Legislature(2011 - 2012)Anch LIO Rm 220
03/21/2011 01:00 PM 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
1:03 p.m.
1:03:39 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:03 p.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 Mike Hawker; Mark Langland, CEO, Northrim
Bank; Jim Jansen, Chief Executive Officer, Lynden Inc.;
Mark Hylen, Owner, Beacon Occupational Safety; Jim Egan,
Executive Director, Commonwealth North; Tom Maloney,
Resource Development Council; Kevin Durling, Petroleum
Equipment and Services Inc., Anchorage; Peter Macksey,
Steelfab, Anchorage; Doug Smith, Little Red Services;
Steven Pratt, Consumer Energy Alliance Alaska; Ben
Cleveland, Vice President, Peak Oilfield Service Company;
Jeff Lentfer, Midas Alaska; Edward Gohr, Delta Leasing;
Dana Pruhs, President, Pruhs Construction Company; Lynn
Johnson, Dowland-Bach Corporation; Dave Hebert, General
Manager, Nabors Alaska Drilling; Keith Silver, The Silver
Agency, Anchorage; Linda Leary, President, Carlile
Transportation Systems, Anchorage; Scott Hawkins,
President, Advanced Supply Chain International; Lisa
Reider, Consulting Engineer; Dave Harbor, Anchorage; Joe
Beedle, President, Northrim Bank; Mr. Aves Thompson,
Executive Director, Alaska Trucking Association; Maynard
Tapp, Hawk Consultants.
SUMMARY
HB 110 PRODUCTION TAX ON OIL AND GAS
HB 110 was HEARD and HELD in committee for
further consideration.
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."
1:05:09 PM
MARK LANGLAND, CEO, NORTHRIM BANK, stressed the connection
between the economy and the banking business. He noted that
oil was the driving force of Alaska's economy. He opined
that the responsibility for insuring the prominence of the
strong oil industry rested with the state. He stressed the
leadership's responsibility to ensure that jobs were
maintained in Alaska. He believed that oil must be
discovered, developed, and produced. He acknowledged that
oil production was declining. He encouraged further oil
production. He stressed budget discipline. He pointed out
the billions of dollars' worth of oil in the ground. If $4
billion to replace oil revenue was replaced by citizen
taxation, each individual would pay $14 thousand per year.
He suggested a fiscal plan that addressed both revenue and
budget discipline. He stated that the Alaska Clear and
Equitable Share (ACES) was harmful to the oil industry. He
encouraged better alignment between the state and oil
industry. He suggested working with companies with world
class resources and talents. He urged the committee to
restructure ACES. He maintained that Alaska was an
unpopular place to invest in oil.
1:10:35 PM
Representative Gara referred to the "Fraser Report." The
study concluded that 76 percent of the companies
interviewed viewed Alaska as a favorable place to do
business. The current oil tax was not a deterrent for
investors. Mr. Langland stated that he had not seen the
Fraser Report and thus was unable to comment.
Co-Chair Stoltze commented on the subjectivity of some
surveys. Mr. Langland highlighted studies concluding that
Alaska was one of the top taxing entities in the world. He
noted that various surveys viewing taxes and regulatory
regimes regard the process in Alaska as difficult. The cost
of producing oil has increased considerably and all
regulatory costs reduce the total opportunity for profits,
which reduce investment. He argued that the situation was
simple. He stressed that maximizing investment would
maximize oil production.
1:13:01 PM
Representative Wilson asked if business activities such as
new business and home loans had increased or decreased in
the last few years. Mr. Langland replied decreased. He
expressed that the current loan demand was the lowest since
the crisis in the mid-1980s. He noted that the national
financial situation played a part. Oil taxation relates to
future investments and the view of Alaska's economy.
1:14:02 PM
Vice-chair Fairclough asked about foreclosures and savings
accounts. She wondered if Alaskans were able to save their
money and she also queried capital investments. Mr.
Langland replied that Alaska had some of the fewest
foreclosures in the country. He pointed out a small
increase in foreclosures based on quarters. He stated that
the trend was less than comfortable. He cited that both
working capital and capital investment demand was down,
because of business interest.
1:15:56 PM
Representative Neuman wondered about changes in the oil and
gas industry. Mr. Langland shared a story about a loan
officer who had chosen to invest in in North Dakota. He
stated that most risks have increased. He stressed that a
long-term view led to the greatest concern. He pointed out
that Alaska was the only state with only one industry
supplying all the money and nearly 50 percent of jobs to
the state. He stressed that Alaska needed to look forward
in the economy.
