Legislature(1997 - 1998)
04/23/1998 03:10 PM House ECD
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON ECONOMIC DEVELOPMENT
April 23, 1998
3:10 p.m.
MEMBERS PRESENT
Representative Jerry Sanders, Chairman
Representative Mark Hodgins
Representative Ivan Ivan
Representative William K. ("Bill") Williams
Representative Alan Austerman
Representative J. Allen Kemplen
Representative Ethan Berkowitz
MEMBERS ABSENT
All members present
OTHER HOUSE MEMBERS PRESENT
Representative Joe Ryan
Representative Vic Kohring
OTHER SENATE MEMBERS PRESENT
Senator Jerry Ward
COMMITTEE CALENDAR
PRESENTATION: FUEL COSTS AND THE EFFECT ON THE ECONOMY
HOUSE BILL NO. 469
"An Act approving the sale of Prudhoe Bay Unit royalty oil by the
State of Alaska to Mapco Alaska Petroleum, Inc.; and providing for
an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 469
SHORT TITLE: APPROVE SALE ROYALTY OIL TO MAPCO
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
3/13/98 2620 (H) READ THE FIRST TIME - REFERRAL(S)
3/13/98 2621 (H) O&G, ECD, FINANCE
3/13/98 2621 (H) FISCAL NOTE (DNR)
3/13/98 2621 (H) HOUSE AND SENATE JOURNAL SUPPLEMENT
#16 CONTAINS FINDINGS, AGREEMENTS, &
3/13/98 2621 (H) RESOLUTION REGARDING ROYALTY OIL SALE
3/13/98 2621 (H) TO MAPCO
3/13/98 2621 (H) GOVERNOR'S TRANSMITTAL LETTER
3/31/98 (H) O&G AT 10:00 AM CAPITOL 124
3/31/98 (H) MINUTE(O&G)
4/07/98 (H) O&G AT 10:00 AM CAPITOL 124
4/07/98 (H) MINUTE(O&G)
4/07/98 2905 (H) O&G RPT 4DP 1NR
4/07/98 2905 (H) DP: ROKEBERG, BUNDE, BRICE, HODGINS;
4/07/98 2905 (H) NR: RYAN
4/07/98 2905 (H) FISCAL NOTE (DNR) 3/13/98
4/07/98 2905 (H) REFERRED TO ECD
4/09/98 (H) ECD AT 5:00 PM CAPITOL 17
4/09/98 (H) MINUTE(ECD)
4/23/98 (H) ECD AT 3:00 PM CAPITOL 17
WITNESS REGISTER
WILSON CONDON, Commissioner
Department of Revenue; Member, Royalty
Oil and Gas Development Advisory Board
P.O. Box 110400
Juneau, Alaska 99811-0400
Telephone: (907) 465-2300
POSITION STATEMENT: Participated in presentation on Fuel
Costs and the Effect on the Economy.
CHARLIE COLE, Former Attorney General
406 Cushman, Suite 2
Fairbanks, Alaska 99701
Telephone: (907) 452-1124
POSITION STATEMENT: Participated in presentation on Fuel
Costs and the Effect on the Economy.
KEVIN BANKS
Division of Oil and Gas
Department of Natural Resources
3601 "C" Street, Suite 1380
Anchorage, Alaska 99503
Telephone: (907) 269-8781
POSITION STATEMENT: Participated in presentation on Fuel
Costs and the Effect on the Economy.
GINNY FAY, Legislative Liaison
Department of Commerce and Economic Development
P.O. Box 110800
Juneau, Alaska 99811-0800
Telephone: (Not provided)
POSITION STATEMENT: Participated in presentation on Fuel
Costs and the Effect on the Economy.
KARL HANNEMAN
6226 Second Street, Suite 201
Fairbanks, Alaska 99701
Telephone: (907) 452-6700
POSITION STATEMENT: Participated in presentation on Fuel
Costs and the Effect on the Economy.
JEFF COOK, Vice President
External Affairs and Administration
MAPCO Alaska Petroleum Incorporated
1150 H&H Lane
North Pole, Alaska 99705
Telephone: (907) 488-2741
POSITION STATEMENT: Participated in presentation on Fuel Costs
and the Effect on the Economiy and Provided
testimony in support of HB 469.
ACTION NARRATIVE
TAPE 98-4, SIDE A
Number 0001
CHAIRMAN JERRY SANDERS called the House Special Committee on
Economic Development meeting to order at 3:10 p.m. Members present
at the call to order were Representatives Sander, Austerman, Ivan
and Williams. Representatives Kemplen, Berkowitz and Hodgins
arrived at 3:20 p.m., 4:20 p.m., and 4:40 p.m., respectively.
FUEL COSTS AND THE EFFECT ON THE ECONOMY
SUMMARY OF INFORMATION
CHAIRMAN SANDERS stated that what he wanted to do at this meeting
was to invite different parts of the administration and discuss the
situation of the high price of fuel and what might possibly done
about it.
