Legislature(1997 - 1998)
02/17/1997 01:15 PM House TRA
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE
February 17, 1997
1:15 p.m.
MEMBERS PRESENT
Representative Bill Williams, Chairman
Representative Jerry Sanders
Representative Kim Elton
Representative Al Kookesh
Representative Bill Hudson
MEMBERS ABSENT
Representative Beverly Masek, Vice Chairman
Representative John Cowdery
COMMITTEE CALENDAR
HOUSE BILL NO. 63
"An Act extending the motor fuel tax exemption for fuel sold for
use in jet propulsion aircraft to fuel used in those aircraft for
flights that continue from a foreign country; and providing for an
effective date."
- HEARD AND HELD
HOUSE BILL NO. 55
"An Act relating to the fiscal operations of the Alaska Railroad
Corporation and to land acquired by the State of Alaska under the
Alaska Railroad Transfer Act of 1982 or otherwise acquired for
railroad purposes; and providing for an effective date."
- SCHEDULED BUT NOT HEARD
(* First public hearing)
PREVIOUS ACTION
BILL: HB 63
SHORT TITLE: AVIATION FUEL TAX EXEMPTION
SPONSOR(S): REPRESENTATIVE(S) THERRIAULT, Davies, Kelly
JRN-DATE JRN-PG ACTION
01/13/97 48 (H) READ THE FIRST TIME - REFERRAL(S)
01/13/97 48 (H) TRANSPORTATION, FINANCE
01/22/97 126 (H) COSPONSOR(S): DAVIES
02/12/97 (H) TRA AT 1:00 PM CAPITOL 17
02/12/97 (H) MINUTE(TRA)
02/12/97 325 (H) COSPONSOR(S): KELLY
02/17/97 (H) TRA AT 1:00 PM CAPITOL 17
BILL: HB 55
SHORT TITLE: ALASKA RR BUDGET AND LAND
SPONSOR(S): RULES BY REQUEST OF LEGISLATIVE BUDGET AND AUDIT
JRN-DATE JRN-PG ACTION
01/13/97 42 (H) READ THE FIRST TIME - REFERRAL(S)
01/13/97 42 (H) TRANSPORTATION, FINANCE
01/15/97 78 (H) STA REFERRAL ADDED
02/05/97 (H) TRA AT 1:00 PM CAPITOL 17
02/05/97 (H) MINUTE(TRA)
02/10/97 (H) TRA AT 1:00 PM CAPITOL 17
02/10/97 (H) MINUTE(TRA)
02/17/97 (H) TRA AT 1:00 PM CAPITOL 17
WITNESS REGISTER
PAM LABOLLE, President
Alaska State Chamber of Commerce
217 Seward Street, Number 201
Juneau, Alaska 99801
Telephone: (907) 586-2323
POSITION STATEMENT: Testified in support of HB 63.
KURT PARKAN, Deputy Commissioner
Department of Transportation
and Public Facilities
3132 Channel Drive
Juneau, Alaska 99801-7898
Telephone: (907) 465-6977
POSITION STATEMENT: Testified in support of HB 63.
BOB BARTHOLOMEW, Deputy Director
Income & Excise Audit Division
Department of Revenue
P.O. Box 110420
Juneau, Alaska 99811-0420
Telephone: (907) 465-2320
POSITION STATEMENT: Testified in support of HB 63.
RANDY S. WELKER, Legislative Auditor
Legislative Audit Division
Legislative Agencies and Offices
P.O. Box 113300
Juneau, Alaska 99811-3300
Telephone: (907) 465-3830
POSITION STATEMENT: Testified on HB 63.
MARK NECESSARY, Senior Vice President of Refining
Tesoro Alaska
P.O. Box 3369
Kenai, Alaska 99611
Telephone: (907) 776-8191
POSITION STATEMENT: Testified in support of HB 63.
JEFF COOK, Vice President External Affairs
MAPCO Alaska Petroleum
3201 C Street, Suite 700
Anchorage, Alaska 99503-3960
Telephone: (907) 273-3339
POSITION STATEMENT: Testified in support of HB 63.