1:19:24 PM
Representative Hawker clarified that the Fraser Report was
an opinion survey of industry trade groups, and it was not
commissioned by Department of Revenue (DOR). Participants
in the survey are added to a drawing for a prize of $1000.
Representative Doogan relayed the statement that
"government's appetite for revenue is unlimited." He
wondered how the Alaska Permanent Fund factored into the
statement. Mr. Langland was unable to understand the
question.
1:20:43 PM
Co-Chair Stoltze attempted to answer the question. He
proposed that if the Alaska Permanent Fund had not been
created, then the money might have been spent by the
government. Mr. Langland agreed that most governments have
an insatiable appetite.
1:21:26 PM
JIM JANSEN, CHIEF EXECUTIVE OFFICER, LYNDEN INC., stated
that 20 percent of his business was related to oil. Since
2007, business for his company in the oil sector was flat
to down. The downward trend and reduced productivity of oil
were very concerning to him. Other oil producing areas in
the world were booming with the high price of oil. He
remarked that Alaska is down, because of the methods of oil
taxation. He pointed out that there was very little
engineering and seismic activity, which proved that the
industry was not investing. He remarked that companies
would invest in locations with the best possible return.
Oil companies would not invest in Alaska if the total
government take was in excess of 80 percent. He stated that
Lynden operates a fleet of aircraft, and the oil activity
for the airplanes was nonexistent. He stressed that his
company was going to other countries to conduct business.
He talked about Lynden's current international projects
that were led by the availability of business that did not
exist here in Alaska. He mentioned the value of tax
credits. He stated that ACES countered meaningful
investment opportunities. He stressed the urgency to regain
Alaska's reputation as a positive location for investment.
1:27:31 PM
MARK HYLEN, OWNER, BEACON OCCUPATIONAL SAFETY, stated that
his company provided medical and safety services. His
customers included contractors working in the oil industry.
He explained that his clientele numbers had declined over
the past few months, due to limited drilling activities. He
stated that new projects seem virtually obsolete. He
pointed out that his members represent suppliers,
engineers, accountants, map makers, hotels, lawyers, banks,
marketing companies, insurance companies and many other
services that never directly contract with a producer or
work on the North Slope. He shared his personal experience
working in the North Slope. He stressed the urgency for oil
and gas tax reform in Alaska. He encouraged modification of
ACES.
1:33:40 PM
JIM EGAN, EXECUTIVE DIRECTOR, COMMONWEALTH NORTH, stated
that Commonwealth North was a non-partisan public policy
organization dedicated to educating and informing Alaskans.
He stated that the organization supported a reduction of
the oil production tax progressivity rate. The board of
directors of the organization established a study group to
examine whether Alaska's tax structure required adjustment.
The group met weekly for 17 weeks of study. He included a
report of the study for the committee, "Alaska Oil
Investment Tax Structure, Establishing a Competitive
Alaska" (copy on file). The study was not a research
report, but an examination of public policy that surrounds
issues permeating the debate over Alaska's oil tax
structure. The study concluded that Alaska's economy was
built primarily on oil production. He noted a deepening
concern among private sector Alaskans regarding the oil
industry's ability to stem production declines and retain
jobs. One third of Alaskan jobs are related to oil
development and production in Alaska.
1:37:59 PM
Mr. Egan continued to discuss the findings of his report.
With ACES, when the price of oil increases revenues for
producers remain relatively flat. He stressed the necessity
to achieve a competitive return. While the progressivity
calculation in ACES has substantially increased revenue to
the state treasury, it appears to have decreased Alaska's
competitiveness against other domestic and international
basins, thereby creating a disincentive for investment in
Alaska relative to many of those basins. He stated that a
competitive return for the oil industry is contingent on
the amount of capital tied up in generating the return.
Mr. Egan added that the mentioned study concluded that
increasing the rate of return for major oil producer's
investment dollars will make Alaska more competitive.
Another conclusion established that trading some current
oil tax revenue for longer term production from North Slope
fields was in the best interest of all Alaskans. He
suggested that ACES must evolve to encourage oil profits.
He opined that the progressivity rate should be reduced and
or capped. The governor and legislature must ensure that
oil production is given the highest priority. The
legislature must pass revisions to ACES this year.
