Legislature(2011 - 2012)Anch LIO Rm 220
03/21/2011 09:00 AM House FINANCE
| Audio | Topic |
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| Start | |
| HB110 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 110 | TELECONFERENCED | |
| + | TELECONFERENCED |
HOUSE FINANCE COMMITTEE
March 21, 2011
9:05 a.m.
9:05:32 AM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 9:05 a.m.
MEMBERS PRESENT
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Co-Chair
Representative Anna Fairclough, Vice-Chair
Representative Mia Costello
Representative Mike Doogan
Representative Bryce Edgmon
Representative Les Gara
Representative David Guttenberg
Representative Reggie Joule
Representative Mark Neuman
Representative Tammie Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Representative Charisse Millett; Former Representative John
Harris; Bryan Butcher, Commissioner, Department of Revenue;
Margaret Brown, President and Chief Executive Officer, Cook
Inlet Region, Inc. (CIRI); Ethan Schutt, Senior Vice
President, Land and Energy, Cook Inlet Region, Inc.; Aaron
Schutt, Senior Vice President, Chief Operating Officer,
Doyon, Limited; Tara Sweeny, Senior Vice President of
External Affairs and Communications, Arctic Slope Regional
Corporation (ASRC); Eric Fox, Vice President of Operations,
Camp Services NANA Management Services (NMS); Joe Mathis,
President, NANA Pacific; Isaac Nukapigak, President,
Kuukpik Corporation; Joe Nukapigak, Former President and
Chairman of the Board, Kuukpik Corporation; Tom Leonard,
Communications Manager, Calista Corporation.
SUMMARY
HB 110 PRODUCTION TAX ON OIL AND GAS
HB 110 was HEARD and HELD in committee for
further consideration.
[Note: This meeting took place in Anchorage.]
HOUSE BILL NO. 110
"An Act relating to the interest rate applicable to
certain amounts due for fees, taxes, and payments made
and property delivered to the Department of Revenue;
relating to the oil and gas production tax rate;
relating to monthly installment payments of estimated
oil and gas production tax; relating to oil and gas
production tax credits for certain expenditures,
including qualified capital credits for exploration,
development, and production; relating to the
limitation on assessment of oil and gas production
taxes; relating to the determination of oil and gas
production tax values; making conforming amendments;
and providing for an effective date."
9:05:46 AM
MARGARET BROWN, PRESIDENT AND CHIEF EXECUTIVE OFFICER, COOK
INLET REGION, INC. (CIRI), discussed her personal
background and that she had been the head of the oil and
gas division of CIRI for 35 years prior to her current
position as president. She discussed that CIRI was
headquartered in Anchorage and that its regional boundaries
represented the traditional territorial boundaries of the
Dena'ina Athabascan Indians in Alaska. The company had
operating investments inside and outside of the state and
had recently developed energy projects in Southcentral
Alaska such as the Fire Island Wind farm and Underground
Coal Gasification. The company had also been involved in
the oil and gas business for many years. The company had
acquired land through Alaska Native Claims Settlement Act
(ANCSA) that included legacy oil fields and had
participated in exploration primarily in Cook Inlet and in
a well on the North Slope. The company was concerned about
exploration in Cook Inlet and on the North Slope and was
excited that it currently had a well underway on CIRI's
Kenai Peninsula property. She emphasized CIRI's belief that
North Slope development and exploration efforts had a very
significant impact on the state's entire economy.
9:10:08 AM
Ms. Brown discussed CIRI's ownership interest in two
companies that conducted a significant amount of work on
the North Slope, including Peak Oilfield Service Company
(Peak) and Alaska Interstate Construction LLC (AIC). The
companies were known for their work that included moving
oil rigs, building ice roads, moving heavy modular pieces,
etc. The company had reviewed its budget and had been very
concerned that the estimated income derived from Peak and
AIC reflected the decline in work on the North Slope. The
company had seen the effects in the numbers projected by
Peak and AIC in addition to a reduction in work force for
the two companies. Both Peak and AIC had begun a workforce
reduction the prior year given the decline in work
projects. She was alarmed by the magnitude of the decline
and how the economy as a whole would be impacted. She had
seen reports which had indicated that Alaska was not
business friendly and did not welcome private investment.
The difficulty of doing business in the state had "hit
home" in her office. She discussed a recent dinner with
Governor Parnell and business leaders that included
telecommunications leaders, Alaska native corporations, oil
companies, and tourism leaders. The overall concern that
had been expressed was that private enterprise and private
investment in the state were being "squeezed out." She
explained that CIRI had seen a lot of resistance towards
the ability to put private investment dollars into the
region, specifically related to the Fire Island Wind
project. She highlighted that she had also been personally
looking for business opportunities outside the State of
Alaska. She believed that private capital would move
towards the highest likelihood of investment return and a
balance between return versus risk. She did not want to see
private investment dollars slip away in Alaska and believed
it was necessary to examine aspects of the business climate
that were resulting in the decline. She relayed that her
husband was a geologist who had worked in harsh and
challenging conditions in Prudhoe Bay. She thought he would
agree that some of the easy oil had already been found.
9:16:27 AM
Ms. Brown opined that it was important to see the
appropriate return for the risk taken by investors and to
recognize that the oil that remained on the North Slope
would be difficult to produce. A balanced risk versus
return would create a "robust" economy. She discussed that
the decline in the throughput on the North Slope had been
obscured by the significant rise in oil prices in the past
several years. The state had benefited from high oil
prices; however, because the throughput decline had been
masked, there was a lack of understanding about the true
vulnerability of the pipeline. She believed that there was
a need for legislative reform and that HB 110 worked to
address concerns of the oil industry and the general
public. She did not believe the status quo was an option.
She disagreed with the approach that focused on how much
the state would be "giving away" to the oil companies and
emphasized that without a competitive environment on the
North Slope, there would be no oil companies to invest and
develop in the area. Business leaders throughout the state
were concerned and there were several grass roots
organizations that were researching where the competitive
nature could be improved in the state. She thought it was
indicative of the broad concern that people shared across
all business segments about the lack of competition on the
North Slope. She did not profess to know every nuance about
HB 110, but believed the bill was on the right track. She
noted that Alaska had a royalty stream that allowed for
benefits when production and oil prices were high and she
thought that the focus should not be on squeezing every
cent from oil companies in the tax structure. She contended
that Alaskans were looking for a balance that would allow a
long-term robust business climate to persist on the North
Slope that would spread to the rest of the state.
