Legislature(2001 - 2002)

01/22/2002 08:53 AM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                      January 22, 2002                                                                                          
                          8:53 AM                                                                                               
TAPE HFC 02 - 7, Side A                                                                                                         
CALL TO ORDER                                                                                                                 
Co-Chair Mulder  called the  House Finance Committee  meeting                                                                   
to order at 8:53 AM.                                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Eldon Mulder, Co-Chair                                                                                           
Representative Bill Williams, Co-Chair                                                                                          
Representative Eric Croft                                                                                                       
Representative John Davies                                                                                                      
Representative Richard Foster                                                                                                   
Representative John Harris                                                                                                      
Representative Bill Hudson                                                                                                      
Representative Ken Lancaster                                                                                                    
Representative Carl Moses                                                                                                       
MEMBERS ABSENT                                                                                                                
Representative Con Bunde, Vice-Chair                                                                                            
Representative Jim Whitaker                                                                                                     
ALSO PRESENT                                                                                                                  
Kim Duke, Executive Director, Arctic Power;                                                                                     
PRESENT VIA TELECONFERENCE                                                                                                    
Representative  Gary  Stevens;  Jim Sykes,  Oilwatch  Alaska,                                                                   
Mat-Su;  Pamela A.  Miller,  Anchorage;  Deb Moore,  Northern                                                                   
Environmental  Center,  Fairbanks; Mary  Shields,  Fairbanks;                                                                   
Todd  Burnside, Fairbanks;  Patricia  Walsh, Fairbanks;  Gary                                                                   
Newman,  Fairbanks; Gary  Newman,  Fairbanks; Arthur  Hussey,                                                                   
Fairbanks,   Stacey   Fritz,  Fairbanks;   Carolyn   Kreners,                                                                   
Fairbanks; Debbie Miller, Fairbanks.                                                                                            
HB 334    "An  Act  making  appropriations  for  a  grant  to                                                                   
          Arctic Power  to promote the opening  of the Arctic                                                                   
          National   Wildlife   Refuge   for  oil   and   gas                                                                   
          exploration  and development; and providing  for an                                                                   
          effective date."                                                                                                      
          HB 334 was REPORTED out of Committee with a "do                                                                       
          pass" recommendation.                                                                                                 
HOUSE BILL NO. 334                                                                                                            
     "An  Act making  appropriations  for a  grant to  Arctic                                                                   
     Power  to promote  the opening  of  the Arctic  National                                                                   
     Wildlife  Refuge   for  oil  and  gas   exploration  and                                                                   
     development; and providing for an effective date."                                                                         
KIM DUKE,  EXECUTIVE DIRECTOR,  ARCTIC  POWER noted that  the                                                                   
urgency of  additional funding  for Arctic Power  stands from                                                                   
the  extension of  the  campaign into  2002.  The $2  million                                                                   
dollar  grant for  2001 was  purposely  expended through  the                                                                   
year.  There was  an expectation  of success,  which was  not                                                                   
realized.  The campaign needs  to be  extended into  the next                                                                   
three  months.  She  acknowledged   that  the  energy  policy                                                                   
regarding  the  Arctic  National Wildlife  Refuge  (ANWR)  is                                                                   
controversial.  Arctic Power  plans to  do an intense  three-                                                                   
month campaign.  They have swung another member  of Congress:                                                                   
Georgia  Democrat, Zell  Miller. There  are indications  that                                                                   
the President  will be addressing  the issue in the  State of                                                                   
the  Union  address on  January  29.  There have  been  other                                                                   
positive  signs.  The  Chicago   Tribune  has  changed  their                                                                   
editorial stance in support of opening ANWR.                                                                                    
Representative John  Davies asked for more  information about                                                                   
the  appropriation for  union  outreach.  Ms. Duke  explained                                                                   
that union  outreach was  one of  the original categories  in                                                                   
