Legislature(1997 - 1998)
03/26/1998 01:14 PM House RES
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
March 26, 1998
1:14 p.m.
MEMBERS PRESENT
Representative Bill Hudson, Co-Chairman
Representative Scott Ogan, Co-Chairman
Representative Beverly Masek, Vice Chair
Representative Fred Dyson
Representative Joe Green
Representative William K. (Bill) Williams
Representative Reggie Joule
MEMBERS ABSENT
Representative Ramona Barnes
Representative Irene Nicholia
COMMITTEE CALENDAR
HOUSE BILL NO. 393
"An Act relating to contracts with the state establishing payments
in lieu of other taxes by a qualified sponsor or qualified sponsor
group for projects to develop stranded gas resources in the state;
providing for the inclusion in such contracts of terms making
certain adjustments regarding royalty value and the timing and
notice of the state's right to take royalty in kind or in value
from such projects; relating to the effect of such contracts on
municipal taxation; and providing for an effective date."
- HEARD AND HELD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 393
SHORT TITLE: DEVELOP STRANDED GAS RESOURCES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
02/11/98 2280 (H) READ THE FIRST TIME - REFERRAL(S)
02/11/98 2281 (H) OIL & GAS, FINANCE
02/11/98 2281 (H) 2 FISCAL NOTES (DNR, REV)
02/11/98 2281 (H) GOVERNOR'S TRANSMITTAL LETTER
02/19/98 (H) O&G AT 11:00 AM CAPITOL 124
02/19/98 (H) MINUTE(O&G)
02/24/98 (H) O&G AT 10:00 AM CAPITOL 124
02/24/98 (H) MINUTE(O&G)
02/26/98 (H) O&G AT 10:00 AM CAPITOL 124
02/26/98 (H) MINUTE(O&G)
03/03/98 (H) O&G AT 10:00 AM CAPITOL 124
03/05/98 (H) MINUTE(O&G)
03/09/98 2578 (H) RES REFERRAL ADDED
03/10/98 (H) O&G AT 10:00 AM CAPITOL 124
03/10/98 (H) MINUTE(O&G)
03/12/98 (H) O&G AT 10:00 AM CAPITOL 124
03/12/98 (H) MINUTE(O&G)
03/19/98 (H) O&G AT 10:00 AM CAPITOL 124
03/19/98 (H) MINUTE(O&G)
03/24/98 (H) O&G AT 10:00 AM CAPITOL 124
03/24/98 (H) MINUTE(O&G)
03/24/98 (H) O&G AT 5:00 PM CAPITOL 124
03/24/98 (H) MINUTE(O&G)
03/26/98 (H) O&G AT 10:00 AM CAPITOL 124
03/26/98 (H) MINUTE(O&G)
03/26/98 2749 (H) O&G RPT 1DP 5NR
03/26/98 2750 (H) DP: HODGINS; NR: BUNDE, OGAN,
ROKEBERG, BRICE, KEMPLEN
03/26/98 2750 (H) 2 FISCAL NOTES (DNR, REV) 2/11/98
03/26/98 2750 (H) REFERRED TO RESOURCES
03/26/98 (H) RES AT 1:00 PM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE MARK HODGINS
Alaska State Legislature
Capitol Building, Room 110
Juneau, Alaska 99801
Telephone: (907) 465-3779
POSITION STATEMENT: Sponsor of HB 393.
WILSON CONDON, Commissioner
Department of Revenue
P.O. Box 110400
Juneau, Alaska 99811-0400
Telephone: (907) 465-2300
POSITION STATEMENT: Provided a presentation on HB 393.
JIM JOHNSON, Development Manger - Alaska Region
North America Production Division
Phillips Petroleum Company
P.O. Box 1967
Telephone: (713) 669-2968
POSITION STATEMENT: Provided testimony in support of HB 393.