9:21:07 AM
ETHAN SCHUTT, SENIOR VICE PRESIDENT, LAND AND ENERGY, COOK
INLET REGION, INC., was responsible for leasing of oil and
gas production on CIRI land in Cook Inlet and for general
energy development. He relayed that CIRI had encountered a
significant amount of resistance to the Fire Island Wind
project, primarily because CIRI was a for-profit business.
He had heard several times in the past year behind closed
doors that there was no place in the railbelt electrical
market for a for-profit energy company. He believed that
the idea that there should not be a profit motive was an
unacceptable premise and had been a significant obstacle to
the project on Fire Island. The company was currently
looking at several wind farm investments outside Alaska,
which essentially diverted investment money away from the
state. He expressed that when local businesses felt
unwelcome they would take their business outside. He had
visited Calgary, Alberta in the spring and had discovered
that Calgary had been rewarded for an abundance of energy
development in oil fans, oil and gas leasing,
unconventional oil and gas, CO2 tertiary recovery, etc. His
visit to Calgary coincided with two negative pieces of news
for Alaska. During his visit to Calgary there had been
Nigerian engineers looking at the Agrium plant in Nikiski
for possible dismantling of the energy infrastructure in
Cook Inlet.
9:25:24 AM
Mr. Ethan Schutt had also heard the announcement that
ConocoPhillips was closing the LNG (Liquid Natural Gas)
export terminal in Nikiski. He believed the state had
overreached its power to tax and had in turn driven
business away. He did not think that it was helpful to make
"hysterical" pronouncements in the press about the high
profits that oil companies were making and the implication
that profit motive was bad. He relayed that exploration was
both very costly and very risky and that the state needed
exploration investment dollars. He added that the chance of
oil and gas exploration success was less than 10 percent;
therefore, companies needed to be rewarded for successful
investment. He vocalized that HB 110 was a good vehicle for
change and that CIRI appreciated the governor's efforts.
Representative Doogan wondered whether Mr. Ethan Schutt did
not believe that law makers were making enough effort to
incentivize exploration. He believed that law makers had
been under the impression that they were working hard to
incentivize exploration. Mr. Ethan Schutt responded that
there were exploration tax credit incentives for companies
who did not have a significant amount of production;
however, companies who had "real" production paid
significantly higher taxes. He elaborated that the tax
credit incentivized companies that were new to the state
and was not in balance when there was both exploration and
production. Additionally, there was a difference between
the power to tax and the current royalty system. Resource
owners had a royalty interest and it was important to not
"squeeze" too much out on the tax structure because the
power to tax was a governmental function. The sentiment
that the oil belonged to Alaskans and that the state should
get its fair share was specific to the "royalty regime." He
explained that the tax regime related to what was fair in
relation to the state as a government and its power to tax.
Representative Doogan expressed interest in any information
that would help law makers know whether they were not doing
something right. He was under the impression that
approximately half of the $900 million spent in the prior
fiscal year had gone to established oil companies in order
to incentivize exploration and development.
9:30:08 AM
Mr. Ethan Schutt recommended further thought about the
belief that incentivizing oil companies to invest more in
the established fields, particularly in Prudhoe Bay was not
in the state's interest. He believed that the legislature
may want to look at tweaks to incentivize additional
production and production enhancement investment within
established oil fields, because the reserves on Prudhoe Bay
that were not attainable with primary and secondary types
of recovery may have been the state's largest oil asset on
state land. The best place to find more oil was in an
established oil field and the reserves left in Prudhoe Bay
were significant; however, the tax incentive structure in
Alaska related to true exploration outside of established
units. He relayed that CIRI was not present to carry the
water for big oil and that it would be necessary to get
answers from oil companies directly.
Vice-chair Fairclough asked about CIRI's perspective on
actions related to oil taxes that the state could consider
in order to help create a business friendly environment.
Ms. Brown responded that CIRI would like to see an
established fair tax rate that was not overreaching and
that would allow the free enterprise system work. The idea
that the profit motive of private enterprise was not
appropriate was the most alarming to CIRI. It was important
to have an appreciation for where private enterprise,
including native corporations, small companies, and oil
companies, fit in Alaska in order to move forward. She
explained that in Cook Inlet investments CIRI had
experienced permitting delays and had run into the notion
that private enterprise did not belong in the production of
power generation. The state was founded by people with a
"can do" attitude and she worried that Alaska had come to a
place where people no longer had that attitude and could
not design a future to move towards. Additionally, she
thought that discussions related to the type of work
commitments that would be obtained under lower taxes were
beyond the scope and did not represent healthy dialogue
regarding the tax regime. She believed that the demand for
a particular work commitment would happen in unit operating
and lease agreements required by royalty owners.
9:35:58 AM
Vice-chair Fairclough wondered how many workers had been
impacted and how CIRI would reposition those workers who
were no longer employed at Peak and AIC as a result of what
was characterized as "dramatic" decline. Ms. Brown did not
know the exact number of workers that had been impacted,
but the decline had been more dramatic than expected. She
explained that both companies had made workforce reductions
and that although it was not always possible, each company
worked hard to find work for employees in other locations.
The companies did not want to lose trained and qualified
workers; however, the reality was that without available
work it was not possible to retain employees. The companies
worked hard to maintain the balance between retaining a
trained workforce without running into the red.
Representative Wilson asked whether it was state
regulation, federal regulation, or non-profit organizations
that did not support private business. Ms. Brown replied
that CIRI had currently only had dealings with state
regulation through the Department of Natural Resources
permitting process and were pleased with the agency. She
believed that the problem for people was caused by a
rattling of the status quo. She knew it was not easy, but
it was important to be able to embrace change and recognize
that there were systems in the state that were not serving
the people of Alaska the way that they should. She did not
think that Alaska's unique and special status could be used
as an excuse anymore. She professed that Alaska was not
that unique and companies were going to North Dakota,
Alberta, and overseas for oil exploration and development.
9:41:41 AM
AARON SCHUTT, SENIOR VICE PRESIDENT, CHIEF OPERATING
OFFICER, DOYON, LIMITED, discussed that Doyon was the ANCSA
regional corporation for Interior Alaska. The company was
headquartered in Fairbanks and 13,697 shareholders out of
18,158 lived in Alaska. He expressed that Doyon supported
HB 110, but preferred to see certain portions, such as
"bracketing," implemented during the current year. Like
CIRI, the company believed it was time for change. The two
primary goals set forth by the board of directors were to
be as profitable as possible and employment opportunities
for shareholders. Doyon had three primary pillars of the
business that produced revenue and jobs, including oil
field services, government contracting, and natural
resource development. There were four oil field businesses
that operated primarily on the North Slope: Doyon Drilling,
Inc. had approximately 300 year-round employees and
operated drilling rigs; Doyon Universal Services employed
approximately 850 workers and was a food services,
security, maintenance, and emergency medical company; Doyon
Associated, LLC was a pipeline and oil field infrastructure
construction company that employed 150 seasonal employees
and much fewer year-round; Doyon Emerald was an engineering
and technical consulting firm that had 40 employees. He
emphasized that approximately 90 percent of the employees
were Alaskans working in Alaska. Approximately 75 percent
or $300 million of the corporate assets were invested in
the combined oil field services primarily on the North
Slope.
