Legislature(2015 - 2016)HOUSE FINANCE 519
04/02/2016 02:00 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB247 | |
| Public Testimony | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 247 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
April 2, 2016
2:03:45 PM
CALL TO ORDER
Co-Chair Thompson called the House Finance Committee
meeting to order at 2:03 p.m.
MEMBERS PRESENT
Representative Mark Neuman, Co-Chair
Representative Steve Thompson, Co-Chair
Representative Dan Saddler, Vice-Chair
Representative Bryce Edgmon
Representative Les Gara
Representative Lynn Gattis
Representative David Guttenberg
Representative Cathy Munoz
Representative Lance Pruitt
Representative Tammie Wilson
MEMBERS ABSENT
Representative Scott Kawasaki
ALSO PRESENT
Kevin Durling, Petroleum Equipment and Services Inc.,
Anchorage; Bryan Clemenz, Senior VP Bristol Bay Industrial,
Anchorage (In JNU); Steven Samuelson, Self, Petersburg (in
Juneau); Louie Flora, Self, Homer (In JNU); Ray Metcalfe,
Self, Anchorage.
PRESENT VIA TELECONFERENCE
Jim Plaquet, Self, Fairbanks; James McMilon Teamsters
Local 959, Fairbanks; Thomas Fagnani, Self, Anchorage; Pete
Stokes, Self, Anchorage; Paul Kendall, self, Anchorage; RC
Cromwell, AK Instrument Co., Anchorage; Scott Hawkins,
Advanced Supply Chain International, Anchorage; Maynard
Tapp, Hawk, Anchorage; Marleanna Hall, Resource Development
Council, Anchorage; Dave Hansen, Self, Anchorage; Phyllis
Kruger, Self, Anchorage; Carl Portman, Self, Anchorage;
Cathy Duxbury, Self, Anchorage; Gretchen Stoddardm, Self,
Anchorage; Bob French, Self, Anchorage; Michael Jesperson
Self, Anchorage; Mike Heiring, VOSS, Anchorage; Jeanine St.
John, Lynden, Anchorage; Kate Blair, Self, Anchorage; Jan
Wrentmore, Self, Skagway; Tom Lakosh, self, Anchorage;
Susan Kay, self, Wasilla; Matthew Joy, self, Anchorage;
Larry Burgess, Self, Wasilla; Merrick Pierce, Self,
Fairbanks; William Schneider, Self, Anchorage; Eric
Treider, Self, Kenai; Nelma Treider, Self, Kenai.
SUMMARY
HB 247 TAX;CREDITS;INTEREST;REFUNDS;O & G
HB 247 was HEARD and HELD in committee for
further consideration.
Co-Chair Thompson discussed the meeting agenda and
mentioned a three minute limit for each testifier.
2:04:11 PM
HOUSE BILL NO. 247
"An Act relating to confidential information status
and public record status of information in the
possession of the Department of Revenue; relating to
interest applicable to delinquent tax; relating to
disclosure of oil and gas production tax credit
information; relating to refunds for the gas storage
facility tax credit, the liquefied natural gas storage
facility tax credit, and the qualified in-state oil
refinery infrastructure expenditures tax credit;
relating to the minimum tax for certain oil and gas
production; relating to the minimum tax calculation
for monthly installment payments of estimated tax;
relating to interest on monthly installment payments
of estimated tax; relating to limitations for the
application of tax credits; relating to oil and gas
production tax credits for certain losses and
expenditures; relating to limitations for
nontransferable oil and gas production tax credits
based on oil production and the alternative tax credit
for oil and gas exploration; relating to purchase of
tax credit certificates from the oil and gas tax
credit fund; relating to a minimum for gross value at
the point of production; relating to lease
expenditures and tax credits for municipal entities;
adding a definition for "qualified capital
expenditure"; adding a definition for "outstanding
liability to the state"; repealing oil and gas
exploration incentive credits; repealing the
limitation on the application of credits against tax
liability for lease expenditures incurred before
January 1, 2011; repealing provisions related to the
monthly installment payments for estimated tax for oil
and gas produced before January 1, 2014; repealing the
oil and gas production tax credit for qualified
capital expenditures and certain well expenditures;
repealing the calculation for certain lease
expenditures applicable before January 1, 2011; making
conforming amendments; and providing for an effective
date."
