                                
7:55:06 PM                                                                                                                    
BEN MULLIGAN,  Deputy Director,  Alaska Chamber,  emphasized that                                                               
Alaska needs  stability in  its tax structure  right now,  and so                                                               
Alaska  Chamber opposes  HB 111.   [Additional  written testimony                                                               
was found in the committee packet.]                                                                                             
7:55:55 PM                                                                                                                    
WESTON HOWE said he is a  lifelong Alaskan with a leadership role                                                               
in Alaska's natural  resource economy.  He  stated his opposition                                                               
to HB  111 because  the bill does  not encourage  investment from                                                               
producers and  others in  order to support  Alaska's oil  and gas                                                               
industry and economy for the next 30 years.                                                                                     
7:57:06 PM                                                                                                                    
JOE RINTALA,  Construction Business Agent, Teamsters  Union Local                                                               
959, said that he represents  members working on the North Slope,                                                               
TAPS,  and  the Valdez  Marine  Terminal.   The  Teamsters  Union                                                               
represents members  working throughout the state,  and negotiates                                                               
with  its employers  for good  wages and  benefits.   Mr. Rintala                                                               
informed   the  committee   the  union   appreciates  legislation                                                               
introduced to  address the budget shortfall,  and understands the                                                               
need  to  balance  the  budget.    Further,  the  union  supports                                                               
adjustments  to  the  [Alaska] Permanent  Fund  and  new  revenue                                                               
resources  to assist  in obtaining  Alaska's goal,  but does  not                                                               
support HB 111.   Teamsters Local 959 has members  working on the                                                               
GMT 1/CD-6 project  for ConocoPhillips, a new drill  site west of                                                               
CD-5.   Nanook,  one  of  the largest  contractors  on the  North                                                               
Slope, has been  awarded contracts to build  an eight-mile gravel                                                               
road,  ice roads,  a ten-acre  gravel  pad for  the future  drill                                                               
site, and other  projects.  Work at GMT 1  alone has created over                                                               
200  jobs for  Alaskan  Teamsters and  countless  jobs for  other                                                               
unions,  businesses, and  vendors.   He said  that ConocoPhillips                                                               
kept its  commitment to the project,  in spite of the  decline in                                                               
oil prices.   In addition, Armstrong Oil  and ConocoPhillips have                                                               
made "huge  investments in  the North Slope."   Stability  in the                                                               
oil  industry  is  important  regarding  investments;  investment                                                               
leads  to new  development,  and that  leads to  new  jobs.   Mr.                                                               
Rintala urged  the committee  to consider  the impact  of current                                                               
and future  production, especially  in times  of low  oil prices,                                                               
and noted that the Teamsters Union  supported Senate Bill 21 - as                                                               
did  the  majority  of  the   public  -  which  resulted  in  new                                                               
investments by industry, putting Alaskans to work.                                                                              
8:00:26 PM                                                                                                                    
DAVID  SCOTT said  he is  a 68-year  resident of  Alaska and  has                                                               
worked in the  oil and gas industry  for over 30 years.   He said                                                               
he supports HB  111 because it is  time to bring the  oil and gas                                                               
industry to the table to  discuss problems created by Senate Bill                                                               
21.  He expressed his support for HB 111.                                                                                       
8:01:11 PM                                                                                                                    
JOHNNY GRIFFIN  said he is  a 20-year Anchorage resident  and has                                                               
worked in the oil and gas  industry for many years.  The industry                                                               
has provided a  good life for him and his  family, and because HB
111 is bad  for Alaska and Alaska families, he  is opposed to the                                                               
8:02:33 PM                                                                                                                    
JACK KVASNIKOFF  said he is  a lifelong Alaskan and  his personal                                                               
experience  is that  when oil  and gas  companies are  profitable                                                               
there are more jobs.  He said he is strongly opposed to HB 111.                                                                 
8:03:30 PM                                                                                                                    
ALICIA SIIRA,  Deputy Director, Alaska Miners  Association (AMA),                                                               
informed   the   committee   AMA  is   a   nonprofit   membership                                                               