9:46:38 AM
Mr. Aaron Schutt discussed Doyon's second pillar, natural
resource development. Doyon was Alaska's largest private
landowner and had 12.5 million acres and roughly half of
the acreage had been selected for its resource development
potential. He explained that roughly half of the lands
selected for resource development had been selected for oil
and gas potential. The company had partnered in 2005 on a
multi-year commitment with the State of Alaska in a gas
exploration project at Nenana on lands owned by the state,
Alaska Mental Health Trust, and Doyon. A well had been
drilled in 2009 without the hoped success, but the company
would run another seismic exploration during the upcoming
winter in the Nenana basin. Doyon also owned two million
acres in the Yukon Flats with 500,000 selected for oil and
gas potential. In 2010 Doyon had conducted a 100 percent
ownership seismic program near Stevens Village and would
continue ongoing efforts in the Yukon Flats. As a service
contractor and investor in exploration activity, Doyon was
aligned with the State of Alaska regarding the success of
the oil and gas industry in Alaska. The bottom line was
that the company believed that it was time to adjust the
oil and gas tax structure in Alaska. Doyon had 1,500
employees that relied on the success in the oil fields. The
company believed that there were still vast underdeveloped
oil and gas opportunities in Alaska. Like CIRI, Doyon
believed that the best production opportunities were in
existing fields. There had been a loss of jobs and revenue
in Doyon's business segments during the past several years.
The company believed that the current oil and gas tax
policy was a part of the problem. He reiterated that Doyon
supported the bill but did want to see portions of the bill
implemented during the current year.
Representative Guttenberg wondered whether there was any
part of the oil and gas tax structure, administrative
codes, or permitting that should be changed to incentivize
or motivate exploration and development. He expressed that
many law makers pointed to Doyon's success in the Interior
as a game changer for energy in the state. Mr. Aaron Schutt
replied that the exploration incentives that the state
provided were very motivating for exploration outside of
existing fields. At the beginning of the Nenana project
Doyon was a 20 percent working interest owner. He explained
that Doyon was very committed to the project, but that its
partners who at one time owned up to 50 percent owner
interest were not Alaskan companies and looked at the
lifecycle of an oil and gas development project. Some of
the companies were purely exploration and the major oil
producers were involved with the exploration to production
stages. It was important to look at each opportunity and
the players at the table. A detriment to the company was
its inability to attract major producers that would be
present for the "long haul" from exploration through
production. The major producers that could invest hundreds
and billions of dollars in Alaska had not expressed the
interest that Doyon hoped.
9:53:19 AM
Representative Gara asked whether the tax structure in the
Yukon Flats was much lower than the ACES tax structure. Mr.
Aaron Schutt did not know. He explained that due to the
ANCSA 7(i) structure, the company strategy was to jumpstart
exploration activity. He added that Doyon would not be a
significant working interest owner in any development in
the Yukon Flats.
Representative Gara wondered whether the difficulty Doyon
had experienced in attracting producers to the project
could have been due to a reason other than the tax
structure given the possibility that tax was lower in the
Yukon Flats. Mr. Aaron Schutt replied that it was not
entirely clear why the company had not been able to attract
major players to the Yukon Basin. He expounded that at the
forefront of a rank exploration project there was major
risk and that more than 90 percent of rank exploration
ended in dry wells or less than successful wells. The
exploration credits helped and were driving Doyon's
activity in the Yukon Flats and Nenana. He relayed that the
lifecycle of business opportunity included an analysis and
predictability of the tax structure.
Vice-chair Fairclough referenced that from some people's
perspective "everyone in the world could make large profits
except oil." She asked about the difference between an
exploration and a development company. She explained that
exploration seemed to have credits that were doing what the
tax structure had intended to do and were attracting
smaller explorers who were interested in locating smaller
pools of oil or another Prudhoe Bay. Mr. Aaron Schutt
responded that he was not an oil and gas expert, but
provided his perspective. He explained that major producers
had the ability to conduct exploration and to see the
project through to production; however, because production
on large or remote fields were billion dollar investments,
smaller companies with smaller balance sheets, such as
Armstrong Gas Company LLC, needed to "sell down" their
working interests to major producers after finishing the
exploration period.
Vice-chair Fairclough explained that a conversation on the
House floor had lead Alaskans to believe that everything
was fine because there were incentives for exploration
companies who were aware of the tax base and consequently
there was no need to address the severance tax; however, it
was important to understand that the equation had multiple
parts and involved both exploration and production. Mr.
Aaron Schutt agreed. Explorers were important, but the
primary goal was production. He elaborated that when there
was a transition from the explorer to the producer that
often there were delays related to locating the appropriate
partner, the transactional process, and the short
exploration season.
9:59:08 AM
Representative Edgmon wondered what advice Mr. Aaron Schutt
had to help find a balance between increasing business to
address the "precipitous" production decline and the
possible impact of a budget shortfall. As a legislator that
represented rural communities he recognized the importance
of increased business but was weary of the consequences of
a potential budget shortfall and the impact it would have
on rural Alaska. Mr. Aaron Schutt replied that there had
been little discussion about the secondary impact of oil
tax policy on contractors. Doyon was aware of the
investment and activity decline as commodity prices had
increased and they had not seen an increase in contracts,
opportunities, and in secured contractor rates. It seemed
that with high commodity prices that there would be more
activity and higher wages, but Doyon had not been able to
command higher contract rates. The contractor rates
directly impacted employee wages and Doyon had been
struggling to maintain their workforce level.
Representative Doogan wondered whether Doyon's work on the
250,000 acres in the Yukon Flats was primarily related to
oil or gas. Mr. Aaron Schutt responded that it was aimed at
oil exploration.
Representative Doogan asked for a definition of a
"contractor" as it related to the oil industry. Mr. Aaron
Schutt responded that "service provider" was a more
appropriate term. He explained that Doyon contracted with
major oil producers to provide various services, including
drilling, security engineering, food service, construction,
etc.
Representative Doogan thought that major oil companies had
reduced exploration prior to the implementation of ACES
and; therefore, a direct correlation may not have existed
between the changes that were attributed to ACES and the
decline.