KIM ROSS, Executive Director
Alaska Air Carriers Association
1117 East 35th Avenue, Suite 102
Anchorage, Alaska 99508
Telephone: (907) 277-0071
POSITION STATEMENT: Testified on HB 63.
ACTION NARRATIVE
TAPE 97-8, SIDE A
Number 001
CHAIRMAN BILL WILLIAMS called the House Transportation Standing
Committee to order at 1:15 p.m. Members present at the call to
order were Representatives Kookesh, Elton, Sanders and Williams.
Members absent were Representative Masek and Cowdery.
HB 63 - AVIATION FUEL TAX EXEMPTION
Number 050
CHAIRMAN WILLIAMS announced the committee would hear HB 63, "An Act
extending the motor fuel tax exemption for fuel sold for use in jet
propulsion aircraft to fuel used in those aircraft for flights that
continue from a foreign country; and providing for an effective
date." He noted the sponsor wasn't in Juneau. He said he would
take public testimony.
Number 240
PAM LABOLLE, President, Alaska State Chamber of Commerce, came
before the committee to testify in support of the bill. She
referred to testimony that was given the previous week and said
some points that came to her mind was that last year when similar
legislation was discussed there was debate that there had been one
tanker load of jet fuel that had come into the Foreign Trade Zone
(FTZ). This had some impact on our in-state refiners. She said
the purpose of the FTZ is to take some value added product and use
it through the FTZ. This year we had ten loads of foreign refined
jet fuel and we're not receiving any of the tax money from that.
She stated that if we had our local refiners providing this jet
fuel, we'd be increasing our economy of jobs, transportation, and
shipping on the Alaska Railroad as it comes from, for example,
Mapco into Anchorage. Ms. LaBolle said the fact that we have
Alaska businesses, Alaska workers, Alaska royalty crude, paying
state corporate taxes and other fees, and transporting it on in-
state transportation facilities is reason enough to do everything
we can to be sure they have a level playing field. She said the
argument last year was, "Can we afford to lose the tax?" She
stated that we're not getting the tax on all those loads of jet
fuel coming in by tanker and so that is a moot question. Ms.
LaBolle urged the committee to support the bill.
Number 458
REPRESENTATIVE JERRY SANDERS asked what the impact would have been
if Mapco or any other refinery had done these ten loads in Alaska.
He said in talking to representatives from Mapco they have about
430 people working for them, but they don't work at the refinery.
Representative Sanders said he wonders how much difference it would
have made at the refinery if that had happened. He said there has
to be an economic impact when something comes through the FTZ. It
pulls into the port and pays money to the Port of Anchorage.
Somebody works at getting fuel in and out of the tanks. He said it
is not a total loss when the fuel comes in on the ships.
Number 540
MS. LABOLLE responded that she couldn't give an answer as to what
kind of impact it has on the number of employees. However, there
was testimony offered the previous week by Jeff Cook of Mapco that
this was an impact on the amount of business they had and what they
could project for the future. As refiners talk about expanding
their operations, if they see a market they currently have is being
eroded that does not bode well for plans of expansion. Ms. Labolle
stated that the ten loads of fuel that did not come out our
refineries has to have had some impact on the actual business
operation of the in-state refineries and their plans for the
future.
Number 628
REPRESENTATIVE KIM ELTON said it seems that there are two ways of
dealing with the situation. One is to eliminate the tax that
applies to the Mapco fuel, the second to eliminate the FTZ. He
asked if anyone has ever quantified the economic benefits of the
FTZ. He said there is an economic disincentive because we stand to
lose over $4 million of revenue to the state general fund. He
asked if somebody could explain what we're gaining with the FTZ.