organization  established   in  1939  to  represent   the  mining                                                               
industry throughout Alaska.   Its membership is  composed of over                                                               
1,500  members  including   prospectors,  geologists,  engineers,                                                               
suction  dredge   miners,  small  family  mines,   junior  mining                                                               
companies, major  mining companies,  as well as  oil and  gas and                                                               
mining support service  companies.  Although AMA's  mission is to                                                               
promote responsible  mineral development, its testimony  today is                                                               
in opposition  to HB 111 because  a healthy oil and  gas industry                                                               
is crucial  to a healthy  mining industry,  and is also  good for                                                               
Alaska.  The Alaska Miners  Association produces an annual Issues                                                               
of  Concern  document  that  for   the  last  several  years  has                                                               
contained  a provision  pertaining to  the oil  and gas  industry                                                               
which demonstrates  AMA's belief that  it is vital for  Alaska to                                                               
have  oil  and  gas  policy   that  incentivizes  the  industry's                                                               
continued investment in  the state.  However, HB 111  is not that                                                               
kind of  policy, but is  the seventh  change in twelve  years and                                                               
creates new  punitive changes  to the oil  and gas  tax structure                                                               
that  would result  in less  investment,  less production,  fewer                                                               
jobs,  and a  deepening recession.   Her  organization encourages                                                               
the  committee to  focus on  the  larger issue  of a  sustainable                                                               
budget  using   spending  reductions,  [Alaska]   Permanent  Fund                                                               
earnings,  and new  revenue  from broad-based  taxes  - not  from                                                               
increased  taxes   on  existing  taxpayers  who   are  already  a                                                               
significant part of the revenue base.                                                                                           
8:05:38 PM                                                                                                                    
ANNE SENECA,  Regional Director, Consumer Energy  Alliance (CEA),                                                               
CEA-Alaska, informed  the committee CEA is  a nationwide consumer                                                               
advocacy organization  representing families,  farmers, truckers,                                                               
manufacturers,   small   businesses,    and   energy   providers.                                                               
Advocating for a competitive market  and stable energy prices are                                                               
two goals of  CEA, and HB 111 would  destroy opportunities Alaska                                                               
could offer the Lower 48.   A 25 percent tax increase on Alaska's                                                               
minimum  petroleum   production  would   likely  result   in  the                                                               
reduction  of   Alaska's  global  competitiveness,   U.S.  energy                                                               
production,  Alaska  employment  and  income  opportunities,  and                                                               
state  revenue, all  of which  would  adversely affect  Alaskans.                                                               
Ms. Seneca  advised Alaska needs  a healthy business  climate and                                                               
in 2016, there was the first  uptick in production in 14 years as                                                               
a result of oil tax reform  in 2013; however, raising taxes could                                                               
jeopardize recent  gains made in  Alaska's oil industry.   Alaska                                                               
cannot expect  to tax  away the  industry's incentives  to invest                                                               
and  still  expect  to  have  a stable  economy.    She  strongly                                                               
encouraged the committee  to not support HB 111  because it would                                                               
do nothing  to increase production  or provide a  stable economic                                                               
environment in Alaska.                                                                                                          
8:07:50 PM                                                                                                                    
KATE  BLAIR,  Government  and   Public  Affairs  Manager,  Tesoro                                                               
Corporation, informed  the committee Tesoro  Corporation (Tesoro)                                                               
is a Fortune 100 company  and an independent refiner and marketer                                                               
of  petroleum  products.     Tesoro,  through  its  subsidiaries,                                                               
operates  seven refineries  across  the western  U.S.  and has  a                                                               
total  capacity  of 895,000  barrels,  and  also holds  ownership                                                               
interest in Tesoro Logistics.   Tesoro has a proud Alaska legacy,                                                               
beginning with its  first refinery in Nikiski, which  has a crude                                                               
capacity  of  72,000  barrels  per day.    Tesoro's  assets  also                                                               
include  a  69-mile  common   carrier  pipeline  that  transports                                                               
products from the  Nikiski refinery to the  Ted Stevens Anchorage                                                               