10:05:03 AM
Representative Costello asked what portion of HB 110 Doyon
wanted to see implemented immediately. Mr. Aaron Schutt
responded that an immediate change from progressivity to
the bracketed tax provision would be helpful. He noted that
it could take companies years to implement a plan;
therefore, earlier implementation of the bracketing
provision would result in more activity sooner rather than
later.
Representative Neuman wondered how changes in the tax
structure over the past seven to eight years had impacted
job security at Doyon. He asked how changes to the current
system would affect employment opportunities at Doyon in
the future. Mr. Aaron Schutt replied that five years
earlier commodity prices were high and Doyon had
experienced difficulty finding technically qualified
employees. The lower commodity prices that followed made it
hard to keep contracts; however, Doyon had been fortunate
and had maintained a significant number of its contracts.
He detailed that industry competitors had not been as
fortunate and the loss of qualified workers had reduced the
trained job pool in Alaska and was bad for all companies.
Representative Neuman asked whether changes in the tax
structure were needed in order to revive oil and gas job
opportunities that had been strained. Mr. Aaron Schutt
believed that investment decisions by major producers were
influenced by the tax structure and as a result there were
fewer job opportunities in Alaska.
10:09:06 AM
Co-Chair Thomas asked how to keep money and jobs in Alaska.
He did not want to provide oil tax breaks just to see the
money leave the state for other locations such as North
Dakota and Mississippi. Mr. Aaron Schutt replied that it
was in the purview of the legislature to determine the
appropriate balance between incentivizing investment and
the tax level. Doyon believed that it was time to make a
change given that its principal concern was higher
activity.
Co-Chair Thomas did not have a problem providing tax relief
to oil companies; however, he reiterated his concern that
easier and cheaper production in other states would take
money away from Alaska's economy. Mr. Aaron Schutt
responded that the highest investment return was in
existing fields and it was important to discuss what could
be done to increase production in areas like Cook Inlet and
Prudhoe Bay that had seen little investment for many years.
Investment decisions on items such as tertiary recovery in
existing fields were related to tax policy. He expounded
that development of infrastructure in places like North
Dakota was more expensive and riskier than the production
of oil on known fields.
10:12:43 AM
TARA SWEENY, SENIOR VICE PRESIDENT OF EXTERNAL AFFAIRS AND
COMMUNICATIONS, ARCTIC SLOPE REGIONAL CORPORATION (ASRC),
discussed that ASRC had been established pursuant to ANCSA
in 1971. The corporation was headquartered in Barrow and
had subsidiary offices in Anchorage and across the U.S. She
relayed that ASRC was owned by 11,000 Inupiaq shareholders
who lived in various villages in Alaska. The corporation
was the largest locally owned and operated business in
Alaska and had five diverse lines of business that included
construction, resource development, government services,
energy support services, petroleum refining and marketing.
The corporation also operated a BIDCO financial lending
service. She explained that ASRC Energy Services, Inc. was
the largest Alaska based oil and gas services company, had
over 3,000 employees across the state, and had the only
Alaskan owned refining and fuel marketing operation in the
state. The corporation worked with Alaskan businesses of
all sizes across all economic sectors, had 4,000 employees
working across the state, and approximately 6,000 working
in the Lower 48. She communicated that ASRC represented a
broad population with diverse political views, cultural
experiences, and personal beliefs, who shared the goal of
job protection and growth in Alaska.
Ms. Sweeny urged the legislature to reform ACES. She
emphasized that the state needed a competitive tax
structure to attract new investment and production on the
North Slope and to put an end to the decline. She stressed
that the state could not expect to attract new investments
with the ACES tax rate that imposed double and triple the
rates of Wyoming, Texas, and North Dakota. She vocalized
that the oil and gas industry was the "bedrock" of the
Alaskan economy. The industry accounted for approximately
one-third of the state's economy and generated close to 90
percent of its general fund revenue. The industry also
helped to provide jobs in other sectors as well throughout
the state. She stressed that oil had peaked at nearly two
million barrels per day in the late 1980s and currently the
number had been reduced to approximately 600,000 barrels
per day. She stated that at the current rate of decline the
pipeline could shut down within a decade and that the loss
of jobs and damage to the economy could be irreversible.
10:17:54 AM
Ms. Sweeny strongly believed that reform of ACES would
increase investment and job opportunities. She accentuated
that ACES reform was not about saving money for producers
but was for employee job protection, job growth for future
generations, and to create a sustainable future for the
company. She delineated that ASRC Energy Services had heard
from large and small, international and national companies
that were excited about investing in Alaska, but were
waiting for ACES to become more competitive. She shared
that without ACES reform the clients would invest dollars
elsewhere. She relayed that lost work opportunities were
devastating at ASRC Energy Services and that the company
continued to lose out on new work related to engineering,
construction, operations, and maintenance. She acknowledged
the complexity of the issue and stressed the importance of
reform to attract new investment to the state.
10:20:07 AM
Representative Hawker wondered about the market that the
Petro Star refineries had in Interior Alaska and who
depended on them. He explained that management of the Trans
Alaska Pipeline System (TAPS) had testified the prior week
that the shutdown of TAPS and the refineries (one of which
was owned by ARSC) would be a risk to health, life, and
safety particularly in the Interior. Ms. Sweeny replied
that there was a large client base that was dependent on
the products that were sold and distributed by Petro Star.
The refinery was located in North Pole and Petro Star had a
significant presence in rural Alaska including the Bristol
Bay and Koniag regions. She was happy to get the committee
specific numbers.
Representative Hawker requested a market report that would
provide detail of the statewide dependence on TAPS.
Additionally, he wondered whether she could provide detail
on why a tax change would bring a stronger and more robust
economy to ASRC and its shareholders. He referred to her
earlier testimony that the lost opportunities had been
devastating for ASRC subsidiaries. He also discussed Co-
Chair Thomas' concern that the state may provide tax breaks
only to have the money invested outside of Alaska. Ms.
Sweeny answered that there had been conversations with
potential investors and without ACES reform it would impact
ASRC's ability to do more business in Alaska. The
corporation employed Alaskans, shareholders, and other
Alaska Natives and the impacts felt in rural Alaska were
real in that jobs were a very good economic indicator and
provided stability for the company's people.
10:25:18 AM
Representative Hawker understood that ASRC needed to
protect corporate business plans, but surmised that Ms.
Sweeny had corporate experience that led her to believe
very strongly that investment dollars would come to Alaska
in the event that ACES was reformed. Ms. Sweeny responded
in the affirmative.