2:04:37 PM
AT EASE
2:05:25 PM
RECONVENED
2:05:30 PM
^PUBLIC TESTIMONY
2:05:43 PM
JIM PLAQUET, SELF, FAIRBANKS (via teleconference), spoke in
opposition of HB 247. He favored a stable tax system.
Alaska needed continued throughput in the pipeline. He
believed that SB 21 had helped to keep production
occurring. He advised keeping Alaska competitive by
maintaining a stable and balanced tax policy. He thanked
the committee.
2:07:58 PM
JAMES MCMILON TEAMSTERS LOCAL 959, FAIRBANKS (via
teleconference), testified in opposition of HB 247. He
spoke to the wide variety of industries represented in the
union's membership. He listed a number of companies the
union represented. The union understood the fiscal
challenges the state faced and the difficult decisions that
would have to be made. He reported that the union supported
cuts to the operating budget, the use of the Permanent Fund
(PF) earnings reserves, and new taxes. However, the union
was concerned with the governor's plan to change the oil
and gas tax structure. Since the passage of SB 21 [Oil tax
legislation passed in 2013] the oil industry had invested
in Alaska projects including CD5 and Shark Tooth putting
hundreds of Alaskans to work, more oil in the pipeline, and
billions of dollars into the economy. He expressed concerns
with increasing oil taxes and discouraging investment. He
mentioned Repsol/Armstrong potentially increasing
production which was important to Alaska's future. He
thanked the committee for the opportunity to testify.
2:10:43 PM
THOMAS FAGNANI, SELF, ANCHORAGE (via teleconference), spoke
in opposition to HB 247. He talked about his previous
summer employment on the North Slope. He had recently been
informed that he would not have work in the coming summer.
He indicated the tax changes would have significant
implications to oil production. He asked committee members
to carefully consider their decisions in the matter, as his
future would be greatly affected.
(2:12:50 PM)
PETE STOKES, SELF, ANCHORAGE (via teleconference), spoke in
opposition of HB 247 and changing Alaska's fiscal regime.
He was a petroleum engineer with 35 years of oil and gas
experience. He relayed that oil producers were producing at
a loss with low oil prices. New developers were unable to
finance developments because of the uncertainty of the
state's position on credits and taxes. He noted that the
state was collecting more revenue at low oil prices than if
Alaska's Clear and Equitable Share (ACES) was still in
effect. Cook Inlet production had doubled in the previous
five years. He expressed concerns with driving away
investments in the state. Increasing taxes, he believed,
would have a similar effect as it did in 2008. He asked
members to refrain from changing the tax regime.
2:15:35 PM
PAUL KENDALL, SELF, ANCHORAGE (via teleconference),
expressed concerns with the process occurring in Juneau. He
had several suggestions on how to solve the state's fiscal
woes. He continued to provide feedback unrelated to HB 247.
He thought it was imperative to have a $2 million budget.
He commented that anything having to do with oil needed to
be treated like an overlay similar to an old encyclopedia.
He spoke against having the Capital in Juneau. He continued
to provide testimony unrelated to the bill. He thanked the
committee for its work.
2:19:48 PM
RC CROMWELL, AK INSTRUMENT CO., ANCHORAGE (via
teleconference), opposed HB247. He reported that his
business was drastically affected, as it provided support
to the oil industry. He opined that the state had learned
to turn to oil tax changes as the cure for its financial
shortsightedness. He thought that an additional change in
the tax regime would have a negative impact on the state's
fiscal situation. He thought the changes proposed by the
governor in HB 247 would generate instability in the Alaska
oil and gas market. The proposed changes to the tax credit
structure could stifle investments planned by potential and
existing producers. He supposed that an increase of a 5
percent gross tax while not allowing earned or allowable
tax credits could result in a full 5 percent tax increase
for producers that were not in a taxable situation under
current law. A retroactive tax change imposed after the
first quarter would have a negative impact on the state's
financial reputation. The oil and gas industry was Alaska's
largest economic multiplier. His business and his 4
employees were part of the equation. He did not think HB
247 was the right solution. He encouraged members to vote
in opposition to the bill as it was written. He thanked the
committee for its time.