International  Airport  and  to  the  Port  of  Anchorage,  where                                                               
refined  products  such  as jet  fuel,  gasoline,  and  ultra-low                                                               
sulfur  diesel are  stored and  then  transported throughout  the                                                               
state.    Ms.  Blair  pointed   out  the  existence  of  in-state                                                               
refineries has helped  the growth of the  international air cargo                                                               
business and Anchorage is one of  the top five air cargo airports                                                               
in the  world.  Because the  Kenai refinery is also  able to meet                                                               
most  of the  state's demand  for gasoline,  the majority  of the                                                               
gasoline consumed in  Alaska has been refined in  Alaska.  Tesoro                                                               
Alaska's  refinery  and  logistics operations  employ  about  250                                                               
people in Nikiski  and Anchorage, and maintain a  greater than 97                                                               
percent Alaska-hire rate.  As  an independent refiner, logistics,                                                               
and marketing  company, Tesoro does  not pay production  taxes in                                                               
the  state and  thus does  not take  a stance  on what  oil taxes                                                               
should  be; however,  in-state oil  production  matters, and  any                                                               
loss of production  - from the North Slope or  Cook Inlet - would                                                               
affect  the  in-state  refinery  and  potentially  make  Tesoro's                                                               
economics  more challenging  because Tesoro  relies on  access to                                                               
in-state crude through production in  Cook Inlet and on the North                                                               
Slope.   At its  peak, the  Cook Inlet  basin produced  more than                                                               
200,000 barrels  per day  and in 2016,  Cook Inlet  produced just                                                               
16,500 barrels  per day;  Tesoro refines every  drop of  oil that                                                               
comes out of the Cook  Inlet basin and purchases additional North                                                               
Slope  crude  for refinement  in  Nikiski.   Earlier  this  year,                                                               
Tesoro entered a royalty oil  contract with the state allowing it                                                               
to  purchase 20,000-25,000  barrels of  Alaska North  Slope (ANS)                                                               
royalty share oil - which will  benefit the state by $45 million-                                                               
$65 million dollars.  The Cook  Inlet Recovery Act [passed in the                                                               
Twenty-Sixth Alaska  State Legislature]  and Senate Bill  21 have                                                               
resulted  in a  stable local  supply  of crude,  but supply  must                                                               
still be supplemented by imported  light sweet crude from foreign                                                               
and domestic  sources; importing additional crude  along with the                                                               
high cost of  energy in an energy-intensive  refining process may                                                               
make  local  refining  a  less  economical  option  and  lead  to                                                               
increased   importation   of   refined  products,   which   would                                                               
ultimately  affect  the  stable local  supply  of  transportation                                                               
fuels within Alaska.   Ms. Blair urged the  committee to consider                                                               
how  modifications  to  oil  and  gas  tax  credits  will  affect                                                               
production and in-state manufacturing.                                                                                          
8:12:11 PM                                                                                                                    
BILL CORBUS said he served as  the commissioner of DOR from 2003-                                                               
2007.  He  noted his testimony is a summary  of written testimony                                                               
submitted  by KEEP  Alaska  Competitive  (KEEP), an  organization                                                               
composed  of a  variety of  businesses, groups,  and individuals,                                                               
whose  mission   is  to  encourage  a   vibrant  Alaska  resource                                                               
industry.   He added that KEEP  does not accept funding  from the                                                               
oil industry.  Mr. Corbus said  KEEP's position is that HB 111 is                                                               
the wrong  approach; it  increases oil taxes  at low  prices when                                                               
industry is  losing millions, or  is not making enough  profit to                                                               
support  investing $4  billion-$6 billion  a  year.   This is  in                                                               
contrast  with   Senate  Bill  21,  which   is  characterized  by                                                               
"stability over  time."   In the past,  Alaska was  a predictable                                                               
partner in  both high- and  low-price environments and  the focus                                                               
was long-range rather  than short-term.  In  2013, KEEP supported                                                               
[Senate Bill] 21 in order to  turn from a punitive tax system and                                                               
to change incentives to invest  and produce oil, not simply spend                                                               
money.   The  aforementioned  legislation attracted  independents                                                               
which resulted in several large  discoveries which, if developed,                                                               