Co-Chair Thomas explained that his concern about money
leaving the state was directed at "big money" and not at
regional corporations. He was a regional corporation board
member and he did not want money that would have filtered
down to regional corporations to be taken away from Alaska.
He emphasized that was not directing an attack at regional
corporations.
Representative Doogan asked Ms. Sweeny for more detail
about what she meant by "reforming ACES" and how she
thought reform should take place. Ms. Sweeny responded that
ASRC was supportive of HB 110 and of a climate that would
increase certainty, stability, and jobs in Alaska. The
corporation believed that the current system was not
working and that the specific structure of the reform was
at the purview of the legislature.
Representative Wilson wondered whether Alyeska was correct
in its prediction that there would only be two weeks' worth
of oil for the Interior in the event of a pipeline
shutdown. Ms. Sweeney replied that she would get the
numbers.
Representative Wilson asked whether ASRC wanted the
effective date of the bracket provision in HB 110 to be
changed to the current year. Ms. Sweeney verified that ASRC
was supportive of immediate implementation of the bracket
provision that had been discussed by Doyon Vice President,
Mr. Aaron Schutt.
10:29:15 AM
Representative Gara wondered why ASRC thought that a
reduction to the tax rate would increase oil activity when
there had not been increased activity when the tax rate had
been zero on most fields on the North Slope until 2006. He
discussed that there were two different items being
weighed, one of which was an increase to tax credits to
incentivize exploration. He explained that the state could
increase the credits to 50 percent and that companies would
not get the money unless the exploration wells were built.
He was more sympathetic to the tax credits compared to the
second item that related to a reduction in the tax rate,
which had not worked well in the past. He expounded that
despite an oil price increase from $20 a barrel to $40 a
barrel in 2004, two years later there had been less
employment and less investment on the North Slope than
there was currently. He elaborated that the production
decline was approximately 40 percent between 1998 and 2006.
He understood that it was difficult to speculate which
change would alter the behavior of oil companies. Ms.
Sweeney replied that from a service provider standpoint
that the current system was not working. She could not
speak directly to the decisions that were made by the
industry, and although ASRC employed thousands of Alaskans
and provided good services to the industry, it was losing
out due to the current tax structure.
Representative Hawker was concerned that prior questions
had presumed that big oil had quit exploring before ACES
and that nothing had occurred during the ELF [Economic
Limit Factor] tax period. He asserted that previous
testimony had provided an extensive list of insignificant
developments that had taken place during the ELF tax
structure. He stated there had also been a significant
number of businesses that had failed because of
unsuccessful efforts.
10:32:41 AM
AT EASE
10:47:56 AM
RECONVENED
ERIC FOX, VICE PRESIDENT OF OPERATIONS, CAMP SERVICES, NANA
MANAGEMENT SERVICES (NMS), discussed that NMS was a
subsidiary of Nana Development Corporation (NDC). He
explained that Nana Regional Corporation was owned by
12,500 Inupiat who had originated in Northwest Alaska. He
began working for Nana 20 years earlier on the North Slope
and he was proud to be an owner/shareholder of his
employer. He relayed that NANA supported HB 110. The
corporation believed that the bill would lead Alaska to be
in a more competitive global position. The increased
competitive environment would also increase oil and gas
exploration and development. Increased oil and gas
exploration would allow several of NANA's companies to
compete for increased work. The corporation would then be
able to help the Alaska economy grow with private sector
jobs and could provide opportunities and employment to NANA
shareholders. He discussed that unemployment was a problem
in most of the 11 Northwest Alaska regions. He emphasized
the importance of NANA's mission to improve the quality of
life for its people by maximizing economic growth and
protecting and enhancing its land.
Mr. Fox shared that NANA had a long history of serving the
oil patch in Alaska and had started working on the North
Slope not long after the passage of ANCSA. Nana Oilfield
Services, Inc. had provided services for the industry for
four decades and NMS had served the industry for over 30
years. In recent years NANA WorleyParsons had designed and
engineered new North Slope facilities and NANA Construction
had built modules for use on the oil fields. He provided a
quote from NDC President, Helvi Sandvik regarding the state
of the oil industry:
The State of Alaska's taxes and the federal
government's regulation oversight of Alaska's resource
development industry are not good for business
investment. Many of our companies serve the oil
industry. Until the state changes its tax structure
the oil industry will not spend the kind of money it
has…to further develop Alaska's oil fields. The
industry will look to other places in the world to
spend its money, so our companies that serve the oil
industry will continue to face tough times. If the
companies we serve are discouraged from investing in
Alaska that means less work for our businesses and our
people.
Mr. Fox was honored that he had been named shareholder of
the year at the NANA annual meeting the prior week and took
his responsibility seriously. He stressed that ACES was
having a negative impact on the interests of NANA, his
region, and his people. He communicated that NMS had seen
the direct impact of the lack of growth of the oil and gas
industry in the state. The company had 2,400 employees and
was among the 10 largest employers in Alaska. Over half of
its revenues came from providing services to the oil and
gas industry, including, food service, housekeeping,
facilities management, maintenance, remodeling projects,
wastewater management, logistics and security, and crime
prevention and investigation, emergency medical response,
leak detection, transportation, environmental and safety
training, and temporary staffing. The company was committed
to providing employment and career advancement for its
shareholders. Nearly one quarter of the workforce was
Alaska Natives and 12 percent to 14 percent were NANA
shareholders. The company provided air transportation for
NANA shareholders to travel to work on the North Slope. He
emphasized that any contraction of the oil industry reduced
jobs, earnings, and the ability for rural Alaska Natives to
work close to home. As oil production declined in Alaska
the oil producers were forced to demand cost cuts from
suppliers like NMS. The company was faced with cutting its
costs, including the benefits it provided to its employees.
The lack of investment from the oil and gas industry was
evident when NMS Camp Services recently lost a $5 million
contract that it had serviced since 1989. He explained that
the winning bid had cut employee wages from the existing
contract by 20 percent and that NMS Camp Services could not
have made that wage reduction in good conscience,
especially in light of increased health insurance premiums.
10:54:39 AM
Mr. Fox shared that he had spent several days on the North
Slope with NMS President Mary Quin the past November.
Employees had communicated their fears and distress about
greater health care costs and lower profit margins. He
explained NANA was not the only company that had been
impacted by the decline and that the oil industry had shed
1,700 jobs over the past two years.