Commonwealth North is a deliberative organization that
historically does not make "knee-jerk" responses to policy
issues. He hoped to offer a consistent and unique
perspective with the report provided. A significant portion
of the report was dedicated to developing continuity of
data that was presented to the group. The goal of the data
selection was to analyze the sources of information from
study presenters to ascertain how information was used to
support on conclusion or another. He encouraged the
utilization of the study's appendix to reach conclusions
and educate Alaskans. Alaska must restrain the current
momentum of decline in oil production by creating a more
attractive and competitive environment for expanding
investment and reinvestment by the oil industry.
1:44:14 PM
Mr. Egan stated that the first step required when
encouraging investment and reinvestment of the oil
industry, is lowering the progressivity rate to reflect
Alaska's desire to improve the potential return on
investment for Alaska's producers. He pointed out the graph
included in the report, and gave some examples displayed in
the graph. The graph illustrates flat oil production on
Alaska's North Slope.
1:45:44 PM
Mr. Egan explained that the graph reflects changes in the
DOR project forecasting after the passage of ACES. He
stated that ACES compared internationally. He remarked that
it was difficult to compare Alaska to other states, because
of complicated tax structures. The study eliminated the
inclusion of federal dollars in the comparison between
states.
Mr. Egan continued pointed out various tax structures
presented for consideration by the legislature. He
encouraged legislators to read the various comparisons
provided in the study. He believed that the language
employed in the study targeted the Alaskan needs.
1:48:11 PM
Co-Chair Stoltze requested electronic copies of the report.
He asked for a public version of the report. Mr. Egan
replied that the report would be published on
www.commonwealthnorth.org.
1:49:49 PM
TOM MALONEY, RESOURCE DEVELOPMENT COUNCIL, expressed
concern with the current state of the oil industry in
Alaska. He pointed out that the decline in oil production
will lead to continued decline in the North Slope oil
industry. He pointed out that the Alaska oil industry
recently lost one thousand production related jobs
according to a report published by the Department of Labor
and Workforce Development (DOL). He proposed that the
solution was to increase drilling. He noted that the number
of exploratory wells had decreased considerably and those
wells create a significant number of jobs. New investment
is required to minimize decline of production. He pointed
out that policy must change to reflect the important role
that oil has in Alaska's economy. He informed that AOGCC
reports were used in his analysis. He pointed out that the
federal government was not helping to encourage of oil
production. He cautioned that less oil in the pipeline
might hasten the day that the pipeline would be forced to
shut down. He spoke of forecasts and reality.
1:57:43 PM
Mr. Maloney continued to discuss challenges related to the
oil industry. He stressed that many Alaskans were leaving
Alaska after receiving their education. He encouraged
education incentives. He stated that "there is a need to
drill to pay the bills." He continued that "to keep the
dough, we need the oil flow." He stressed that Cook Inlet
production was down 95 percent from its peak 40 years
prior. He encouraged private investment to encourage future
employment.
1:59:45 PM
KEVIN DURLING, PETROLEUM EQUIPMENT AND SERVICES INC.,
ANCHORAGE, spoke about layoffs imminent in his company
which are directly related to the activity by the major
operators on the North Slope. He stated that he released
over 10 percent of his work force last year and another 20
percent this year. He noted that the top industry leaders
will not continue to invest in the state without an
overhaul of the current tax regime. He advocated for a
change.
2:02:17 PM
Vice-chair Fairclough requested comment regarding the
argument that the tax structure is attached to drilling or
production. Mr. Durling responded that tens of millions of
dollars invested in two drilling rigs were sitting in
Vancouver Washington. Each rig would apply an excess of 100
employees. He believed that an improvement in the tax
regime would allow the comfort needed to transport the
drilling rigs to Alaska. The equipment is merely waiting
for the opportunity to drill.
2:04:12 PM
PETER MACKSEY, STEELFAB, ANCHORAGE, stated that the current
tax policy has had a negative effect on his company. He
noted that his business changes throughout the year and
does not rely entirely on the oil industry. He explained
his business structure and the benefit of oil industry
investment on employment. Oil fields provided stability for
his company during the last ten years. His company
constructs the barrels used to hold the oil. He performed a
calculation regarding his company and oil production. He
commented on media reports about recent gains for the film
industry in Alaska. He understood that Alaska offered the
greatest tax incentives in the country for the film
industry. He preferred similar advantages for the oil
industry.