ACTION NARRATIVE
TAPE 98-38, SIDE A
Number 001
CO-CHAIRMAN SCOTT OGAN called the House Resources Standing
Committee meeting to order at 1:14 p.m. Members present at the
call to order were Representatives Hudson, Ogan, Masek, and Green.
Representatives Williams, Joule and Dyson arrived at 1:15 p.m.,
1:16 p.m., and 1:30 p.m., respectively.
HB 393 - DEVELOP STRANDED GAS RESOURCES
CO-CHAIRMAN OGAN announced the only order of business today would
be House Bill Number 393, "An Act relating to contracts with the
state establishing payments in lieu of other taxes by a qualified
sponsor or qualified sponsor group for projects to develop stranded
gas resources in the state; providing for the inclusion in such
contracts of terms making certain adjustments regarding royalty
value and the timing and notice of the state's right to take
royalty in kind or in value from such projects; relating to the
effect of such contracts on municipal taxation; and providing for
an effective date."
CO-CHAIRMAN OGAN called on Representative Mark Hodgins, sponsor of
the bill.
Number 019
REPRESENTATIVE MARK HODGINS, Alaska State Legislature, stated the
House Oil and Gas committee passed out CSHB 393(O&G), AS AMENDED,
version 0-GH2006\L, this morning. The committee held extensive
public hearings and debates looking at what is best for Alaskans
and Alaska. The gist of the bill is to enable legislation to allow
the administration to form a contract with a sponsor group that
would go forward and look at building a trans-Alaska gas pipeline.
It would bring the gas that is on the North Slope, approximately 37
trillion cubic feet, down to tidewater. The energy transmitted
down the gas line would enable the Alaskans along the line and in
Southcentral an abundance of energy over the next 60 to 70 years.
Revenues would be created by the royalties and taxes earned. The
municipalities would also share in some of the taxes earned. There
would be thousands of jobs created. The revenue source looked at
on the North Slope indicates that there is approximately $150
billion worth of gas. The state's take in terms of taxes is
approximately $12 billion. The federal government's take in terms
of taxes is approximately $26 billion. The project right now is
not profitable. The bill takes a look at payments in lieu of
taxes. "The idea being that if the state gives up a little bit, if
the people defer some of the state taxes for a holiday of some
period of time, that...that would make the cash flow portion and
thus the financing and the profitability of this pipeline a little
bit better." The state owns 12.5 percent of the resource. It is
not only a taxing and regulation authority but an owner of the
resources. It is important to keep in mind that it is a for-profit
project. The producers, sponsors, companies, and individuals that
would be involved in the project depend on a profit. The people of
the state are depending on the legislature to help the project come
forward for the revenue, jobs and spin-offs it would create.
Number 106
CO-CHAIRMAN OGAN asked Representative Hodgins whether the $12
billion in state taxes would be royalties and taxes.
Number 116
REPRESENTATIVE HODGINS replied it would be taxes.
CO-CHAIRMAN OGAN asked Representative Hodgins whether it would be
royalties and taxes combined.
REPRESENTATIVE HODGINS replied it would be taxes. Royalties would
be above taxes. The project has the potential of going for 30 to
50 years. Taxes would be ad valorem, severance, business, and etc.
Number 136
REPRESENTATIVE JOE GREEN referred to page 2, line 14, and asked
Representative Hodgins whether the phrase "at least the next
decade" would mesh with the expected timing of the gas pipeline
now. Earlier, the timing was expected to be 2002 and 2003, then it
moved to 2006 and 2007. He also wondered whether the concept is to
give some deference to severance taxes and royalties without
specifying it in the bill.
Number 171
REPRESENTATIVE HODGINS replied yes the taxes need to be considered.
The cost of the gas line is not known. The next step would be for
the sponsor group to come forward with some preliminary engineering
ideas, time lines, and costs at which point the taxation situation
could be looked at. The bill would enable an idea for taxes and
for the administration to sit down and look at the alternatives
then bring them back to the legislature for ratification. In terms
of the ten-year period of time, testimony from producers has
indicated that they could be as early as 2007 or 2008, if
everything goes without flaws. It would be a little bit later
before gas actually flows down the line and the cash registers
start ringing.