JOE MATHIS, PRESIDENT, NANA PACIFIC, discussed that NANA
Pacific was a subsidiary of NDC. He had been a NANA
employee for close to three decades and was proud of the
work that the company did for its shareholders and for its
contribution to the Alaskan economy. He relayed that
despite the vast oil resources remaining on the North Slope
that production continued to decline at a serious rate. He
stressed that North Dakota could surpass Alaska's
production in three to four years. Without new oil coming
on line, production would be down to approximately 250,000
barrels per day in 2020, which would cause serious
operational challenges for the pipeline. The reduced
exploration and work on the North Slope made it harder for
NANA to help its region, shareholders, and Alaska. He
observed that Alaska had once been the top oil producer in
the nation, but it was currently number two and would soon
slip to number four. He contended that investment dollars
were bypassing Alaska for North Dakota, Alberta, Australia,
and Russia. He discussed that there would be only one
exploration well drilled on the North Slope in the winter
of 2011 compared to approximately 170 active drill rigs in
North Dakota. The prior week he had attended RES 2011, the
largest conference of tribes and native peoples in the U.S.
and had met with tribes that were based in North Dakota,
Montana, and Oklahoma. He wished he could have been as
excited about Alaska's oil field future as the tribes were
about the growth prospects and new oil field development in
their states. He emphasized that Alaska was not competitive
compared to other oil regions and that the total marginal
government take on a barrel of $100 oil was 82 percent,
compared to 55 percent in Alberta and 43 percent in the
Gulf of Mexico.
Mr. Mathis stressed that Alaska's investment climate was
driving away business and it was necessary to reverse the
trend. He stated that a new drill site would include goods
and services, engineering, permitting, building roads and
gravel pads, materials for local vendors, modules, power
supply from source to drill site, backup power,
transportation, operators, and fulltime maintenance. NANA
had invested $20 million in the NANA Construction Big Lake
facility where modules for the resource industry were
built. He stated that an increase in Alaska's
competitiveness would mean there would be direct work for
NANA Construction to build modules. There would be 20 to 70
new jobs for residents in the Mat-Su Valley, Eagle River,
and Anchorage. He discussed that the NANA subsidiary NANA
WorleyParsons was an industrial engineering company that
had been hurt by the downturn. He explained that NANA
WorleyParsons directly benefited from new projects by oil
and gas companies because of its role in the engineering
and design of new facilities. When the company had new
projects it hired new employees and helped the entire
economy grow. He reported that the impact of ACES was
currently hitting the state hard.
11:00:17 AM
Mr. Mathis elaborated that the combination of the recent
recession and ACES had been devastating to the oil
industry. He discussed that NANA WorleyParsons had peaked
in 2008 with 675 employees and $115 million in revenue and
was currently operating at about half that size. Highly
qualified employees had left the state for more attractive
career opportunities and were creating a "brain drain" in
Alaska. He explained that senior designers were looking to
learn about new software that was used in offshore industry
and without change in the exploration action they would
look to a future outside of the state. He voiced that other
oil producing regions had recovered from the recession and
that some areas were currently growing or booming. There
were new projects occurring in Texas, Alberta, Australia,
and throughout the Middle East; however, Alaska was no
longer an attractive place to do business. He accentuated
that investment in new projects took years and without
action the way of life in Alaska would change dramatically.
He highlighted four reasons why HB 110 would create jobs
and increase production. First, the brackets for the
progressive portion of the production tax would reduce one
of the highest marginal tax rates in the world. The
brackets would be similar to income tax brackets; therefore
when the price of a barrel increased, only the incremental
portion of the barrel would be taxed at the higher rate.
Second, the bill promoted infield drilling with tax credits
that were increased to 40 percent on the North Slope and to
equal tax credits in the other parts of the state. Third,
the bill calculated taxes on an annual basis of average
prices and costs as opposed to volatile monthly
calculations. Fourth, HB 110 allowed companies to take tax
credits in one year instead of spreading them over two
years. He emphasized that he had come to the state to help
build the Trans Alaska Pipeline and did not want to see it
torn down.
Co-Chair Stoltze related personal experience regarding his
father's work at NANA Purcell Security. He expressed that
the current discussion had been less about the details of
HB 110 and more about the story of the industry in Alaska
and the economy.
11:04:08 AM
Representative Gara wondered whether there were producers
in Alaska that were leaving the state to work in North
Dakota. He observed that the committee had received very
little information regarding development in North Dakota.
He understood that the developers in North Dakota
represented a different group that did small fields, used
the fracking method, and used different technology and
production than was used in Alaska. He did not believe
there was a major overlap between the companies that were
conducting business in Alaska and the companies in North
Dakota; therefore, unless there was proof that companies
were leaving the state for North Dakota, the idea that
companies in Alaska were fleeing to North Dakota did not
hold water. Mr. Mathis did not know which producers were
taking business to North Dakota. He thought that
ConocoPhillips may have been interested in working there,
but that it would be necessary to get the answer from the
producers. There were service companies that had not
necessarily been leaving but had been sending operations to
North Dakota. In an email received that day, the Mandan
Tribe in North Dakota had asked Mr. Mathis whether he would
be interested in providing them with oil field service
work. He explained that North Dakota was working to attract
industry and that he would hate to see the valuable
expertise in Alaska leave the state. He elaborated that the
expertise would be driven by the amount of work that was
available and that it would move wherever it was needed.
Representative Gara asked whether it was understood that
the actual tax rate paid by an oil company was much less
than the marginal tax rate. He explained that the marginal
tax rate at $100 a barrel only measured the tax rate
between $99 a barrel and $100 a barrel. Mr. Mathis did not
know.
Representative Neuman wondered how to show that there would
be increased oil in the pipeline as a result of a change to
the tax system. Mr. Mathis replied that it was very
difficult to provide a guarantee regarding how oil
companies would spend their money. There were no more
guarantees on how companies would spend their money than
there were on how and where Alaska residents would spend
their Permanent Fund Dividend checks or how people would
spend an energy check that was provided to offset high
energy costs. He emphasized that there would not be a
different outcome in production without a change.
Vice-chair Fairclough believed that committee member input
was important; however, it was not helpful to make
accusations that were based on personal opinion. She
discussed that Cruz Construction was a service provider in
Alaska that had experienced the secondary effects of the
current taxation structure. She understood that it was
subjective that the tax structure was the cause and effect;
however, from the perspective of Cruz Construction it was
the cause and effect. The company was repositioning all of
its assets in North Dakota and the number of employees in
Alaska had been reduced from two hundred down to ten and
the number could potentially go down to three or four. She
emphasized that the claim that there had been no evidence
of loss of jobs on the North Slope represented a
perspective. She encouraged committee members to ask
questions that could be answered with fact. She thought the
question regarding the difference in development strategies
in North Dakota from Alaska was important. She explained
that development in North Dakota was occurring on private
property and that the same government regulations and
permitting processes were not required.