will provide significant revenues for  the state; however, HB 111                                                               
would reverse  Senate Bill 21 as  well as provisions in  ACES and                                                               
in other legislation  for cashable NOL credits.   Mr. Corbus said                                                               
KEEP recognizes  the state  does not have  the resources  to cash                                                               
out tax credits when prices are  low, but this does not mean that                                                               
credits and NOLs  should not be allowed  against production taxes                                                               
when prices are  high.  Further, KEEP believes  the primary focus                                                               
should  be  on  fixing  the  current  fiscal  problem  using  the                                                               
[Alaska]  Permanent Fund  realized earnings,  cutting costs,  and                                                               
utilizing  reasonable broad-based  revenue  solutions that  would                                                               
not kill investments.                                                                                                           
8:16:00 PM                                                                                                                    
MARLEANNA HALL, Executive  Director, Resource Development Council                                                               
for  Alaska,  Inc.  (RDC),  informed   the  committee  RDC  is  a                                                               
statewide   trade  association   comprised  of   individuals  and                                                               
companies from  Alaska's oil and  gas, mining,  fishing, tourism,                                                               
and  timber industries.   The  members  of RDC  believe the  best                                                               
approach to  grow the economy  and generate new revenue  would be                                                               
to produce  more oil,  attract more  tourists, harvest  more fish                                                               
and timber, and  mine more minerals.  Regarding HB  111, she said                                                               
that raising  taxes on companies  that are in negative  cash flow                                                               
is not a  sound fiscal policy.  Increasing taxes  on Alaska's oil                                                               
industry would  not increase throughput  for TAPS,  encourage the                                                               
development of new prospects, nor  would it solve Alaska's fiscal                                                               
crisis.    In  fact,  higher  taxes  in  the  current  low  price                                                               
commodity environment  would likely deter investment  and lead to                                                               
lower state  revenue and  a weaker private  sector.   Further, HB
111  would  jeopardize  recent  gains   such  as  the  first  oil                                                               
production  increase   in  14  years,  billions   of  dollars  of                                                               
investments since  2013, and  optimism about  recent multibillion                                                               
barrel discoveries on  the North Slope.  Ms. Hall  said if HB 111                                                               
is  enacted, production  decline  rates of  six  percent or  more                                                               
annually  might reappear,  and Alaska  could end  up with  a much                                                               
smaller economy;  however, incentivizing the industry  will cause                                                               
it  to drill  more and  create more  wealth, jobs,  and activity.                                                               
The passage  of Senate Bill  21 in 2013 brought  new exploration,                                                               
jobs, and  continued investment  in Alaska.   The members  of RDC                                                               
are  not  asking  for  a  tax decrease  during  the  current  low                                                               
commodity  price environment,  as  is being  considered in  other                                                               
states and  countries, but  do request that  the committee  do no                                                               
harm to  Alaska's largest industry.   She urged the  committee to                                                               
reject HB 111.                                                                                                                  
8:18:42 PM                                                                                                                    
CO-CHAIR TARR  announced that  HB 111 was  held over  with public                                                               
testimony open.                                                                                                                 

Document Name Date/Time Subjects
HB111 Supporting Document - Letters in Support 3.1.17.pdf HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HB 111
HB111 Opposing Document - Letters in Opposition 3.1.17.pdf HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HB 111
HB111 ver O 2.8.17.PDF HRES 2/13/2017 1:00:00 PM
HRES 2/17/2017 1:00:00 PM
HRES 2/20/2017 1:00:00 PM
HRES 2/22/2017 1:00:00 PM
HRES 2/22/2017 6:30:00 PM
HRES 2/24/2017 1:00:00 PM
HRES 2/27/2017 1:00:00 PM
HRES 3/1/2017 1:00:00 PM
HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HRES 3/8/2017 1:00:00 PM
HB 111
HB111 Fiscal Note DOR-TAX 2.12.17.pdf HRES 2/13/2017 1:00:00 PM
HRES 2/17/2017 1:00:00 PM
HRES 2/22/2017 1:00:00 PM
HRES 2/22/2017 6:30:00 PM
HRES 2/24/2017 1:00:00 PM
HRES 2/27/2017 1:00:00 PM
HRES 3/1/2017 1:00:00 PM
HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HRES 3/8/2017 1:00:00 PM
HRES 3/13/2017 1:00:00 PM
HB 111
HB111 Sectional Analysis 2.12.17.pdf HRES 2/13/2017 1:00:00 PM
HRES 2/17/2017 1:00:00 PM
HRES 2/20/2017 1:00:00 PM
HRES 2/22/2017 1:00:00 PM
HRES 2/22/2017 6:30:00 PM
HRES 2/24/2017 1:00:00 PM
HRES 2/27/2017 1:00:00 PM
HRES 3/1/2017 1:00:00 PM
HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HRES 3/8/2017 1:00:00 PM
HB 111
HB111 Sponsor Statement 2.12.17.pdf HRES 2/13/2017 1:00:00 PM
HRES 2/17/2017 1:00:00 PM
HRES 2/20/2017 1:00:00 PM
HRES 2/22/2017 1:00:00 PM
HRES 2/22/2017 6:30:00 PM
HRES 2/24/2017 1:00:00 PM
HRES 2/27/2017 1:00:00 PM
HRES 3/1/2017 1:00:00 PM
HRES 3/1/2017 6:00:00 PM
HRES 3/6/2017 6:30:00 PM
HRES 3/8/2017 1:00:00 PM
HRES 3/13/2017 1:00:00 PM
HB 111