Number 195
REPRESENTATIVE GREEN stated the purpose of the bill is to say, "Hey
state these are the things that we need to be looking at in order
to--I mean conceivably things that will happen in order to get this
line built so that the state ultimately will gain from the royalty
it owes and the jobs it'll create and all those good things that
that major project would bring. But, there's nothing in here that
we're committing to--neither--we have no schedule, we don't talk
about it...It's just conceptually, we may have to give a little in
royalty, we may have to give a little in taxes, defer--eliminate
them for a while, take a holiday. It's a wake up call rather than
a commitment."
Number 211
REPRESENTATIVE HODGINS replied, "Yes." This is enabling
legislation to allow the administration to go forward with
negotiations. A proposed contract would be submitted to the
legislature for ratification or be sent back for further
negotiations.
Number 218
CO-CHAIRMAN OGAN entertained a motion to adopt CSHB 393(O&G), with
the attached amendment (version 0-GH2006\L).
Number 228
REPRESENTATIVE BEVERLY MASEK made a motion to adopt CSHB 393(O&G),
version 0-GH2006\L, with the attached amendment, for consideration.
There being no objection, it was so adopted.
Number 234
CO-CHAIRMAN OGAN called on Commissioner Wilson Condon from the
Department of Revenue.
Number 277
WILSON CONDON, Commissioner, Department of Revenue, stated the
original bill, HB 393, was introduced by Governor Tony Knowles.
The House Special committee on Oil and Gas spent several weeks
working on the bill and the department has worked closely with
Representative Hodgins's staff to prepare a committee substitute.
The proposed committee substitute is designed as a framework to
bring back to the legislature the issue of which fiscal system
would be appropriate to develop the North Slope gas resource. He
referred to a flow chart and stated there are three key elements.
What is stranded gas, what is a qualified project, and what does it
take to be a qualified sponsor of a qualified project. Stranded
gas is uneconomic or uncompetitive to develop. A project that
would develop and market 500 billion cubic feet (bcf) of stranded
gas over a 20-year period and make it available to local
communities, if appropriate and economical. A qualified sponsor is
someone with an intent to own an equity interest in the project:
own some or all of the stranded gas, have a right to purchase some
or all of the stranded gas, have the major permits necessary to
construct the project, or have the financial strength to build the
project.
COMMISSIONER CONDON stated the bill would authorize and require the
executive branch to put together a fiscal system constructed around
the notion of payments in lieu of taxes. The payments would then
come back before the legislature in the form of a contract and
piece of authorizing legislation. It would not authorize the
executive branch to sign it, but rather instructs the executive
branch on how to put together a proposal to bring back to the
legislature. The legislature would either authorize or reject the
proposal.
COMMISSIONER CONDON stated someone interested in developing
stranded gas would put together a proposal and apply. The proposal
would come before the commissioners of revenue and natural
resources to determine whether it actually is a project and not a
"fly-by-night scheme." The commissioner of revenue must answer the
following questions: Is the gas stranded? Do the proposers meet
the standards for a qualified sponsor? Is the proposal a qualified
project? The commissioner of natural resources must answer the
following questions: Does the project plan provide for diligent
development? Is there a satisfactory plan for providing gas to
local communities? If the answer to the five questions is yes,
then the commissioners would be responsible for putting together
the package to come before the legislature. The commissioner of
revenue would put together a fiscal package with respect to the
payments in lieu of taxes, Alaska hire, gas for local communities,
royalty arrangements, and sharing of revenues generated with local
communities. The bill would also authorize the establishment of
the Municipal Advisory Group. The commissioner of revenue would
notify the group with respect to the development of municipal
revenue sharing terms and issues affecting them during
negotiations. The commissioner of natural resources would
negotiate the terms of the royalties, provide a method for valuing
the gas for royalties, and modify the rights of the state to take
royalties in-kind rather than in-value.