Vice-chair Fairclough asked Mr. Fox how to reframe the
conversation with Alaskans related to the difference
between explorers and producers and who would be put to
work under each scenario.
11:11:49 AM
Mr. Fox responded that exploration and production were
outside of the services that NMS provided. The company was
involved in the production phase with services such as
security, camp services, facility management, etc. The jobs
that NMS provided were frequently available to
shareholders. There was a charter flight to Kotzebue that
had previously operated once a week because there were
enough jobs on the North Slope to call for a frequent
flight; however, currently the flight operated every two
weeks given the decline in jobs, particularly in Deadhorse.
He explained that the shareholders were experiencing the
decline first-hand and that the company had pumped millions
of dollars in revenue into the NANA region that was
whittling away. He emphasized that rural Alaska desperately
needed the income.
Vice-chair Fairclough wondered whether the company had seen
job loss from service organizations. Mr. Fox responded in
the affirmative. He explained that exploration did not fall
into the NMS realm and that the job loss was on the
technical end.
Mr. Mathis added that NANA WorleyParsons had seen a 50
percent decline from 678 employees down to fewer than 300.
Representative Doogan referred to earlier testimony
regarding 1,700 lost jobs in the past few years and
wondered where the loss had occurred. Mr. Mathis responded
that the job loss had occurred in the oil industry.
Representative Doogan asked for clarification that the job
loss was within the oil industry in Alaska. The Department
of Labor and Workforce Development (DLWD) data showed that
oil and gas employment had gone from 12,900 in 2008 to
13,000 in 2009 and was projected at 12,700 in 2010. The
department's numbers did not reconcile with the statement
that 1,700 jobs had been lost. Mr. Mathis replied that he
would provide the committee with the source of the 1,700
figure.
11:15:47 AM
Representative Gara explained that the committee had not
heard any evidence that producers had been leaving the
state for North Dakota and that he would be concerned to
find out that they were. He discussed that there was
evidence that completely substantiated Vice-chair
Fairclough's point that contractors were looking for work
wherever they could get it, whether it was in Alaska, North
Dakota or both. Mr. Mathis replied that he did not mean to
infer that producers had been closing up and leaving the
state.
Vice-chair Fairclough remarked that the major producers
were currently repositioning their assets and competing in
a global market. She would continue to pursue her belief
that because the state was competing with a global market,
the tax structure was causing Alaska to lose out on its
larger investments.
Representative Guttenberg had heard concern that the firm
CH2M Hill had been consolidating work on the North Slope
instead of outsourcing it. He wondered whether NMS had lost
work to another company. He discussed that it was difficult
to reconcile all of the different factors including the job
loss at NMS and other companies and the DWLD numbers. Mr.
Mathis replied that job loss had been a result of canceled
projects and was not due to competition. He could not speak
for CH2M Hill.
Representative Guttenberg was concerned that there was a
conflict between different perceptions and some of the
statistics provided by DWLD.
Representative Joule hoped that the state never lost sight
of the importance that Alaska Native corporations played in
the overall state economy.
Co-Chair Stoltze explained that although the topic was on
oil tax, the discussion was an opportunity to help Alaskans
understand that the corporations were important engines for
the state economy.
11:20:40 AM
ISAAC NUKAPIGAK, PRESIDENT, KUUKPIK CORPORATION, discussed
that the corporation was under ANCSA for the village of
Nuiqsut located in the Colville River delta. Nuiqsut was
eight miles from the Alpine oilfield processing facility
and four miles from Nanuq, one of the Alpine oilfield
satellites. The Alpine oil field was located on the western
edge of existing oil and gas development on the North Slope
and Nuiqsut was located within the National Petroleum
Reserve Alaska (NPRA). He delineated that Alpine was
discovered in 1992 by ARCO Alaska (now ConocoPhillips
Alaska Inc.) and was the first oil discovered on ANCSA
land. Many of the facilities were expected to be located on
land owned by Kuukpik, the village corporation of Nuiqsut.
Kuukpik had negotiated for environmental and other
protection for subsistence on behalf of its shareholders
and the residents of Nuiqsut. Kuukpik was able to reach an
agreement to ensure that Alpine and future Alpine oil field
satellites would be developed in a balanced and
environmentally responsible way. The corporation was in
favor of balance and environmentally responsible
development on the North Slope. Kuukpik depended on oil and
gas resources and many shareholders and their families
worked in the oil industry. He explained that Joe
Nukapigak, the former Kuukpik president and chairman of the
board, would testify for Kuukpik and on the impact of ACES
on jobs and the people of Nuiqsut. Kuukpik was in the
business of providing services for the oil and gas industry
on the North Slope and other. The corporation had two
wholly owned subsidiaries that provided oil field services,
including drilling, construction of ice roads, pads, roads,
and pipeline. Kuukpik also had a business partnership that
provided services that included geophysical, transportation
logistics, catering, surveying, engineering, and oil field
security.
11:25:19 AM
Mr. Nukapigak relayed that through its business ventures
Kuukpik had firsthand experience with the oil and gas
industry on a daily basis, including the wealth of the
industry and the changing level of activity. He emphasized
that the oil industry needed to move west to the NPRA in
order to make and develop significant new discoveries
onshore on the North Slope. One of the biggest problems
that blocked development on the NPRA was the failure of the
Army Corps of Engineers to issue a bridge permit for the
Nigliq Channel on the Colville River for the "CD-5" or
"Alpine West" project. He expounded that the Environmental
Protection Agency (EPA) opposed the CD-5 bridge. He
explained that without the bridge and other potential
satellites, oil fields that ConocoPhillips had proposed
were unlikely to be built in the foreseeable future, which
would delay and prevent other oilfields in the NPRA to be
developed. He relayed the bridge permits would do no good
without the interest of the oil and gas companies. He
stressed that the current ACES tax regime was a major
obstacle to the oilfield development on NPRA. He stated
that even if the permits for the bridge and three potential
oil field satellites were obtained that Kuukpik oil field
services companies had seen reduced activity levels across
the North Slope. He believed that the ACES concept of
sharing the upside of higher oil prices made good sense
along with a substantial reduction to the state's severance
tax when the price of oil reached $40 a barrel as it had in
2008. The concept of sharing was positive for oil and gas
in the state; however, the profit share that the ACES tax
regime took during high oil prices was too high. He opined
that the development of oil and gas fields needed to be
environmentally balanced and responsible. Similarly, the
State of Alaska needed to balance its desire for revenue
from oil and gas development in the non-renewable oil
resources with the business need of the oil companies that
powered much of the state economy. A balance would be a
win-win situation for the state and the oil industry.