Number 1297
WILSON CONDON, Commissioner, Department of Revenue; Member, Royalty
Oil and Gas Development Advisory Board, explained that the state
has a right under its oil and gas leases to take royalty oil and
gas in value or in kind. When asked by Chairman Sanders if their
was anything that could be changed in the statute that would give
the board or the Department of Natural Resources some authority to
demand benefits for the citizens of the state of Alaska,
Commissioner Condon stated that he would not recommend it because
it would be an administrative nightmare and it would be getting
into the price controlling business.
CHAIRMAN SANDERS also asked if Commissioner Condon could see any
problem with the state taking a set amount of fuel and having it
processed by MAPCO at cost plus a small margin, then the state
could distribute it to Western Alaska among the school districts.
This would allow the schools more money for their budget.
COMMISSIONER CONDON responded that conceptually he did not have a
problem with that but was skeptical about the capability of
government department's ability to do that efficiently and
effectively.
TAPE 98-4, SIDE B
Number 0048
FORMER ATTORNEY GENERAL CHARLIE COLE stated that something is wrong
when MAPCO and other producers and distributors can sell gasoline
for a $1.00 a gallon down in Seattle and Alaskans are paying $1.22
in Fairbanks. He further stated that people in Fairbanks were
outraged at these high prices.
Number 0542
KEVIN BANKS, Division of Oil and Gas, Department of Natural
Resources, stated that Commissioner Shively extends his regrets for
not being able to attend. Mr. Banks remarked that good government
has only a limited role in the market place and should be cautious
about expanding that role. He said trying to control prices
creates other kinds of market.
REPRESENTATIVE IVAN IVAN asked Mr. Banks if he was telling the
legislature to stay out of this business. He stated he certainly
could understand that it is a very complicated issue.
MR. BANKS responded that, that's not what he is saying.
REPRESENTATIVE ALAN AUSTERMAN asked if Mr. Banks was involved in
the writing of the contract.
MR. BANKS answered that yes, that he had negotiated with MAPCO.
REPRESENTATIVE AUSTERMAN asked Mr. Banks about how the 15 cents per
barrel was arrived at.
MR. BANKS responded that there were two things in mind when the
Department of Natural Resources entered into this agreement and
established the price. The first is the fact that the department
is compelled to choose a price, which is higher than Royalty is and
in value. The contract is negotiated it is not awarded. He stated
that part of the reason that it's 15 cents per barrel is because in
the negotiations MAPCO didn't offer to pay more.
CHAIRMAN SANDERS asked Mr. Banks if he knew of anything in the
Alaska Statutes that could be changed or what could be done to help
negotiate a better contract for the citizens of the state.
MR. BANKS responded that more work would have to be done and did
not have an answer to that yet.
TAPE 98-5, SIDE A
Number 0954
GINNY FAY, Legislative Liaison, Department of Commerce and Economic
Development, stated that Commissioner Sedwick sends her regrets for
not being able to attend. When asked about high fuel prices in
Western Alaska she responded that prices in Western Alaska are
higher because they have only one supplier (No competition). She
stated that having MAPCO and TESORO as refiners in Alaska provides
a considerable amount of economic benefits to people in Alaska.
Number 1333
CARL HANNEMAN, resident of Fairbanks Alaska, summarized a letter
that he had written to Chairman Sanders. He spoke about jet fuel
and MAPCO'S expansion to increase jet fuel production. He
suggested the Department of Revenue add comparative jet fuel and
gasoline wholesale prices to a web site that already tracks fuel
prices.
Number 1886
JEFF COOK, Vice President, External Affairs, MAPCO Alaska
Petroleum, stated that he was here today in support of HB 469 and
asked that it be passed out of committee so that it may go on to
the Senate. He further stated that this bill is about confirming
the message that Alaska is open for business and Economic
Development.
REPRESENTATIVE AUSTERMAN stated that the cost of fuel in the state
of Alaska is not directly related to the renewal of this contract
(HB 469). If the state wants to solve some of these problems
dealing with the price of gasoline we should do it through a tax
system. He further stated that this contract is important enough
to the state of Alaska so he wants to make sure that it gets passed
this year and that it is time to get it through the system.
COMMITTEE ACTION
The committee took no action.
NOTE:
The meeting was recorded and handwritten log notes were taken. A
copy of the tapes and log notes my be obtained by contacting the
House Records Office at 130 Seward Street, Suite 211, Juneau Alaska
99801-1182, (907) 465-2214, and after adjournment of the second
session of the Twentieth Alaska State Legislature, in the
Legislative Reference Library.
HB 469 - APPROVE SALE ROYALTY OIL TO MAPCO
TAPE 98-5, SIDE A
Number 1849
CHAIRMAN SANDERS announced the next order of business was HB 469,
"An Act approving the sale of Prudhoe Bay Unit royalty oil by the
State of Alaska to Mapco Alaska Petroleum, Inc.; and providing for
an effective date."
CHAIRMAN SANDERS noted it is not his intent to move the bill out of
the committee today, but he also realizes that holding the bill
will not solve the problem.