2:22:42 PM
SCOTT HAWKINS, Advanced Supply Chain International,
ANCHORAGE (via teleconference), opposed HB 247 in its
current form. He thought raising taxes on the largest and
most financially important industry at a time when it was
losing substantial amounts of money in the state was bad
economic policy. He also thought changing the tax code
frequently on the same industry was also bad economic
policy. He believed the current tax code ratified at the
ballot box was working. He discussed the investment that
had occurred since the newest tax regime was put into
place. He reported that his company had lost over 10
percent of its workforce since the oil price downturn. He
anticipated a 30 percent reduction in total revenues for
the current year. He claimed that the industry made
responsible decisions to operate in a way that would be
sustainable in the current price environment. He opined
that the operating budget that was passed out of the House
Finance Committee a few weeks prior did not reflect the
same sense of economic reality. He pointed out that raising
taxes was not the right conversation to be having at
present. He realized that the tax credits in the current
tax code attracted attention in light of the budget
deficit. He noted that the credits had an actual return on
investment in the form of a true financial return to the
state. Curtailing them as the administration proposed was
penny-wise and pound-foolish. There were new oil
developments - proven reserves because of the curtailment.
He concluded that HB 247 needed to be revised to eliminate
the tax hikes or put on the back burner. He requested that
the legislature refrain from increasing taxes. He thanked
committee members for their attention.
2:26:10 PM
MAYNARD TAPP, HAWK, ANCHORAGE (via teleconference), opposed
HB 247. He was a small business owner supporting the oil
industry. He thought additional taxes to the oil industry
would not encourage investment. He believed the only way
the state to address its problems was to stop overspending
and over promising. Since 2014, the companies his business
worked with had asked him to cut his costs. Due to the
market, his business had cut its cost headcount by 15
percent and his billing revenue was down by 15 percent
totaling a 30 percent loss in overall billing revenues. At
the same time the oil and gas industry had lost about 250
percent of its revenues with the price changes of oil. He
thought the state should decrease its headcount by 50 and
reduce wages by 15 percent. He suggested that it would even
the playing field. He offered that instituting a furlough
program might be helpful. The goal should be to encourage
increasing oil production, the lifeblood of the state.
2:28:47 PM
MARLEANNA HALL, RESOURCE DEVELOPMENT COUNCIL, ANCHORAGE
(via teleconference), spoke in opposition to HB 247. She
reported that the council members were the lifeblood of
Alaska's economy. The council believed that the best
approach to expand the economy and generate new revenues
was to produce more oil, attract more tourists, harvest
more fish, and mine more minerals. Raising taxes on
companies that were reporting record losses and were in a
negative cash flow was not sound fiscal policy. She noted
the investment that resulted from the legislation from
2013. She concluded that HB 247 did not encourage
investment. She thanked the committee for the opportunity
to testify.
2:32:06 PM
DAVE HANSEN, SELF, ANCHORAGE (via teleconference), spoke in
favor of HB 247. He did not believe the state could afford
the oil production tax program. He relayed the various
costs of the current tax regime. He thought low oil prices
rather than oil production taxes, were why companies having
financial difficulties. Also, the credit program was not an
effective way to increase oil production. Some credit money
might help produce oil, but some of the money was used for
companies that would never produce oil to bail them out of
bankruptcy. He continued that oil industry jobs were
important but so was the $400 million of capital project
jobs which were eliminated from the previous year's budget.
He argued that tax credits only related to oil production
taxes, not royalties and property taxes. There had been tax
system changes some of which were strongly supported by the
oil industry. He respected people from the oil industry. He
suggested that carrying the oil industry at the state's
expense was not the state's job when oil prices were low.
He wondered if Alaskans were willing to give up $1000 of
their dividends to pay for oil tax credits. He implored the
committee to right-size the oil industry tax credit
program.