the grant.  The item  supported tours  of union officials  to                                                                   
the  North  Slope.  There  was  also  a  contribution  to  an                                                                   
advertising  campaign  coordinated   by  the  unions.  The  5                                                                   
percent administration fee goes to Arctic Power.                                                                                
Co-Chair Mulder  noted that private  sector fund  raising has                                                                   
been extensive  and successful.  Ms. Duke observed  that they                                                                   
raised over $175 thousand dollars  from the private sector in                                                                   
the  Anchorage   area.  She  added  that  further   funds  of                                                                   
approximately  $600  thousand   dollars  were  received  from                                                                   
unions and industry for advertising.                                                                                            
Representative John Davies felt  that industry should provide                                                                   
greater  support, but  observed that  he would  not offer  an                                                                   
amendment to require a match by industry.                                                                                       
Representative  Hudson  noted that  there  is  a 2006  sunset                                                                   
date. Ms. Duke clarified that  the intent is to use the funds                                                                   
in the next  three-months. She did not anticipate  that funds                                                                   
would remain after that time.                                                                                                   
Co-Chair  Mulder pointed  out  that it  is standard  language                                                                   
with any capital appropriation.                                                                                                 
Co-Chair Mulder  provided members  with a proposed  committee                                                                   
substitute    #22-LS1281\F,   1/18/02    (copy   on    file).                                                                   
Representative  John  Davies  MOVED  to  ADOPT  the  proposed                                                                   
committee   substitute,   #22-LS1281\F.    There   being   NO                                                                   
OBJECTION, it was so ordered.                                                                                                   
JIM   SYKES,   OILWATCH   ALASKA,    MAT-SU   testified   via                                                                   
teleconference  in opposition  to HB  334. He  felt that  the                                                                   
legislation  was  not  needed.  He  spoke  to  the  financial                                                                   
ramifications  of Arctic  Refuge  oil. If  the Arctic  Refuge                                                                   
were opened  for drilling,  almost two  barrels of  oil would                                                                   
have to be produced to earn the  same amount of royalties the                                                                   
state  now   receives  from  one  produced   barrel.  Senator                                                                   
Murkowski  told   the  Palmer   Chamber  of  Commerce,   last                                                                   
Wednesday, that  the maximum royalty  the state  could expect                                                                   
from Arctic Refuge oil is 50%,  which translates to more than                                                                   
a 44% loss of  revenue per barrel compared  with oil produced                                                                   
on state lands.                                                                                                                 
The oil industry,  along with federal and  state governments,                                                                   
project another 30  years of oil development  from lands West                                                                   
of the Arctic  Refuge. Add in  West Sak heavy oil,  which the                                                                   
U.S. Energy  Information Administration  estimates  has three                                                                   
to six  billion barrels of  potentially recoverable  oil, and                                                                   
the estimate  rises to 40  years. Additionally, 93%  of North                                                                   
Slope's  estimated  natural  gas  reserves  lie  outside  the                                                                   
Arctic Refuge.                                                                                                                  
Mr. Sykes observed that opening  the Arctic Refuge would take                                                                   
away the  state's leverage to  prioritize oil  development on                                                                   
state lands, including West Sak heavy oil and natural gas.                                                                      
Mr. Sykes spoke  to who could best support  the effort: state                                                                   
of  Alaska or  industry. He  pointed out  that the  published                                                                   
2000 Annual reports  from Exxon-Mobil, BP and  Phillips taken                                                                   
together show  a total net  profit of $33.7 billion  dollars.                                                                   
When  they become  available,  2001  reports  may have  lower                                                                   
figures, but  Exxon-Mobil and  BP are  among the largest  and                                                                   
most   profitable  Companies   in  the   world.  The   Alaska                                                                   
Department of Revenue  projects a total FY03  state income of                                                                   
$6.36 billion  dollars from  all sources. Spending  proposals                                                                   
for  FY03  total  $7.3 billion  dollars.  The  difference  is                                                                   
roughly a billion dollar shortfall.                                                                                             