Without ACES reform and a more balanced structure, the
state and the oil companies would eventually lose. He
expounded that the oil companies would leave the state for
better opportunities in the competitive global market.
11:30:29 AM
Mr. Nukapigak emphasized that without the oil industry the
Inupiat people and their children could not move forward
without risking their culture and lifestyle; therefore,
Kuukpik supported HB 110 as a promising step in the right
direction. He opined that ACES reform was the first step
towards promoting an increased level of oil and gas
exploration and development in NPRA and the State of
Alaska.
JOE NUKAPIGAK, FORMER PRESIDENT AND CHAIRMAN OF THE BOARD
KUUKPIK CORPORATION, discussed that he had been the
president of Kuukpik when the Alpine oilfield had been
discovered. The Alpine facility had been built partially on
land that was owned by Kuukpik. He had been the chairman
during the discovery, development, and completion of the
first two Alpine satellite fields, Nanuq and Fiord. He had
been involved in resource development, particularly in the
oil and gas industry for over 20 years. He was currently
the president of Nanuq, Inc., a wholly owned civil
construction subsidiary of Kuukpik. He discussed that
almost all of the residents of Nuiqsut were Kuukpik
shareholders. Subsistence was the foundation of the Inupiat
culture, but they were also in favor of balanced and
environmentally responsible development of the North
Slope's oil and gas resources. Many of the shareholders
worked or had worked for the oil companies and the jobs
helped residents to buy fuel, ammunition, whaling boats,
snow machines, and equipment to pursue their subsistence
lifestyle. Profits from Kuukpik's oil field services
businesses helped the company pay dividends to its
shareholders. He discussed that the majority of oil and gas
exploration on the North Slope over the past 10 years had
been in NPRA. He relayed that permits had delayed three
ConocoPhillips satellite fields called Alpine West (also
called CD-5), Lookout, and Rendezvous. The satellites would
make it more economical to develop fields farther west
through the use of existing pipelines, roads, and
potentially other facilities. He explained that the Nuiqsut
residents had seen gas flares from a number of exploration
wells over the past 10 years as they traveled their hunting
grounds in NPRA.
11:36:54 AM
Mr. Joe Nukapigak shared that Kuukpik believed that
discoveries had been made by several oil companies, but no
projects had been built in NPRA. There had been no
exploration in NPRA over the past couple of winters because
federal agencies did not allow companies to build
facilities. He accentuated that permits for CD-5 were
critical, but a reasonable and fair severance tax was also
extremely important. Kuukpik had seen a decline in oil
field activity and in jobs across the North Slope. The
problem was not only a result of the economic downturn and
permitting delays, but was due to the ACES tax structure as
well. The state deserved a fair share of oil produced in
Alaska; however, the current ACES share was too high at
higher oil prices. The share of the profit that the state
took away needed to be reduced to encourage onshore
development in NPRA. The oil companies needed to be
rewarded for the risk they took on new development. He
emphasized that it was necessary to have a balance that
worked for the state, the oil companies, and for Nuiqsut.
Representative Gara relayed that he and others had written
letters to the Army Corps of Engineers to urge them to
allow the bridge across the Colville River to go through.
He wondered whether Kuukpik would feel comforted and open
to a system that focused on increased credits instead of a
reduced profits tax, provided that it was possible to show
that the credits would increase development. He believed
that the portrayal that some members of the legislature did
not want to see expanded oil development was inaccurate. He
explained that there were just different approaches. He
relayed that there had been a discussion about increasing
the exploration credit to 40 percent or 50 percent to
address the decline in exploration. He discussed that
ConocoPhillips and British Petroleum (BP) both reported
Alaska profits and had made over $15 billion over the past
four years. He was concerned that companies would spend the
savings from a reduced tax outside of Alaska; however, with
exploration credits the companies would only receive money
for working in the state.
Mr. Isaac Nukapigak believed that it was likely that the
state and the industry could reach a compromise. There were
options that Kuukpik would need to explore. He remarked
that he could not speak for the industry.
Representative Joule remarked that Kuukpik had been the
only village corporation that the committee had heard from
that day. He discussed that at one point local entities had
not been on the same page related to the Colville River
bridge but the federal government had been close to
providing the permits; however, now that local entities
were united, the federal government was deterring the
process. He hoped that the project would be allowed so that
NPRA and NPRA west development could occur.
11:42:54 AM
Mr. Isaac Nukapigak replied that Kuukpik had worked to
unify the community and had looked at both economic and
social areas. The leadership of the community of Nuiqsut
and Kuukpik had passed a joint resolution to have Kuukpik
take the lead on oil and gas negotiation for Nuiqsut.
Kuukpik worked to make certain that oil and gas development
continued and was done in the most environmentally
practical way.
Mr. Joe Nukapigak added that when Prudhoe had first been
discovered many years earlier that the residents of the
North Slope had been skeptical. He communicated that over
time the residents had learned how the oil and gas industry
worked and their skepticism had changed to support. Kuukpik
was the first village corporation that had owned part of
Alpine. He explained that Alpine provided a significant
benefit to Nuiqsut and to other Alaska communities.
11:45:32 AM
TOM LEONARD, COMMUNICATIONS MANAGER, CALISTA CORPORATION,
read a prepared statement from Andrew Guy, Calista
Corporation president and chief executive officer.
Dear Committee members:
Calista Corporation supports a more competitive
environment for Alaska's oil and gas exploration and
development. We support legislation encouraging the
increase in oil production on the North Slope.
Development of Alaska's resources should be considered
a long term investment of long term projects. A more
balanced long term strategy could benefit Alaska and
the nation in many ways, from the potential of a more
consistent oil and gas supply, to steady employment
for hundreds of Alaskans.
The current tax structure, "ACES," can be improved.
CNBC's report last summer placed Alaska as the worst
state in which to conduct business in the nation. The
survey determined Alaska was ranked last for the
fourth year in a row.
Additionally, higher well credits can help encourage
new and existing field development. Alaska has a
strong history of exploration, and the state laws and
regulations need to better support continued
exploration and business development in Alaska. The
jobs oil and gas provides for our Shareholders enables
them to work rotational schedules and still live a
subsistence lifestyle.
Again, Calista supports utilizing our states natural
resources in a safe and responsible way, while
providing a more balanced business environment for
the oil and gas industry. Calista thanks you for
your time in this important matter.
HB 110 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
11:48:36 AM
The meeting was adjourned at 11:48 AM.
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