2:34:46 PM
PHYLLIS KRUGER, SELF, ANCHORAGE (via teleconference), spoke
in opposition to HB 247. She noted all of the benefits that
the oil industry had brought to the state. She spoke in
support of the large producers and the contributions they
made. She thought it was unacceptable to fire the producers
that had been supporting the state for more than 40 years.
She believed the state needed new revenue and new projects.
She suggested taxing fishermen from out of state.
2:38:13 PM
CARL PORTMAN, SELF, ANCHORAGE (via teleconference),
expressed his concern with the fiscal situation. He spoke
in opposition of HB 247. He believed that the current the
tax regime encouraged investment and production. He
mentioned the industry currently losing money based on low
oil prices. He encouraged the legislature to continue
making additional cuts. He also suggested using Permanent
Funds earnings to fill the fiscal gap. He recalled Governor
Jay Hammond's vision for the PF included the eventual use
of fund earnings to help pay for essential government
services. He did not support HB 247 given low oil prices,
low throughput in the Trans-Alaska Pipeline System (TAPS),
and the need for new industry investment. He thought the
committee substitute was an improvement over the governor's
bill. However, it still represented a tax increase on
industry increasing the cost of doing business in Alaska
during the most serious downturn in oil prices in decades.
He thanked the committee.
2:41:11 PM
CATHY DUXBURY, SELF, ANCHORAGE (via teleconference),
opposed HB 247. She believed the state could not tax its
way out of the budget deficit. She opposed changing the
current tax regime because increasing production was the
key to solving the state's financial woes. She asked what
increasing taxes did for the state's economy. She thought
it would be hurtful. She had taken a pay cut in her
business and wondered if the legislature would also like to
take a pay cut. She wanted to see the state encourage
production. She added that legislators needed to think
about what was actually happening in the private sector and
to private sector employees. She did not believe that the
legislature had really cut anything to-date.
2:43:49 PM
GRETCHEN STODDARDM, SELF, ANCHORAGE (via teleconference),
worked in the petroleum industry and understood that
changes were coming. She had personally benefited from tax
credits. She opposed HB 247 in its current form. She
believed the credits did exactly what they were designed to
do. She encouraged legislators to do something with the tax
credits rather than the tax structure. She hoped that
changes would apply to more than one industry. She thanked
the committee.
2:46:34 PM
BOB FRENCH, SELF, ANCHORAGE (via teleconference), supported
HB 247. He asserted that all of the economists who had
testified before the legislature agreed that it was not
possible to balance the budget using cuts alone. There was
a need for new revenue as well. He suggested that one of
the largest cuts that had not been made was to oil tax
credits. He believed it amounted to welfare for the most
profitable corporations in existence. He added that Alaska
could not afford to keep paying $825 million in tax credit
cash payments while only receiving $54 million in
production taxes. He supported raising the 4 percent
minimum to all fields to raise new revenue. He suggested
the 4 percent minimum needed to gradually rise with higher
oil prices replacing the flat rate. He thought the
legislature had the opportunity to claw back on four mega
projects: Knik Arm Bridge, the Juneau Access Road, The
Susitna Road, and the Ambler Road. Alaska did not have the
$7.83 billion estimated to complete these mega projects. He
also recommended that the legislature claw back $263
million in unspent allocated funds for the 4 projects he
mentioned. He supported a statewide sales tax. He suggested
that the tax could be structured progressively by excluding
groceries, medicine, and clothing. He thought it was
possible to for low income households to receive sales tax
refunds at the end of each year. He thanked the committee
for hearing his testimony.
2:49:25 PM
MICHAEL JESPERSON SELF, ANCHORAGE (via teleconference),
spoke in opposition to HB 247. He thought it was crazy to
change the current tax regime. He spoke of the 2008
economic downturn and indicated he lost his job during that
time. He thought the current committee substitute would
discourage development of the oil industry. He thought that
additional cuts needed to be implemented. He added that if
the state had to increase taxes they should be implemented
on a statewide basis such as a sales tax. He also suggested
increasing the statewide corporate tax rather than
targeting specific industries.