COMMISSIONER CONDON stated when the commissioner of revenue
completes the contract, it would be made open for review by the
public and legislature. There would be a period of legislative
review before being submitted for final review and approval. After
the initial review, there would be an opportunity to make
modifications, if necessary. The proposal would then be submitted
to the governor. The governor would then submit the proposed
contract, along with legislation, to the legislature. The
legislature would then determine whether to approve it or not.
Number 458
CO-CHAIRMAN OGAN announced Representative Dyson joined the meeting
some time ago.
Number 462
REPRESENTATIVE GREEN asked Commissioner Condon whether there would
be a similar flow chart for the environmental consequences of
another line. Does it provide for an advisory position?
Number 470
COMMISSIONER CONDON replied it is a business proposition. It is
meant to provide a responsible framework for a business deal. The
state would still have to do its environmental job.
Number 482
REPRESENTATIVE GREEN asked Commissioner Condon what would happen if
snags were hit along the way.
Number 489
COMMISSIONER CONDON replied it would move along irrespective of
whatever kind of environmental difficulties did or did not arise.
It is a process to develop a set of proposed economic arrangements.
COMMISSIONER CONDON noted that Commissioner John Shively is
participating via teleconference in Anchorage in order to answer
any questions in regards to the royalties.
Number 504
REPRESENTATIVE BILL WILLIAMS asked Commissioner Condon whether the
legislative review process would be timed while the legislature is
in session.
COMMISSIONER CONDON replied, "We would have to do that, yes."
Number 510
REPRESENTATIVE MASEK referred to page 4, line 8, and asked
Commissioner Condon to talk about the phrase "establishing a fiscal
regime that reduces the risks and improves the economies of a
stranded gas development project".
Number 518
COMMISSIONER CONDON replied Dr. Pedro H. van Meurs concluded, as
part of a consulting study, that the fiscal system the state has in
comparison to other people's resources is relatively uncompetitive
because it is front-end loaded: the state takes its share out of
the front end. In terms of improving the economics, Dr. van Meurs
recommended that the state try to take its share of the rent in the
later years thereby sharing in the risks when the economics are not
good. It tends to be a more stable arrangement because if things
turn out to be good then the state gets a share of the "bonanza,"
people feel they have gotten a fair deal, and there isn't the
political pressure to change the fiscal system over the life of the
project. It increases the willingness of those to become investors
and lowers the threshold to make an investment in the project.
Number 563
REPRESENTATIVE MASEK stated Commissioner Condon did not answer her
question. She wondered how much would the state give away in taxes
and royalties to reduce the risk and improve the economics.
Number 568
COMMISSIONER CONDON replied the bill would not give anything away.
The bill would provide a framework that would require the executive
branch to come back with a proposal that might or might not give
something away. It would require the executive branch to respond
to an application and bring a proposal to the legislature for
consideration.
Number 582
REPRESENTATIVE HODGINS stated Dr. van Meurs has indicated there
would be a 2 percent reduction on the state's side. If that was
the case, the state is looking at a $12 billion take totaling $260
million to $270 million. "You have to keep in mind that the
economics of this project through the ramp-up process and some of
the testimony that we had over the year has been that this project
is very, extremely cost heavy on the front end. And, one of the
considerations would be--return on investment would be--private
sector would be looking at. The return on the investment is real
susceptible to the front-end cost. The project of laying out the
amount of dollars it would take to build this line, and it has been
suggested approximately $15 billion at this point, the amount of
money that would be needed to...to...to start this project is
further complicated by the taxes that would be involved in the
front end and so by deferring those tax holiday or to a later date
when the cash registers starts, when the gas actually starts
flowing, when the revenues flow, enables this project to go
forwards. The way this project is presented now, we will not have
a project. If it's at $15 billion the economy is such that there's
better investments for these investors throughout the world. We
would not have a project and then our gas would indeed be stranded
up on the North Slope as the state's share."