2:09:37 PM
DOUG SMITH, LITTLE RED SERVICES, spoke to the benefit of
tax credits for oil companies. He explained the services
provided by his company, which he described as a barometer
of activity for oil production. He noted that his company's
activity is down since 2008. The lack of activity and
wellwork led to the loss of 11 employees and benefit
reductions. Incremental oil rate improvement provided a
focus point for his company. He pointed out that the
majority of jobs serving the oil industry included
maintenance. The maintenance of the facilities is important
and maintenance needs are declining. He compared the two
decisions regarding the tax credits. He advocated for a
competitive environment to allow industry an opportunity to
find middle ground. He agreed with the testimony offered by
Great Bear Petroleum. He sought an opportunity to
compromise with the oil industry as the state is dependent
on throughput in TAPS.
2:14:39 PM
Co-Chair Stoltze explained that the committee did not lack
interest in questioning the testifiers, but time
constraints prevented them.
2:14:55 PM
STEVEN PRATT, CONSUMER ENERGY ALLIANCE ALASKA, spoke about
his alliance, which is a nonprofit organization. He
stressed the need to provide incentive to oil companies,
which will reinvigorate the economic security in Alaska. He
read a letter regarding the issue. He realized that all
members of the committee recognized the potential effects
on the economy of decreased oil production. He commented on
a resolution passed by the Consumer Energy Alliance Alaska
that he was asked to present to the legislature. Aside from
state revenue, over 30 percent of Alaskans are dependent
upon oil and gas development for employment. For the long
term, alliance members are concerned with declining oil
exploration and development in the state and the potential
impacts on the economy. In a fiscal sense, state spending
increases in the last decade combined with declining oil
production provide additional sources of concern. He
offered to provide a copy of the resolution to the
committee. He encouraged the passage of HB 110, which
modifies the progressivity structure of Alaska's tax
regime.
2:18:50 PM
Co-Chair Stoltze discussed distribution of documents.
2:19:13 PM
BEN CLEVELAND, VICE PRESIDENT, PEAK OILFIELD SERVICE
COMPANY, stated that his company is owned by Cook Inlet
Regent Corporation and Nabors Alaska Drilling. The company
was in business for 24 years with a record of 80 percent
local hire. He advocated strongly for changes in the oil
and gas tax regime. He stated that ACES reclaims a greater
than necessary take for the state. Since the passage of
ACES, Peak Outfield Service experienced a 45 percent
decline in revenue. The oil industry is the backbone of the
state's economy.
2:21:14 PM
AT EASE
2:33:16 PM
RECONVENED
JEFF LENTFER, MIDAS ALASKA, provided his opinions about
ACES. He informed that he was raised in Alaska and returned
after college. He explained that his business had no direct
tie to oil companies, but functioned downstream from the
oil industry and relied completely on them. He recalled
tough times resulting from low oil prices in the late
eighties and early nineties. He did not wish to see Alaska
enter the same situation. He expressed concern about the
lack of development in Alaska given the high price of oil.
He stressed that the state must act now to create the
needed incentive. He cited the need for tax incentives to
encourage new investment, such as those seen in the film
and cruise ship industries. He noted that other companies
are also concerned about the current tax laws. He expected
limited development if the tax structure is unchanged. He
expressed confusion regarding the $2 billion tax break that
is reported. He thought that without the tax break,
additional development would not occur. He stressed that
the surplus currently enjoyed by the state is a result of
oil industry.
2:45:59 PM
EDWARD GOHR, DELTA LEASING, provided a history. He worked
in the oil industry previously. His focus was a loss of
jobs in the state without a tax incentive for the oil
industry. Capital projects allow for new hires. The oil
companies have a decision making process and they move
their business to the areas of less risk. The oil companies
are currently choosing other locations. He mentioned a
friend whose kids want to come to Alaska, but are unable,
because the jobs are not available. He spoke about the
permitting process in North Dakota. He noted that the drill
rigs are limited. The forecast lessened by six percent this
year and will continue to do so for many years without a
significant change in the tax structure. He advocated for
lower taxes for the oil industry and jobs for Alaskans.