Number 689
MS. LABOLLE indicated she couldn't answer that question. She
explained one of the objectives in promoting the business of
fueling jets at Alaska's FTZ is to promote Alaskan business. She
stated that if we're not promoting Alaskan business, and if it
isn't Alaskan jet fuel then why do we care where they fuel the
jets. She said we need to do whatever we can to make sure that it
is Alaskan business that is being promoted.
Number 771
KURT PARKAN, Deputy Commissioner, Department of Transportation and
Public Facilities (DOT/PF), was next to come before the committee.
He noted he didn't have anything in writing in response to the Air
Carrier Association's comments as he had promised. He is in the
process of putting that information together and would get the
response to the committee the following day.
CHAIRMAN WILLIAMS said he would appreciate receiving those written
comments the following day.
Number 838
REPRESENTATIVE ELTON said the committee discussed what the affect
to the treasury is as a result of the FTZ. There was an
expectation that the revenue that we had been getting will diminish
significantly, perhaps close to zero. If that has been the case,
he would assume that the economic benefit is significantly greater
than what we're giving up through the tax revenues. He asked Mr.
Parkan if he would discuss the benefits to the private and the
public sector.
Number 884
MR. PARKAN responded that it is very difficult to quantify when you
don't have much of a history. He said there hasn't been much use
of the FTZ since it was created at Anchorage a few years ago, with
the exception of some french perfume and alcohol that has come
through. It's been minuscule until recently when the fuel started
coming through. Mr. Parkan said the department noticed more and
more tankers were bringing the foreign fuel and saw a potential
loss in tax revenue as a result of that. The department tried to
deal with it last year by looking at modification of the FTZ to
make fuel an exemption. There were problems with making fuel an
exemption, so they have chosen to support the bill. Mr. Parkan
said the department's opinion has always been for a level playing
field and they felt they were unsuccessful in creating that level
playing field by putting an exemption on the tax, so they support
level playing field by eliminating the tax. He added that the
custom bonded warehouse fuel issue came up as an alternative to the
FTZ. He stated that even if they were able to stop the use of the
FTZ for the purposes of bringing in fuel, the shippers and
suppliers could still use bonded warehouse fuel as an alternative.
Mr. Parkan said in terms of quantifying the benefits, it is hard to
say. He said there hasn't been an analysis done clearly by
promoting Alaskan based refiners, there is a benefit in potential
for expansion in using our resources versus foreign fuel coming
into the state.
Number 1037
REPRESENTATIVE ELTON indicated confusion. He said, "If we didn't
have the FTZ, that the foreign fuel is able to come in under the
auspices of the FTZ that those people would be able to bring fuel
in using bonded warehouses and still not pay the tax."
MR. PARKAN said the answer is yes. He noted there is a little
extra paperwork involved, but they can effectively do the same
thing through the bonded warehouses that they do through the FTZ.
Number 1075
REPRESENTATIVE SANDERS asked if there are any value added
provisions to the FTZ. He said they obviously aren't adding any
value to perfume, alcohol or fuel.
Number 1090
MR. PARKAN said he believes that when the state and municipality
were putting together the application, that is what was stated as
the intent. He said he doesn't think that there is a specific
clause or requirement that it take place. He noted with regard to
fuel, there is no value added.
Number 1124
REPRESENTATIVE BILL HUDSON asked if there was a link to the tax
collected on Alaska produced fuels for the operations of the rural
airports. He noted Ms. Ross said that the $4.5 million that was
currently collected from the taxes on our domestic produced fuels
were funds that were earmarked for the operations and maintenance
of our rural airports. Representative Hudson asked if there was
any indication of the collection of those taxes for that purpose,
or are they just general fund monies that they are appropriated
out. He asked if federal money can be used, for example, for the
operations and maintenance of our airports in addition to the
construction and reconstruction of them.
Number 1189
MR. PARKAN referred to Representative Hudson's last question and
said the FAA has recently allowed airports to use a small portion
of capital funds, the Airport Improvement Program (AIP) dollars,
for runway maintenance, specifically cracked sealing and minor
repairs to extend the longevity of the runways. He said in this
year's capital budget there is a small amount identified for that
purpose. That is the only area where there is a crossover between
capital construction operating for federal dollars. He stated that
in the budget there is reference to the aviation tax fuel account.