Number 608
REPRESENTATIVE MASEK stated the way the section is written would
give quite a bit of power to the executive branch to develop and
implement a contract to recover and transfer the natural gas.
Number 616
CO-CHAIRMAN BILL HUDSON referred to the Municipal Advisory Group,
and asked whether it would include all of the communities along the
line or within a given region. He wondered whether the gas would
be made available to those communities as part of the overall
contract.
Number 626
REPRESENTATIVE HODGINS replied the language in the bill indicates
economic proximity. For example, a spur line drawn to Cook Inlet,
and a substation to service Valdez, would be taken up in economic
proximity and would be available under the intent language in the
bill.
CO-CHAIRMAN HUDSON stated the revenue sharing would be to offset
the burden of the cost to the communities along the line.
REPRESENTATIVE HODGINS stated the "pipeline mayors" have indicated
that they are comfortable with getting the project to go forward.
They have also indicated their needs and willingness to accept some
of the socioeconomic impacts of the project - more schools, more
services, more people coming to their communities - as long as they
can recoup deferred dollars in the form of a tax holiday, for
example, they would be very, very supportive of the project.
Number 657
CO-CHAIRMAN HUDSON stated the gas belongs to all of the people of
Alaska, therefore, he would like to see an equitable sharing of the
resource. Certainly, some communities would get wonderful energy
and fuel benefits. He would like to see Kodiak and Southeast be
considered in the final analysis, if revenue sharing is one of the
major elements of the contractual relationship.
Number 665
REPRESENTATIVE REGGIE JOULE stated so much of resource development
is tied to the Asian markets. He wondered whether those markets
have been looked at and what type of impact would they have.
Number 673
REPRESENTATIVE HODGINS stated Dr. van Meurs testified that the
economic turmoil in the East would not negatively impact but
positively impact Alaska as a supplier of liquid natural gas to
Japan, Korea and Taiwan.
Number 689
COMMISSIONER CONDON stated, if the project was in place today, the
price of gas would be low. Nobody would do a project like this
without entering into it for the long-term, however. The delivered
price would likely be tied in to the price for....
TAPE 98-38, SIDE B
Number 000
COMMISSIONER CONDON continued. Low prices would have a revenue
effect on the project. There are some competitors that are badly
affected by the current economic difficulties in Asia, particularly
Indonesia because it is a source of gas and a competitor.
Number 022
REPRESENTATIVE WILLIAMS asked Commissioner Condon how he came up
with the qualifications for a qualified sponsor or qualified
sponsor group.
Number 038
COMMISSIONER CONDON replied the intent of the qualifications is to
ensure that the sponsor or group sponsor is serious and has the
economic strength and interest to put a project together.
REPRESENTATIVE WILLIAMS asked Commissioner Condon, whether a
sponsor or group sponsor would have to have a net worth of at least
33 percent of the estimated cost, in order to buy 10 percent of the
stranded gas.
COMMISSIONER CONDON replied, "No." A qualified sponsor or
qualified sponsor group would have to intend to own an equity
interest in the project and meet one or more of the additional
criteria spelled out in the bill.
Number 085
REPRESENTATIVE GREEN asked Commissioner Condon whether he sees
anything to inhibit the state taking gas in-kind.
COMMISSIONER CONDON replied the bill authorizes the state to limit
and change its right to take gas in-kind.
REPRESENTATIVE GREEN replied the bill does not inhibit it, but
future negotiations might.
Number 123
REPRESENTATIVE MASEK referred to page 5, lines 20-21, "(3) use
reasonable efforts to contract with qualified Alaska businesses
when their performance is competitive with regard to price,
quality, and availability." , and asked what criteria would be used
to determine whether an Alaskan company is eligible to receive
special treatment for subcontracting.
Number 140
COMMISSIONER CONDON stated the provision is a statement of intent
by the legislature in terms of what it wants to see accomplished.
There is a provision dealing with Alaska hire, and "Alaska
business" is defined on pages 14-15.