2:51:34 PM
DANA PRUHS, PRESIDENT, PRUHS CONSTRUCTION COMPANY,
discussed his company that employs 150 Alaskans with an
annual payroll of over $8 million. He commented that his
greatest challenge and preoccupation was to obtain enough
work to retain the employees that have made his company
successful. He stated that he is an Alaskan business man
without benefit from the oil industry. He stated that he is
unable to hire new people as construction needs are low. He
expressed concern about the next generation of Alaskans if
changes in oil revenue are felt. He believed that the
proposed change in the tax structure would provide
incentive to oil companies for exploration and development.
He expressed confusion about the lack of urgency displayed
by the legislature. He supported the passage of HB 110 or
any other legislation that that modified ACES and
encouraged development of non-unitized areas in a positive
manner.
2:55:28 PM
Vice-chair Fairclough commented that a committee process
was in place and the committee had worked tirelessly on the
very important issue. She added that other committees are
also working on the issue. The resource committee also had
the bill in front of them. She understood the urgency. She
stated that the process was expedited.
2:57:28 PM
Mr. Pruhs asserted that he understood the process and was
not picking on the committee. He discouraged a special
session to address the issue. He expressed appreciation for
the opportunity to testify on the issue.
Co-Chair Stoltze commented on prioritizing the legislation
presented to the House Finance Committee.
2:58:25 PM
LYNN JOHNSON, DOWLAND-BACH CORPORATION, spoke in support of
HB 110. He informed that his parents owned the business
Alaska Helicopters. He recalled the initial discovery of
oil in Prudhoe Bay in July of 1968. He supposed that
migration of workers to North Dakota might occur if
exploration in Alaska did not commence. He explained his
wish to remain and prosper in Alaska. He pointed out that
his company is down 10 percent in employees and 40 percent
in revenues. He noted the substantial loss of high skill
jobs that were easily transferable to other geographical
areas. The declining production and throughput of TAPS
might lead to a shutdown due to technical problems, which
would lead to further loss of high skill employees in
Alaska. He pointed out that all Alaskans are in the oil
business, yet the state is not competitive with other
basins. Competition is the driving force of business. He
opined that the progressivity element in ACES compromises
Alaska's ability to become competitive in the national and
global markets. High oil prices combined with progressivity
minimize investment incentive.
Mr. Johnson commented that Norway's taxes remain slightly
higher than ours, but the company is government owned. He
acknowledged that HB 100 was not perfect, but he believed
that its implementation would improve the economy in
Alaska.
3:04:28 PM
MAYNARD TAPP, HAWK CONSULTANTS, spoke in support of HB 110.
He believed that ACES halted investment. He remembered a
partnership between the oil industry and the state. He
wished to increase production to improve the revenue stream
for Alaska. He invited creative thinking and further
legislation to exceed the goals of HB 110 and maintain the
wealth of the state. He acknowledged that the past
investment also resulted in declines in production. He
encouraged legislation to solve the problem.
Co-Chair Stoltze appreciated Mr. Tapp's advocacy.
3:07:43 PM
DAVE HEBERT, GENERAL MANAGER, NABORS ALASKA DRILLING, spoke
in support of HB 110. He explained that Nabors Alaska
Drilling provided oil and gas drilling and work-over
operations on the North Slope and across Alaska. Nabors
Alaska Drilling accepts responsibility for drilling the
discovery and confirmation wells in Prudhoe Bay. Nabors
Alaska Drilling was the largest drilling contractor in
Alaska and Nabors Industries is the largest land drilling
contractor in the world. He spoke about the decline in
operating drilling rigs for his company. The decline in
rigs translates to decline in jobs.
3:13:22 PM
Mr. Hebert highlighted the decline in infield development
drilling and work-over operation and export work.
Representative Gara asked if Nabors Alaska Drilling owned
the one exploration rig drilling on the North Slope. Mr.
Hebert replied yes and stated that his company conducted
drilling operations for Brooks Range Petroleum.
Representative Gara asked for information about additional
exploration rigs. Mr. Hebert responded that the drilling
performed by Brooks Range Petroleum provided the only
activity of its kind.
Representative Gara recalled earlier testimony citing that
the number of development wells declined. The information
received from the Alaska Oil and Gas Conservation
Commission (AOGCC) stated that exploration well activity
declined, but development and service wells are at the
highest level since 2005. Mr. Hebert responded that the
overall rig activity had declined slightly in Prudhoe Bay.
He thought that more wells might be drilled with a fewer
number of rigs.