Mr. Sykes concluded  that the legislation is  unwarranted and                                                                   
pointed  out  that  industry  has  billions  of  dollars  for                                                                   
investment. He  observed that  the state is proposing  salary                                                                   
freezes  and  reductions  and  emphasized the  need  to  fund                                                                   
public safety, health, and education.                                                                                           
Mr.  Sykes  recommended  revenue-raising  measures,  such  as                                                                   
enactment of a  windfall profit sharing tax.  Presently, when                                                                   
oil prices  rise, the  state share  decreases. He  maintained                                                                   
that if the  state and oil industry are truly  partners, then                                                                   
rising profits  should be  split equally.  If prices  rose as                                                                   
they  did from  1999 to  2000, it  might mean  an extra  $1.5                                                                   
billion dollars to the state of  Alaska, depending on how the                                                                   
tax details  are structured.  He added  that corporate  taxes                                                                   
could be  equalized in  a manner  proposed by  Representative                                                                   
Croft. Corporate rates would be  lowered, but the special tax                                                                   
reduction for oil companies would be removed.                                                                                   
Mr. Sykes  summarized  that there  is plenty  of oil and  gas                                                                   
available for  at least two  more generations outside  of the                                                                   
Arctic  Refugee  and  that  there  is no  need  to  fund  the                                                                   
appropriation to Arctic Power.                                                                                                  
DEB MOORE,  NORTHERN ALASKA  ENVIRONMENTAL CENTER,  FAIRBANKS                                                                   
testified  via teleconference  in opposition  to HB 334.  She                                                                   
pointed out that the state is  facing a budget shortfall. She                                                                   
felt that  it was inappropriate  to spend money when  half of                                                                   
the  state  did   not  support  the  opening   of  ANWR.  She                                                                   
maintained that  Arctic Power  is lobbying and  stressed that                                                                   
the  appropriation  raises  the  question  under  the  Public                                                                   
Purpose Clause  of the Alaska Constitution, that  state money                                                                   
can only  be used  for a  pubic purpose.  A legal opinion  in                                                                   
1991, by the Attorney General  cautioned that the legislature                                                                   
couldn't appropriate  money for a partisan  political purpose                                                                   
since they rarely qualify as a public purpose.                                                                                  
MARY  SHIELDS,  FAIRBANKS  testified  via  teleconference  in                                                                   
opposition  to HB  334. She  noted  that past  appropriations                                                                   
have not  resulted in achieving  the goal [of  opening ANWR].                                                                   
She observed that  the state funds 70 percent  of the effort.                                                                   
She  maintained  that  industry  can  pay  its  own  way  and                                                                   
stressed that the funds could  be invested into the Permanent                                                                   
Fund or the Tourism Marketing Fund.                                                                                             
TODD  BURNSIDE,  FAIRBANKS testified  via  teleconference  in                                                                   
opposition to  HB 334. He observed  that a third  of Alaskans                                                                   
oppose opening  ANWR. He maintained  that the money  is being                                                                   
gambled on a private interest.                                                                                                  
PATRICIA  WALSH, FAIRBANKS  testified  via teleconference  in                                                                   
opposition. She noted  that she is a tour  operator. Bookings                                                                   
for 2002 are  40 percent below the past years.  She requested                                                                   
that the funds  be spent on the Alaska visitor  industry. She                                                                   
maintained that  public money should  not be spent  on Arctic                                                                   
power in the current fiscal climate.                                                                                            
ARTHUR  HUSSEY,  FAIRBANKS testified  via  teleconference  in                                                                   
opposition to  HB 334.  He pointed out  that the  state would                                                                   
receive a greater rate of return  on drilling on state lands.                                                                   
He recommended that equal funds  be spent on non-consumptive,                                                                   
non-extractive  uses of  ANWR  such as  guiding, hunting  and                                                                   
tourism. It is also questionable  if the state should support                                                                   
a lobbying activity.                                                                                                            
STACEY  FRITZ,  FAIRBANKS  testified  via  teleconference  in                                                                   
opposition. She  maintained that the oil industry  can afford                                                                   
their own  lobbying and advertising.  She stressed  that ANWR                                                                   