Number 175
REPRESENTATIVE HODGINS stated the constitutionality of local hire
is handled better through a contract instead of legislation. "We
talked about the definition and the definition we can use anything
we want to and that's just a way of us keeping score as to which
companies are adhering more to our wishes. And, then we can bring
political pressure or individual pressure on those companies to
raise the amount of what we feel are Alaskan residents to their
employment schemes, for their employment roles. Basically,
constitutionally we have a difficult time of...of putting the
threshold too low and excluding a lot of folks. I think our best
and probably most capable way of making sure that Alaskan are
employed is the responsibility that I think the Oil and Gas
committee will take on as far as making certain of the training
requirements that the...the job specialties, the requirements that
the employer will have for employees and making sure that we have
the trained Alaskans to...to fulfill those jobs. Other
than...other than that it's very difficult to exclude somebody from
Washington state or other states that come up here to work. We've
talked about a lot of different schemes. Basically, the best one
is having a well trained Alaskan workforce. And, I believe that
will be the responsibility of the legislature to make sure that
that happens."
Number 212
REPRESENTATIVE MASEK stated she would still like to know what
criteria would be used in the intent language to decide who is
competitive and eligible to receive a contract in reference to a
reasonable effort - "(3) use 'reasonable efforts' to contract with
qualified Alaska businesses when their performance is competitive
with regard to price, quality, and availability.", page 5, lines
20-21.
Number 234
COMMISSIONER CONDON stated the term "reasonable" is often used by
the legislature in many different contexts. The language should be
changed, if the legislature has any other kind of effort in mind.
Number 255
CO-CHAIRMAN OGAN referred to page 15, line 21, "(ii) resident
fishing, hunting, or trapping license under AS 16;", and asked
Commissioner Condon whether the language should read "qualifies for
a license and domiciled for 12 months." It is a pretty tight
description of a resident.
Number 268
COMMISSIONER CONDON replied it would be a good change. Currently,
it means that a person would have to get a license in order to get
a job. It would not change the legal requirement of reporting who
is or isn't a resident, but it would remove a potential problem.
Number 293
REPRESENTATIVE HODGINS asked Co-Chairman Ogan what his intention is
for the bill.
CO-CHAIRMAN OGAN replied he would like to move it out next week.
REPRESENTATIVE HODGINS replied the timeliness of getting the bill
out is very important in order to get it through the House Finance
committee as part of the budget process. It was worked extensively
in the House Oil and Gas committee.
Number 315
CO-CHAIRMAN OGAN replied the bill is a priority of his.
CO-CHAIRMAN OGAN asked Commissioner Condon what would happen if the
legislature rejected the contract negotiated by the administration.
Number 331
COMMISSIONER CONDON replied the bill does not have any provision
that requires a report to the legislature, until a tentative set of
arrangements have been agreed upon. There is an opportunity to
make changes to the contract before it goes to the legislature.
CO-CHAIRMAN OGAN asked Commissioner Condon, if the legislature
voted to not go ahead with the contract, would the administration
renegotiate.
COMMISSIONER CONDON replied it might, but the bill does not address
that.
CO-CHAIRMAN OGAN stated it would be prudent for the bill to address
that.
COMMISSIONER CONDON replied it would not necessary. It would not
be precluded, but it does not need to be required.
Number 358
CO-CHAIRMAN OGAN referred to page 11, Section 43.82.210, (1) - (9),
and stated it gives the commissioner of revenue the ability to
adjust oil and gas production taxes, oil and gas exploration taxes,
oil and gas pipeline transportation property taxes, oil and gas
conservation taxes, Alaska net income taxes, municipal sales and
use taxes, municipal special assessments, comparable taxes or
levies imposed by the state or municipality after the effective
date, and other state or municipal taxes. This is a heck of a lot
of authority delegated to the commissioner of revenue, even though
the legislature has to sign off on it. He asked Commissioner
Condon why he should be given all that authority, and why is the
language talking about "oil" and gas taxes when this is a gas bill.