Representative Gara reported rumors that Mr. Hebert opined
that the legislature should unify and act. He noted that
many different ideas exist, yet they are different from
that of the governor. He informed that the governor
introduced HB 110, yet had not encouraged differing
viewpoints from others.
3:18:08 PM
Vice-chair Fairclough acknowledged that the governor had
not ever come to her office to work on compromise. She
wondered about the cost of repositioning a drilling rig.
She asked if Nabors Alaskan Drilling was interested in
repositioning assets outside of Alaska. She asked about the
timeframe allotted to the state prior to shipping rigs out
of state. Mr. Hebert responded that some rigs can be
repositioned, but rigs located in Prudhoe Bay were not
conducive to working in other places. He stated that Nabors
Alaskan Drilling was looking for every opportunity to
increase the market for the underutilized drilling rigs. He
estimated a transportation cost of several million dollars
to relocate the rigs.
Vice-chair Fairclough asked about two rigs that were
reportedly positioned in Canada.
Representative Wilson asked how many jobs each rig would
provide. Mr. Hebert stated that a typical drilling rig
employed approximately 50 people.
Representative Wilson asked where the employees work who
were formerly employed on the inactive drilling rigs. Mr.
Hebert replied that some now work in the Lower 48.
Representative Wilson stated that employees might be
difficult to get back after people leave.
3:21:43 PM
Co-Chair Thomas asked if entire families sometimes work for
a particular oil rig in the Nabors Alaskan Drilling
Company. Mr. Hebert replied no. He furthered that
approximately 80 percent of the company's work force was
Alaskan based. He stressed the company's preference for
instate hire.
Co-Chair Thomas asked if Nabors Alaskan Drilling operated
at the Kensington Mine. Mr. Hebert replied that his company
facilitated drilling not mining.
3:23:07 PM
KEITH SILVER, THE SILVER AGENCY, ANCHORAGE, spoke in
support of HB 110. He claimed to be a victim of ACES. He
explained that he was laid off due to a reduction of work
on the North Slope and a reduction of support staff in
Anchorage. He believed that Alaska must be competitive with
other jurisdictions in order to attract investment dollars.
He suggested that ACES be changed to Fair and Competitive
Tax (FACT).
3:27:22 PM
Representative Gara questioned the accuracy of the
statement that high oil prices do not benefit the oil
companies. He noted that ACES was devised to have a 25
percent tax and $30 in profits before progressivity kicks
in. Mr. Silver disagreed. He believed that if the oil
companies profited under ACES, the state would see new oil
exploration as a result.
LINDA LEARY, PRESIDENT, CARLILE TRANSPORTATION SYSTEMS,
ANCHORAGE, testified in support of HB 110. She explained
that she moved to Alaska upon graduation from college
because there were jobs available. She spoke about
downsizing in her company resulting from the downturn in
the economy.
3:32:53 PM
Ms. Leary mentioned that her company endured a three year
long wage freeze. She informed that she had seen oil rigs
moved from Alaska to Texas. She spoke about the prosperity
in North Dakota. She mentioned witnessing 65 drilling rigs
during a 120 mile trip in North Dakota. She believed that
Alaska could experience the same prosperity. She
recommended altering the viewpoint of the oil industry in
Alaska. She added that her company would benefit from the
simplicity of retaining their equipment in Alaska. She
encouraged a sense of urgency regarding new legislation and
Alaska's tax regime. She recommended against further
studies to determine the effects of the oil and gas
industry. She advocated for working with the industry to
promote Alaska.
3:38:36 PM
SCOTT HAWKINS, PRESIDENT, ADVANCED SUPPLY CHAIN
INTERNATIONAL, spoke in support of HB 110. He explained
that his company specialized in supply chain management,
procurement and warehouse operations in support of North
Slope operators. He expressed pride in the jobs related to
oil and gas extraction. He stated that the future of those
jobs was uncertain, and the trends were discouraging. He
was discouraged by the declining investment. He pointed out
the consensus building in a diverse manner regarding the
tax increases of 2007. He opined that the increases were
not working because they suppressed investment in Alaska.
Mr. Hawkins encouraged a sense of urgency. Oil field
exploration and new investment are required to fill the
pipeline and maintain viability of the resource.