He read from a previous operating budget, "Include within the
general fund, fund amounts appropriated in this act. The following
amounts are from the unreserved special accounts in the general
fund." It lists the highway fuel tax account and the aviation fuel
tax account. Those are two accounts that are part of the general
fund. He stated that for the purpose of their budget and the short
forms there is no reference to a funding source other than the
general fund. Federal funds, interagency receipts and the program
receipts are receipts that they do receive from the rural airports
which amounts to about $2.8 million. Their budget for operating
the rural airports is between $20 million and $22 million. Mr.
Parkan stated that in addition to the $2.8 million in program
receipts they also receive $17.2 million in general fund.
Number 1336
REPRESENTATIVE HUDSON asked if the $4.5 million currently being
received on taxes from domestic produced fuels flows into the
general fund.
Number 1340
MR. PARKAN confirmed that it is general fund dollars. That it is
a subaccount like any other subaccount to the general fund. He
stated that when they put their budget together they look at the
total need of the airports and clearly the revenues derived from
program receipts does not cover what it costs to operate the
airports.
Number 1375
BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division,
Department of Revenue, commented in response to information that
Ms. Ross provided. Mr. Bartholomew stated that Ms. Ross has been
waiting for a year for an answer and that the Department of Revenue
provided their position on this issue and they don't know of any
state that has legally taxed fuel flown into an FTZ so on that
issue the Department of Revenue had no additional action. Mr.
Bartholomew referred to a letter to committee members which stated
the above. Mr. Bartholomew stated that two tankers arrived to
deliver FTZ fuel in calendar year 1995. In 1996, there were five
tankers as reported to them by the Municipality of Anchorage.
Number 1489
RANDY S. WELKER, Legislative Auditor, Legislative Audit Division,
Legislative Agencies and Offices, referred to an audit completed
last year which listed options from taxing no flights to taxing all
flights. Mr. Welker said he missed the discussion at last meeting
concerning problems DOT/PF encountered in trying to modify the FTZ
regulations of getting the fuel exempted. He stated that option
three on page 11 of the audit is to define a foreign flight
exemption in statute which this bill does. House Bill 63 is the
closest to option three presented by Legislative Audit Division.
Number 1612
REPRESENTATIVE ELTON asked if the auditors looked at the bonded
warehouse option.
MR. WELKER responded that because it appeared there were greater
economic disadvantages to the bonded fuel versus the FTZ, they
concentrated their efforts on the FTZ.
Number 1660
MARK NECESSARY, Senior Vice President of Refining, Tesoro Alaska,
testified via teleconference from Kenai. Mr. Necessary explained
that Tesoro employs 160 full-time employees at the Kenai refinery.
Tesoro employs 550 employees in Alaska which includes their retail
marketing segment as well as Fairbanks and Anchorage petroleum
terminals. Mr. Necessary stated that Tesoro supports the bill as
well as a lot of the testimony given by Mr. Cook the previous day.
Mr. Necessary stated his disbelief that outside refineries could
have a 3.2 cents per gallon advantage over instate refineries.
Tesoro announced today a $50 million investment in Alaska over next
12 months to improve or increase production of jet fuel. He stated
that more than 25 percent of the jet fuel used in Alaska comes from
refineries on the West Coast, Korea and Far East. These refineries
are large, sophisticated and well funded operations.
Number 1785
REPRESENTATIVE HUDSON asked about value in restraining costs for
fuel that would be purchased and used for local purposes. For
example, if you lose out to the foreign import and assuming your
costs are somewhat based on your total production, do you then pass
those costs on to rural airports, or domestic flights or other
instate consumptive uses.
Number 1822
MR. NECESSARY responded that the costs would be passed on to the
customers.