Number 398
COMMISSIONER CONDON replied the bill would no authorize the
modification of any oil taxes. According to the bill drafters, it
is the product of how the bill needs to be drafted. "Oil and gas"
is the proper name used in the chapters that authorize these taxes.
Sections 43.82.020 and 43.82.210 only authorize the development of
a proposal for stranded gas. In terms of the commissioner's
authority, it is only a to-do list of things to consider. It does
not give the commissioner authority to change or excuse anybody
from any of the taxes.
Number 434
CO-CHAIRMAN OGAN asked Commissioner Condon to state for the record
that there is nothing in the bill that would give him the authority
to consider changing taxes on oil.
Number 437
COMMISSIONER CONDON replied, as a citizen of the state, he has the
authority to consider changing the taxes on oil, but it won't
amount to a "hill of beans" just considering it. He doesn't have
the authority to change taxes on anything under the bill and he is
not instructed by the bill to come before the legislature with a
proposal to change oil taxes.
Number 445
CO-CHAIRMAN OGAN stated the language gives the commissioner the
expressed authority to negotiate oil and gas taxes.
COMMISSIONER CONDON replied, in his opinion, there is no ambiguity.
It does not authorize a proposal on oil taxes. It happens to be
the proper name used in the chapters pertaining to taxes and gas.
COMMISSIONER CONDON stated, "No, it doesn't have a damn thing to do
with oil, except that its got the three letter word that says 'oil'
there."
CO-CHAIRMAN OGAN stated he knows the intent of the bill doesn't
deal with oil, but a lawyer somewhere might decide that it does
mean oil.
COMMISSIONER CONDON replied he would flunk his bar exam then.
Number 483
CO-CHAIRMAN HUDSON asked Commissioner Condon whether there could be
a change in oil taxes without the legislature making them.
COMMISSIONER CONDON replied, "You're absolutely right." That is
also true of gas taxes.
CO-CHAIRMAN HUDSON asked Commissioner Condon whether that is true
for any other monetary term because in essence it is an
appropriation, the purpose of the legislature.
COMMISSIONER CONDON replied, "Correct."
Number 495
REPRESENTATIVE WILLIAMS referred to page 16, line 17, and wondered
whether there is anyway to loop the interest to the qualifications
under Section 43.82.110.
COMMISSIONER CONDON replied yes it is possible.
REPRESENTATIVE WILLIAMS asked Commissioner Condon whether there is
any problem with that.
COMMISSIONER CONDON repled, "I don't believe so." A qualified
sponsor is one or more enterprise applying to put together the
project. The minimum qualifications apply to the entire group.
This says subject to the contract and with the approval of the
commissioner parties can be added to or taken out of the sponsor
group. It is common in all kinds of commercial deals.
REPRESENTATIVE WILLIAMS stated he is a little bit leery of this and
will look at it further.
Number 543
CO-CHAIRMAN OGAN referred to page 25, line 18, "If a provision of
this chapter conflicts with another provision of state or municipal
law, the provision of this chapter governs." This is the reason
why he is concerned about it affecting oil and gas. He asked
Commissioner Condon whether it is fairly standard.
COMMISSIONER CONDON replied, "Yes." He said, "If you're passing a
piece of legislation that you want to establish the rules of the
game, you want to make sure there isn't something that's gonna come
in from a (indisc.) that will change those rules."
Number 558
CO-CHAIRMAN OGAN stated the bill gives the commissioner of revenue
a lot of authority to negotiate contracts that would affect
municipalities. He asked Commissioner Condon what process does he
envision to address the concerns of municipalities.
Number 569
COMMISSIONER CONDON replied the bill would establish a Municipal
Advisory Group. The commissioner of revenue would be required to
keep the group informed, and seek its advise in regards to
municipal sharing.
CO-CHAIRMAN OGAN called on Jim Johnson from Houston.