3:46:31 PM
LISA REIDER, CONSULTING ENGINEER, testified in support of
HB 110. She stated that her area of expertise was fuel and
fuel systems. She informed that many employees on the North
Slope are contractors and consultants as opposed to British
Petroleum corporate employees. The British Petroleum
employees oversee the work performed by the contractors,
but the majority of the work is performed by independent
contractors. She spoke about the challenges obtaining fuel
for the North Slope fleet. She asked questions about the
legislation and wondered why Prudhoe Bay was not allowed to
deduct costs for capital improvements.
Ms. Reider informed that the North Slope was an aging
facility. The infrastructure and the workforce were aging.
Approximately 40 percent of the work force is nearing
retirement age. The infrastructure is approaching 35 years
old. She recognized the amount of work that must be done.
The existing well was harvested, but new oil exploration is
nonexistent. She mentioned the great expense for health and
human safety on the North Slope. The increment weather
results in shorter work days and increased cost of doing
business.
3:53:55 PM
Ms. Reider concluded that the additional expenses of
operating on the North Slope do not always benefit
production.
DAVE HARBOR, ANCHORAGE, expressed appreciation to the
committee for their time and patience. He spoke at length
about the history of oil and gas legislation in Alaska. He
explained that in 1971 he was asked by Morris Thompson to
help with the Alaska Native Claims Settlement Act
Communication Program. He explained his role of
communicating the enrolment program throughout the world.
Through the process he became sensitive to the needs of
rural Alaska. He mentioned his opportunity to work on joint
venture programs.
Mr. Harbor recalled flying into rural villages in the
middle of winter to enable joint venture partnerships to
build the Kuparuk Construction Camp.
Mr. Harbor stated that during the 1970s, the state
legislature increased various taxes approximately once a
year. He recalled the passage of the Alaska Native income
tax change that altered the structure of income taxation.
The changes led to lawsuits from the oil companies.
3:59:14 PM
Mr. Harbor referred to the history of oil taxation in
Alaska with bipartisan participation, where a definition of
"fair share" was determined. He explained that the process
was an example of agreement from bipartisan groups
including Governor Hammond and Senate President Kertula and
House Speaker Duncan. Fair share was defined that led to 20
years of prosperity for Alaska and the elimination of
personal income tax.
Mr. Harbor noted the two pronged challenge faced by the
state, from both state and federal properties. He pointed
out that the actions of the federal government had not
benefited Alaska's natural resource development. He thought
the best action for state lands was to allow exploration
and production to provide the quickest opportunity for new
oil flow in the pipeline. He supported HB 110, but would
entertain other opportunities to solve the issue.
4:04:13 PM
JOE BEEDLE, PRESIDENT, NORTHRIM BANK, spoke in support of
HB 110. He encouraged an adjustment in the ACES tax laws.
He noted that when ACES passed, there was great
anticipation for a gas line in Alaska and continued
development of federal and offshore lands. He noted that
the potential challenges associated with a gas line have
changed since the inception of ACES. The market conditions
have therefore changed.
Mr. Beedle mentioned tax credits. He stated that his bank
exercised its tax credits. A tax credit, when purchased
requires risk. An oil company requires a return on the
credit. Lowering the tax is important and utilizing the tax
credit to modify behavior is also important. He requested
that the legislature lower the overall tax rate.
4:09:17 PM
MR. AVES THOMPSON, EXECUTIVE DIRECTOR, ALASKA TRUCKING
ASSOCIATION, explained that the Alaska Trucking Association
had 200 members. Each year the association developed
legislative priorities, such as highway infrastructure
projects and highway safety issues. The number one concern
this year was ACES. The association served the oil
industry, construction industry and the auto carriers. He
understood that many downturns were the result of the
national economic crisis. He offered anecdotal information
that trucking business is down 10 to 25 percent.
4:12:46 PM
Mr. Thompson agreed that all Alaskans are in the oil
business. He stressed the urgency to reduce the oil tax and
provide incentive to bring employees back to work. The
Alaska Trucking Association supported HB 110.
Co-Chair Stoltze thanked all of the committee members and
participants for coming before the committee.
HB 110 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 4:15 PM.
4:15:35 PM
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB110 DOR Tangeman to HFC chairs 3-21-2011.pdf |
HFIN 3/21/2011 1:00:00 PM |
HB 110 |
| HB110 DOR Tangeman on Well Data 3-21-2011.pdf |
HFIN 3/21/2011 1:00:00 PM |
HB 110 |
| HB 110 Anchorage Testimony on 032111.pdf |
HFIN 3/21/2011 1:00:00 PM |
HB 110 |