Number 1843
CHAIRMAN WILLIAMS stated that the bill will be taken up again and
that it will be changed by the plan to add bunker fuel exemptions
at the request of himself and the sponsor. Chairman Williams
stated that they will work with the sponsor's office to come up
with a committee substitute.
Number 1878
JEFF COOK, Vice President, External Affairs, MAPCO Alaska
Petroleum, testified via teleconference from Anchorage. Mr. Cook
stated Mapco has about 150 employees based in the refinery,
marketing and distribution and 300 employees or more in retail.
Payroll dollars are higher with the 150 employees because of the
quality of personnel. He stated that with their gasoline
expansion, Mapco hired a lot of new people in 1996. Mr. Cook said,
"Also as to the Port of Anchorage and the economic impact there, we
do pay a fee to transport our fuel on the pipeline from the port
area to the spaghetti farm on the pipeline or the airport. We are
paying a fee, so it comes in by tanker and they have to pay a fee
to get it over there but that then displaces potentially, fuel that
we would send over." He stated that most of the benefits to the
FTZ would potentially accrue to the municipality. The only action
in the FTZ is this fuel issue and Mapco has activated their own
tanks to take advantage of FTZ when they could be expanding their
production, however this tax does make that a better option at this
time. Mr. Cook said he believes the Municipality of Anchorage is
supporting this bill as part of wanting to expand action at the
airport. The foreign tradesman will be able to do some value added
activity with this new protocol that lets trade be unbuttled and
repackaged. He stated that this would be the kind of activity
MAPCO would want an FTZ to do. Mr. Cook stated without the bill we
will disadvantage the in-state refiners and employees of Mapco,
Tesoro, Petrostar, the railroad and others.
Number 1976
KIM ROSS, Executive Director, Alaska Air Carriers Association,
testified via teleconference from Anchorage. Ms. Ross reported she
did not receive a response or any additional documentation from
DOT/PF or from Mapco since the last hearing February 12, 1997. She
stated that on Wednesday, Representative Sanders asked Deputy
Commissioner Parkan whether the $4 million in aviation fuel taxes
comes from the general fund. Representative Sanders also asked
whether the $4 million would be in addition to the $60 million the
legislature must cut from next year's operating budget. Mr. Parkan
stated, on the record, that the $4 million does come from the
general fund and then he said, "no tie no link between fuel tax
revenues and the DOT/PF's budget". Ms. Ross referred the committee
members to AS 43.40.010(e), effective July 1, 1994, "... proceeds
of the taxes on aviation fuel shall be paid into a special aviation
fuel tax account in the state general fund. The legislature may
appropriate funds from this account for aviation facilities." Ms.
Ross then quoted the preamble to the 1994 amendment raising the
fuel tax 3.2 cents which read as follows: "The purpose of this Act
is to increase the tax on aviation gasoline in an amount
substantially comparable to the amount that would be derived from
the DOT/PF reimposition of landing fees of rural state-owned
airports and to leave this increased tax in place only so long as
the commissioner of Transportation of Public Facilities does not
before January 1, 2000, impose landing fees at those airports at a
higher rate than was in effect on January 1, 1994." Ms. Ross
stated that the legislative intent of the bill was to find an
alternative funding source in lieu of the proposed landing fee
program as the cost for administering the program was approximately
40 cents on the dollar. Ms. Ross considered this much more
effective to use the fuel tax increase than the landing fee
program. "The link between aviation fuel taxes and rural airport
maintenance and operations budgets is there in black and white,
written into our own statutes. As additional proof of this tie-in,
I would like to refer you to your packets and the 1994 DOT/PF
flowchart, which was used as justification for the 1994 fuel tax
hike. The flowchart depicts fuel taxes, aviation fuel taxes versus
the DOT rural airport maintenance and operations overall budget.