Number 589
JIM JOHNSON, Development Manger - Alaska Region, North America
Production Division, Phillips Petroleum Company, testified via
teleconference in Texas. Phillips has been interested in
evaluating opportunities to participate in a North Slope gas
project including a trans-Alaska gas pipeline system, liquid
natural gas facilities, and shipping elements. In that regard,
Phillips is supportive of this legislation. There is potential for
commercialization of North Slope gas. The progress will require
the evaluation of the cost of a gas line, marketing arrangements,
tax and regulatory structures. The bill provides a means to
address the tax and regulatory structures. It enables the issues
to be addressed and provides the extra push for the project.
CO-CHAIRMAN OGAN asked the committee members to familiarize
themselves with the bill for the next meeting. It is an important
issue.
Number 635
REPRESENTATIVE HODGINS stated it is important to keep in mind that
this is enabling legislation to allow a contract to go forward.
Concerns of any authority given to the administration or small
group of folks are generally well founded, but in this case
anything produced will have to come back to the legislature for
ratification. "I'm not sure that the concerns that have been
voiced by some members of this body as to the absolute power that
would result--I don't believe those concerns are valid for the fact
that this contract would have to come back to this body for
ratification. And, I think it's important to remember that if all
60 of us were involved in the negotiation process we wouldn't come
up with a contract. And the basis of this enabling legislation is
to look at some alternatives to determine if this is going to be a
cost effective job, if this is going to be profitable. If it is
not going to be profitable, it is not gonna be built. If it's not
built, the state's share of the natural gas on the North Slope will
stay there till some other technology comes along or until some
time in the near or distant future. To give an idea, right now the
North Slope has proven to be approximately 37 trillion cubic feet.
If we can get this pipeline online and get this project I think
we'll find that there will be two to three times that amount of
natural gas up there. To give you an idea as to what 37 trillion
cubic feet would do for the people of the state of Alaska, our
share of that thru the royalty percentage would be approximately 4
trillion cubic feet. Four trillion cubic feet is more gas than has
been used in Cook Inlet since its inception. I can guarantee you
that the jobs that have been created in the Cook Inlet basin from
the use of natural gas, the export of it, the heating of the
Southcentral Alaska has been extremely beneficial. Extremely
beneficial to Alaskans. I know that the impact that we're going to
be talking about will impact virtually every community in the
state, but we must remember that if we load too much dollar amount
for a revenue dedication on the front end of this project, this
project will probably never get built. And, we can hand a lot of
socioeconomic impacts on it, we can hand a lot of revenue sharing,
we can hang a lot of other items that will cost dollars that will
actually stop this project from going forward. The decision that
we have to make at this level is decide if we want to see this
project continue on any further. If we don't want to see this
project continue on any further, then I would suggest that we no do
anything with this bill. If there is a hope and a pray and a
chance that this project can go and it will be profitable not only
for the business that are involved in it, but for the people of
Alaska then I think it's our direct responsibility to carry forward
and search that out. There is no hidden agenda in this enabling
legislation. It's simply go forward, make a contract, come back,
we'll say yes or no. If we say no then you'd better go forward and
do another one. And that's the simplicity of it and to draw any
other conclusions tends to fog the real essence of the contract
with unknown fears and speculation of event that...that probably
will not happen or could not happen. I would urge you to take a
hard look at this. Make the changes that you deem are appropriate.
Take the testimony that is important to the people of the state of
Alaska and with due diligence go forward with this piece of
legislation at your earliest convenience."
REPRESENTATIVE MASEK stated it is important to look at what the
state can do, but it is not necessary to hurry because of the price
of oil today. The resources are valuable to the state and there
will probably be some development in the future. She is not
comfortable with the bill. Many changes are needed. She is not
sure whether this is the time for it. She doesn't want the state
to rush into something that it may regret.
ADJOURNMENT
Number 685
CO-CHAIRMAN OGAN adjourned the House Resources Standing Committee
meeting at 2:45 p.m.
| Document Name | Date/Time | Subjects |
|---|