2:52:49 PM
MIKE HEIRING, VOSS, ANCHORAGE (via teleconference), opposed
HB 247 as written. He had over 30 years of experience in
the oil and gas industry. He specifically provided
engineering and construction services for Udelhoven
Oilfield System Services, an Alaska based company employing
Alaska residence for over 40 years. He spoke of extensive
research being done by Alaska Oil and Gas Association
(AOGA) and other organizations projecting the impacts to
future investment in the oil and gas industry in the state
of Alaska. More recently he had had direct conversations
with current and future oil and gas companies that had
indicated that the passage of HB 247 would discourage
additional investment. He opined that the attempt by
Governor Walker to raise taxes and repeal credits when the
oil and gas companies were struggling to remain profitable
would dramatically affect the State of Alaska in the short
and long term. He requested that members carefully
reconsider the legislation before the committee. He thanked
the committee members for their time.
2:54:58 PM
JEANINE ST. JOHN, LYNDEN, ANCHORAGE (via teleconference),
opposed HB 247. She expressed her concerns about her job
and her husband's job as well as her son's job. She
supported broad-based taxes. She relayed her personal
experience. She urged members to consider the future when
contemplating the current legislation before the committee.
She thanked members for their service.
2:58:14 PM
RAY METCALFE, SELF, ANCHORAGE, supported HB 247. He relayed
his work on the North Slope. He indicated that he had sat
as the committee chair of House Finance in 1982. At the
time the legislature was considering a giant tax break for
the oil companies. He recalled listening to the testimony
of Mr. Whitehouse, the chairman of Standard Oil of Ohio
(SOHIO). Standard Oil of Ohio was 52 percent owned by
British Petroleum (BP) and the face of BP in Alaska. Mr.
Whitehouse had told the committee that the company was
suffering from poverty stricken oil problems because of the
expense of the pipeline. The legislature gave the oil
companies a giant tax break at that time. Shortly after the
tax break he was in Washington D.C. and was told about the
windfall profits tax and documents that had been subpoenaed
from SOHIO. He tracked down some of the documents including
a lengthy letter to the SOHIO board. It was the same person
that had testified to the legislature that the company was
suffering from poverty. The letter explained that there was
so much money coming out of the North Slope that they did
not know what to do with it all. He fast forwarded to SB
21. He relayed that he had been the one to initiate a
campaign against the legislation. He continued that the
message given by the oil companies was that there were
greener pastures in North Dakota and other places. He
asserted that those places were shutting down whereas they
were still producing in Alaska. He opined that the oil
industry was still around Alaska because the companies were
making money. He suggested that Alaska had less to show for
its 18 billion barrels than any country in the world that
had ever produced that many. He spoke to the example of
Norway.
3:01:29 PM
KATE BLAIR, SELF, ANCHORAGE (via teleconference), spoke in
support of HB 247. She relayed her personal experience and
currently worked in the oil industry. She had seen the oil
industry having to make some tough decisions including
having to implement layoffs. She stated that for more than
40 years the oil industry had provided 85 percent of the
state's revenue. She relayed several benefits provided by
the oil industry to the state. She believed that the
credits to the oil companies were not subsidies. She
supported the use of the PF earnings and having a broad-
based tax. However, she could not support going back to one
single industry year after year. She requested that the
committee listen to the will of the people who voted to
keep SB 21 in place less than 2 years prior. She wanted
companies to spend their investment dollars in Alaska, hire
Alaskans, and to provide a future for her family. She
thanked the committee.
3:05:12 PM
JAN WRENTMORE, SELF, SKAGWAY (via teleconference), spoke in
favor of HB 247. She thought the tax credit regime might
have been a good strategy in the past but, at present the
state could simply not afford it. She supported calling
back the money for the mega projects and favored a
statewide income tax. She thanked the committee.
3:05:56 PM
TOM LAKOSH, SELF, ANCHORAGE (via teleconference), spoke in
favor of the original bill. He felt that the state could
not afford to subsidize the oil industry. He thought it was
unconstitutional for the state to pay for others to take
the state's natural resources. He referred to Article 8,
Section 2 and Section 16. He was not opposed to the idea of
subsidizing production but it had to be viewed in the
context of a corporate income tax and royalties. He
advocated suspending production well before having to pay
for people to take Alaska's oil. He advocated for a fair
and just compensation for Alaska's oil. He felt that the
oil companies should demonstrate their need for tax breaks.