Last year, HB 362 was introduced and the refineries argued their
support for the tax exemption centered around an `unlevel playing
field'. Their competition was able to provide non-taxable foreign
fuel." Ms. Ross further stated that the total fuel through the FTZ
in 1996 was 38 million gallons, which was approximately 6 percent
of the total fuel consumed in Anchorage. The increase from 1995 to
1996 was 2 percent. Ms. Ross stated that MAPCO must import many
times this amount each year in order to meet their needs. Ms. Ross
then said, "Jeff Cook says that might be a silly option but we know
the refineries can't produced enough local fuel to meet the demands
so they too are importing non-taxable foreign fuel. Last Wednesday
Jeff Cook from Mapco was asked `What will you do with the 3.2
cents' and Mr. Cook replied `There will be no additional revenues
from 3.2 cents to his company'. He further stated the refineries
wanted the exemption as an incentive to expand their facilities
which would generate new jobs and additional corporate taxes.
Well, this maybe someday expansion for some undefined project is
not enough justification for a subsidy giveaway. Mr. Chairman and
members of the committee, the refineries of this state don't want
a level playing field, they simply want a subsidy. The
justifications they give us don't make sense and for more than a
year now they have continued to refuse to answer some pretty simple
questions." Ms. Ross offered herself and her association's
assistance in finding ways to develop solutions.
Number 2256
REPRESENTATIVE HUDSON asked about the growth of the importation of
foreign produced fuel, the impact on local sales and the impact on
reduced funds from locally produced fuels that are currently used
in rural Alaska. Representative Hudson stated that if the foreign
refineries continue with these activities, there will be more
untaxed fuel used in the international trade airways. He stated
his concern about having less monies to put into maintenance and
operations of runways in rural Alaska and asked Ms. Ross to look at
ways to offset or find solutions and address this issue.
Number 2302
MS. ROSS responded that the Department of Revenue stated there were
two tankers in 1995 and in 1996 there were five tankers. The Port
of Anchorage received $25,000 in revenue as each ship came in.
Number 2329
REPRESENTATIVE SANDERS requested clarification about the increase
from 1995 to 1996 being 2 percent since figures used earlier in the
meeting were different.
Number 2353
MS. ROSS responded, 4 percent to 6 percent in 1996 came from
figures Representative Therriault talked about. She stated that
the figures were 20.7 million gallons of tax exempt foreign
produced fuel in 1995, and in 1996, just under 38 million gallons.
She further stated that the total amount of fuel used in 1996
increased over that used in 1995 from 4 percent to 6 percent.
Number 2394
MR. BARTHOLOMEW stated to further clarify Ms. Ross' statement, he
believes she was quoting, when she said it went from 4 percent in
1995 to 6 percent in 1996, was total consumption of jet fuel
provided by FTZ. The increase was from 20 million gallons to 38
million gallons, so the percentage increase of the FTZ import was
much bigger than 6 percent. It was almost double, almost 100
percent. He said he thinks when she quotes 4 percent and 6
percent, that is what percentage the FTZ is of the total
consumption of jet fuel at Anchorage and Fairbanks international
airports. Mr. Bartholomew said the total consumption went up by 45
million gallons at Anchorage and Fairbanks international airports
in 1996.
Number 2432
MR. PARKAN referred to comments by Ms. Ross regarding the
dedication of the fuel tax and link between the tax and the budget
and said he just received a copy of the chart he thought she was
referring to. He said it looks like it might have been prepared at
a time when there was discussion about having dedicated funds.
TAPE 97-8, SIDE B
Number 001
MR. PARKAN indicated he isn't sure how to respond to the subsidy
questions Ms. Ross had. He said clearly the bulk of the fuel tax
and the bulk of the fees paid at the international airports are
borne by the large cargo carriers. They're currently paying more
than their share in terms of the tax as well as the landing fees.
He said he would try to include information concerning Ms. Ross'
comments that will be forwarded to the committee the following day.
CHAIRMAN WILLIAMS stated the bill would be brought back before the
committee on Monday, February 24, 1997.
ADJOURNMENT
Number 040
CHAIRMAN WILLIAMS adjourned the House Transportation Standing
Committee meeting at 2:00 p.m.
| Document Name | Date/Time | Subjects |
|---|