belongs  to all Alaskans  and  the whole nation,  of which  a                                                                   
majority oppose drilling. She  questioned the legality of the                                                                   
CAROLYN KRENERS,  FAIRBANKS testified  via teleconference  in                                                                   
opposition to HB  334. She maintained that Arctic  Power is a                                                                   
private   lobbying  group   that  is   not  supported   by  a                                                                   
significant number  of Alaskans.  Public money should  not be                                                                   
used for  a special interest  lobbying group.  She maintained                                                                   
that authorization  of  an additional  $1 million dollars  to                                                                   
Arctic Power is unconscionable.                                                                                                 
DEBBIE  MILLER,  FAIRBANKS testified  via  teleconference  in                                                                   
opposition. She noted that many  Alaskans favor protection of                                                                   
ANWR. She  stressed that the funds  do not go  to educational                                                                   
purposes  and  that  the  funds  would  be  better  spent  on                                                                   
education in  the state. She  questioned the legality  of the                                                                   
appropriation. She  noted that the appropriation  might be in                                                                   
violation  of  the  Alaska  Procurement  Code.  The  Attorney                                                                   
General's Office  has expressed  concerns in past  years that                                                                   
grants  to  Arctic Power  may  be  an  attempt to  avoid  the                                                                   
procurement  code  in  order  to  receive  lobbying  services                                                                   
without  competition or  public involvement.  She noted  that                                                                   
Arctic Power has received approximately  $10 thousand dollars                                                                   
a day  for  their effort  to open  ANWR. She  added that  the                                                                   
appropriation   might  also  violate   AS  37.05.321,   which                                                                   
prohibits  the   legislature  from  influencing   legislative                                                                   
PAMELA A. MILLER,  ANCHORAGE testified via  teleconference in                                                                   
opposition  to HB  334. She  noted that  there is  a lack  of                                                                   
accountability.  She did  not  think that  the  appropriation                                                                   
reflected  well on Alaska.  She suggested  that the  funds be                                                                   
spent  to provide  spill prevention  and  response to  assure                                                                   
adequate oversight.  She questioned if funds  are coming from                                                                   
the effort to provide support for the natural gas pipeline.                                                                     
Ms.  Miller expressed  concern  that there  was  insufficient                                                                   
time for  the public  to be  aware of  the meeting.  Co-Chair                                                                   
Mulder  pointed out  that the  meeting  was advertised  under                                                                   
statutory and uniform rule requirements.                                                                                        
Co-Chair Mulder  explained that  the majority of  the funding                                                                   
is  coming  from  a reappropriation  for  evaluation  of  the                                                                   
natural gas  pipeline. The Administration has  indicated that                                                                   
the  funding for  [evaluation  of the  gas  pipeline] is  not                                                                   
needed at this time and would  be an appropriate redirection.                                                                   
He felt that Alaskans do support the legislation.                                                                               
Representative  John Davies MOVED  to ADOPT Amendment  1. Co-                                                                   
Chair  Mulder   OBJECTED  for  the  purpose   of  discussion.                                                                   
Representative  John  Davies  explained  that  the  amendment                                                                   
would  appropriate  $100  thousand  dollars to  the  city  as                                                                   
Kaktovik. The  city is impacted  by the effort to  open ANWR.                                                                   
Funding would also assist the city in the preparation of a                                                                      
video indicating their support for opening ANWR.                                                                                
Co-Chair Mulder WITHDREW his OBJECTION.                                                                                         
Representative Hudson  spoke in support of the  amendment. He                                                                   
noted  that  Kaktovik  is  the  community  most  affected  by                                                                   
efforts to open  ANWR and it is in the state's  best interest                                                                   
to provide them assistance.                                                                                                     
There being NO OBJECTION, Amendment 1 was adopted.                                                                              
Representative Foster MOVED to report CSHB 334 (FIN) out of                                                                     
Committee. There being NO OBJECTION, it was so ordered.                                                                         
HB 334 was REPORTED out of Committee with a "do pass"                                                                           
The meeting was adjourned at 10:02 AM.                                                                                          

Document Name Date/Time Subjects