He thanked the committee.
3:09:46 PM
SUSAN KAY, SELF, WASILLA (via teleconference), spoke in
support of keeping the tax structure but changing the
direction of the credits. She felt that the credits were
unfair and the money should be shared with non-profits.
3:13:33 PM
MATTHEW JOY, SELF, ANCHORAGE (via teleconference),
supported the legislation. He felt that it was fair for the
state to receive a percentage of revenue from resource
extraction. He thought that if it was not economical to
extract a resource, then it would be better to keep the
resource until prices increased. He mentioned hearing
concerns about jobs. He thought it was important to be
aware that many of the jobs created by the state were
filled by people who lived outside of Alaska. He thought it
was unfair to the citizens of Alaska not to tax those
people that worked in the state but lived elsewhere. They
should pay an income tax.
3:16:24 PM
LARRY BURGESS, SELF, WASILLA (via teleconference), spoke in
opposition of HB 247. He believed that the promises the
state made should be kept. He believed there was a new rule
in place that 90 percent of the jobs had to be filled via
local hire for any state funded project. He noted that when
tax credits were involved, there should be a return on
investment to the state. He thanked the committee.
3:18:21 PM
MERRICK PIERCE, SELF, FAIRBANKS (via teleconference), spoke
in favor of HB 247. If the state did not continually give
away its resources it could be similar to Norway. Norway
had about 20 times the wealth of Alaska. Alaska was not
doing nearly as well because the state was giving away its
resources as it did under the Economic Limit Factor (ELF)
system, the Petroleum Production Tax (PPT) system, or under
SB 21. He noted that when the bill was in House Resources
the most fundamental reforms were scrapped such as the
requirement that Alaska charge compound interest on past
due taxes. The provision would not make a difference in
whether a company chose to invest in Alaska. However, the
provision incentivized companies not to pay their taxes
with a 4 percent simple interest penalty. He continued to
discuss various rates of return. He opined that SB 21
guaranteed that taxes would not be paid. The issue came up
25 years prior when Hugh Malone fought to establish the
compound interest penalty on past due taxes. He never
thought the state would return to simple interest
penalties. He continued that the actions by House Resources
were inexcusable in the prior week where key provisions
were stripped from the bill. He noted that Representative
Hawker was allowed to debate and argue against the
legislation even though he had a conflict of interest. He
spoke of Representative Wilson serving on the borough
assembly. He mentioned the illegal bribes that were taken
in past years. He concluded that under the current
unconstitutional tax regime, if unchanged and the price and
throughput stayed the same, about $70 billion worth of oil
would be taken from Alaska over the following 10 years. He
thanked members for their time.
3:21:35 PM
WILLIAM SCHNEIDER, SELF, ANCHORAGE (via teleconference),
opposed HB 247. He thought the state needed to raise
revenue through an income tax program and by using the
earnings from the PF. He thought basic services needed to
continue being provided. He opined that the state needed to
pay its own way in order to support a quality of life in
Alaska. He encouraged members to get the job done in the
current legislative session. He thanked the committee.
3:22:19 PM
KEVIN DURLING, PETROLEUM EQUIPMENT AND SERVICES INC.,
ANCHORAGE, testified in opposition of HB 247. He also was a
past president for the Alaska Support Industry Alliance.
The Alliance and its members were the front line of the
industry. He suggested that when oil prices were low his
company was the first to go. He spoke of his company
cutting benefits, salaries, and laying off Alaskan workers.
His company had made adjustments knowing it was necessary
to weather the storm. He anticipated his company would ramp
up again when commodity prices changed because of
tremendous resources that still existed. However, his
company could not ramp up if the state continued with the
instability that would prevent investment from returning.
He felt that HB 247 was being used as a tool to fill the
budget gap with no regard for the long term effects.