CHAIRMAN SANDERS called on Jeff Cook from MAPCO Alaska Petroleum
Incorporated (MAPCO).
Number 1886
JEFF COOK, Vice President, External Affairs and Administration,
MAPCO Alaska Petroleum Incorporated, testified in Juneau. He is
hear to support HB 469 and to ask that it be passed out of the
committee today. There are a number of other committee referrals
in the House and it still needs to go on to the Senate. It is very
appropriate to talk about the bill in the House Special Committee
on Economic Development because it is a bill about economic
development and jobs for the city of North Pole, the Fairbanks
North Star Borough, the Municipality of Anchorage, and the state of
Alaska. It is about confirming the message that Alaska is open for
business and economic development. It is about encouraging
existing businesses in Alaska to expand. He cited two companies in
Fairbanks expanding because of the expansion of the MAPCO refinery
in North Pole. The bill is about encouraging one of the few value-
added industries in Alaska to expand and export products to
international air carriers and to bring money back to Alaska. The
expansion will add 14 thousand barrels a day of jet fuel production
and 3 thousand barrels a day of diesel fuel. The 14 thousand
barrels a day of jet fuel will off set what is now being imported
from outside. The bill is about supporting a business that spent
$90 million more with all vendors in 1998 than what it took in
through gross sales due to capital and construction projects. The
bill is about supporting a $70-million refinery for crude now under
construction. The bill is about adding 19 new permanent MAPCO
employees in Anchorage and Fairbanks, and another 300 employees in
MAPCO express stores. It is about supporting 375 construction
workers at its peak this summer. Right now, there are over 100
workers on site. It is about supporting a business that spent $465
million last year with 729 Alaskan vendors, educational
institutions, and charitable organizations. It is about expanding
the $8,351,962 spent with Golden Valley Electric by another $2
million per year to help stabilize electrical rates for commercial
and residential consumers in the Interior and Fairbanks. There
will be about another 25 railroad cars per day going south from
North Pole to Anchorage on the railroad increasing the Alaska
Railroad Corporation's revenue by over $10 million a year, adding
20 new employees and new locomotives. It will also increase
property taxes to the Fairbanks North Star Borough and city of
North Pole. But all of these benefits can only happen if MAPCO has
the additional crude oil allowing it to complete and operate its
expansion.
MR. COOK further stated the city of North Pole, the Fairbanks North
Star Borough, and the Fairbanks Chamber of Commerce have all passed
resolutions endorsing HB 469. He as attended all of the public
meetings and not one person has testified against the bill. This
bill is also about a commitment made a year ago between MAPCO and
the legislature. As the jet fuel tax was passed last year, MAPCO
promised it would expand its refinery and bring economic benefits
to Alaska. MAPCO is moving ahead with that promise and now needs
the royalty oil contract to complete the commitment. He urged the
committee members to send a strong message about economic
development in Alaska by passing HB 469 out of the committee today.
CHAIRMAN SANDERS called for an at ease.
CHAIRMAN SANDER called the meeting back to order.
Number 2120
REPRESENTATIVE ALAN AUSTERMAN stated that he doesn't see the cost
of fuel directly related to the contract. He wondered whether a
tax system could solve some of the problems with the price of gas-
o-line in Fairbanks, Anchorage, and around the state. It seems
that the contract is important enough to the state to get it passed
this year.
Number 2149
CHAIRMAN SANDERS stated he thinks that the bill will pass out of
the committee the first part of next week. There is plenty of time
because soon there will be the one-day notice for scheduling
committee meetings. He suggested to Representative Austerman that
he talk to the other body to get it to move its version forward in
order that the two versions can come together quicker.
REPRESENTATIVE AUSTERMAN asked Chairman Sanders whether he has
scheduled the bill for next week yet.
CHAIRMAN SANDERS replied he has scheduled it for Thursday.
REPRESENTATIVE AUSTERMAN responded that is one week from today.
REPRESENTATIVE IVAN M. IVAN stated he is also concerned about the
bill's scheduling, especially in regards to a conference committee.
REPRESENTATIVE AUSTERMAN stated a conference committee could be a
good week away too because of the work being done in the Senate.
CHAIRMAN SANDERS stated he will talk to the House Finance Committee
for scheduling as well.
REPRESENTATIVE MARK HODGINS asked Chairman Sanders whether the
earliest the bill could be moved out of the committee is one week
from today.
CHAIRMAN SANDERS replied, "Yes."
REPRESENTATIVE AUSTERMAN stated it is further than that because of
the deadline for scheduling committee hearings.
CHAIRMAN SANDERS stated there could be a meeting on Tuesday.
REPRESENTATIVE AUSTERMAN noted it is already passed the scheduling
deadline.
CHAIRMAN SANDERS asked his staff to see what could be done about
the scheduling. He reiterated it is not his intention to move the
bill out of the committee today.
ADJOURNMENT
Number 2247
CHAIRMAN SANDERS adjourned the House Special Committee on Economic
Development at 5:20 p.m.
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