Incentives lead to investments while increased taxes did
not. Consequences would result with changes in the current
tax system. He posed a question about the market reaction
if HB 257 made the problem worse.
3:25:16 PM
BRYAN CLEMENZ, SENIOR VP BRISTOL BAY INDUSTRIAL, ANCHORAGE
(IN JNU), spoke in opposition of HB 247. He spoke about his
company which touched all markets in Alaska and beyond with
a number of business activities related to the oil
industry. He mentioned that Bristol Bay Industrial was a
subsidy of Bristol Bay Native Association. He continued to
relay the services his company provided to the oil
industry. He noted that the current tax policy worked. He
stated that the change jeopardized the company's baseline
business and further investment. Near term prospects were
with developers and operators who had invested based on the
current tax policy. New operators in the Cook Inlet area
and Middle Earth were included. He emphasized that the
change proposed in HB 247 jeopardized the success of future
development and the viability of the company's baseline
business. Stability in the tax structure was vital. He
asked members to reject HB 247.
3:29:08 PM
STEVEN SAMUELSON, SELF, PETERSBURG (IN JUNEAU), spoke in
support of HB 247. He believed that Alaska needed to pay
its own way. He thought it should start on a local level.
He talked about generating new revenue aside from oil. He
spoke of the benefits of the oil industry. He mentioned the
benefits of the Permanent Fund program and opined that the
Permanent Fund Dividend (PFD) was a bonus check. He noted
that in Petersburg had a city sales tax. He supported a
sales tax. He hoped for a better future.
3:32:50 PM
LOUIE FLORA, SELF, HOMER (IN JNU), spoke in favor of HB 247
but did not support the committee substitute generated in
House Resources - CSHB 247 (RES). He read from the poem,
"The Red Wheel Barrel" by Dr. William Carlos Williams. Like
the red wheel barrel the issue of oil tax credit reform was
simple and complex at the same time. So much depended upon
the legislature passing oil tax credit reform as part of a
sustainable fiscal plan. It was critical to fix the $800
million problem. If the tax system was left in place and
the state ended up paying more for oil tax credits than the
state received in oil revenues, Alaskan residents would be
paying companies and corporations their PFD's. A reasonable
give-and-take was essential for industry. He opined that
Alaska's economy could not withstand an $800 million in tax
credit payments each year. So much depended on a vibrant
economy in Alaska and a healthy oil industry. He suggested
meeting in the middle and coming up with a plan. He
continued that Alaska could not afford the current fiscal
regime. Alaska needed to act in the coming spring. Part of
the action needed to include a reasonable modification of
the oil tax credit system. He thanked committee members for
their bravery and hard work.
3:35:38 PM
ERIC TREIDER, SELF, KENAI (via teleconference), spoke in
favor of HB 247. He believed there should be a base tax of
5 percent on oil produced from all wells. He thought the
rate should grow as oil prices increased to 10 percent at
$80 per barrel and 25 percent at $125 per barrel. He added
that the system of tax credits needed to be replaced by a
loan program unless producers wanted to give the state an
equity interest in the wells it was helping them drill.
Presently, the state was taking nearly all of the risk and
receiving very little in return. He reported that
historically the legislature had done a poor job of
managing the state's oil income. Norway had produced about
twice as much oil as Alaska had, yet its sovereign wealth
fund contained 20 times more than Alaska's PF. He spoke of
promises made for a 'yes' vote on Proposition 1 [SB 21]. He
suggested ending corporate welfare and adopting an oil tax
law befitting a proud owner state such as Walter Hickel's
Alaska.
3:37:39 PM
NELMA TREIDER, SELF, KENAI (via teleconference), spoke in
favor of HB 247. She thought it was a sad day when
education, senior benefits, and other services were cut
while the state payed oil tax credits. She did not
understand the legislature's approach and asked members to
explain themselves. She thanked the committee.
3:39:40 PM
Co-Chair Thompson CLOSED public testimony.
HB 247 was HEARD and HELD in committee for further
consideration.
Co-Chair Thompson reviewed the agenda for the day.
ADJOURNMENT
3:40:14 PM
The meeting was adjourned at 3:40 p.m.
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