Legislature(2023 - 2024)SENATE FINANCE 532
05/04/2023 01:30 PM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| SB114 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 114 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
May 4, 2023
1:43 p.m.
1:43:05 PM
CALL TO ORDER
Co-Chair Olson called the Senate Finance Committee meeting
to order at 1:43 p.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Donny Olson, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Jesse Kiehl
Senator Kelly Merrick
MEMBERS ABSENT
Senator David Wilson
ALSO PRESENT
John Sonin, Self, Douglas.
PRESENT VIA TELECONFERENCE
Ed Davis, Self, Fairbanks; Sean McGuire, Self, Fairbanks;
Randy Beltz, Self, Anchorage; Caroline Storm, Self,
Anchorage; Merrick Peirce, Self, Fairbanks; Leila Kimbrell,
Executive Director, Resource Development Council for
Alaska, Anchorage; Pete Stokes, Self, Anchorage; Catherine
Chambers, Self, Anchorage; Allen Strah, Self, Eagle River;
Edward Wesley, Self, Anchorage; Richard Gustafson, Self,
Homer; Jesse Carlstrom, Self, Anchorage; Richard Faulkner,
Self, Anchorage; Christine Resler, ASRC Energy Services,
Anchorage; Joe Mathis, Self, Anchorage; Arleigh Hitchcock,
Self, Fairbanks; Kelly Droop, Self, Anchorage; Christine
Williams, Self, Anchorage; Lois Epstein, Self, Anchorage;
Laurie Funyani, Self, Anchorage; George Pierce, Self,
Kasilof; Katie Capozzi, President, Alaska Chamber of
Commerce, Anchorage; Donald Bullock, Self, Douglas; Carl
Berger, Self, Anchorage; Laura Bonner, Self, Anchorage.
SUMMARY
SB 114 OIL & GAS PRODUCTION TAX; INCOME TAX
SB 114 was HEARD and HELD in committee for
further consideration.
SENATE BILL NO. 114
"An Act establishing an income tax on certain entities
producing or transporting oil or gas in the state;
relating to the oil and gas production tax; and
providing for an effective date."
1:43:25 PM
Co-Chair Olson relayed that the committee had previously
heard the bill on March 31, and had adopted a committee
substitute (CS).
1:43:45 PM
Co-Chair Olson OPENED public testimony.
1:44:06 PM
JOHN SONIN, SELF, DOUGLAS, spoke in support of the bill. He
thought the bill was an economical re-establishment of
balance in the economy. He mentioned Reaganomics. He was in
support of re-shifting the wealth and creating synergy with
our labors, which allowed our society to be civilized. He
thought the additional wealth meant more funds for
education. He supported an educated voter populace. He
thought that after some very imbalanced approaches to a
fiscal plan in the state, more money for producers would
induce more production. He thought an autocratic society
was being created. He emphasized the need for trust, which
he felt was the key to capitalism.
Co-Chair Olson asked if Mr. Sonin was in support of the
bill.
Mr. Sonin relayed that he was in support of the bill. He
reiterated that more trust was necessary.
1:47:52 PM
ED DAVIS, SELF, FAIRBANKS (via teleconference), testified
in support of the bill. He had worked in the oil industry
for 28 years. He identified what he thought was a
disturbing trend. He relayed that he had worked on the
Trans-Alaska Pipeline System (TAPS) for 20 years. He
referenced SB 21 [oil and gas tax legislation passed in
2013] and mentioned promises of outlying oilfield
development. He referenced Smith Bay, the Great Bear Field,
and other areas. He mentioned large oil discoveries. He
thought when SB 21 was first introduced, there had been
claims that the pipeline would be restored to one million
barrels a day for a well-funded state government. He
thought the trends were exactly the opposite of what was
promised. He wanted the industry to develop the fields that
were promised.
1:51:01 PM
SEAN MCGUIRE, SELF, FAIRBANKS (via teleconference),
testified in support of the bill. He thought that Alaska
was getting less money for its oil than anywhere else in
the world. He mentioned promises from the oil companies and
layoffs after passage of SB 21. He referenced cuts to
schools and programs at the University of Alaska (UA). He
recalled speaking with Senator Bishop. He thought
Republicans had given oil companies a gift in the form of
SB 21 and hoped that the state would get some money back.
1:52:47 PM
RANDY BELTZ, SELF, ANCHORAGE (via teleconference), spoke in
opposition to the bill. He relayed that he was a lifelong
Alaskan and worked for North Star Terminal and North Star
Equipment Services. He asserted that North Star employees
also were in opposition to the bill. He asserted that
passage of the bill would hurt the residents of the state
and hurt the workforce. He thought the bill was bad for
Alaska businesses.
1:54:00 PM
CAROLINE STORM, SELF, ANCHORAGE (via teleconference),
testified in support of SB 114. She was a self-employed
architect. She cited that ConocoPhillips had reported $18.7
billion profit in 2022. She contrasted that the amount the
legislature was debating adding to the Base Student
Allocation (BSA) was only .01 percent of ConocoPhillips
profit. She cited that the oil companies had spent $25
million in a campaign to vote no on a proposition in 2020.
She mentioned a presentation to the committee wherein
someone advocated for the oil industry profits and
longevity. She noted that oil would always be needed for
materials. She questioned whether the state would bow to
pressure from the oil industry or prioritize the needs of
its children. She thought the state needed a young populace
to drive the economy. She cited outmigration of the 18- to
35-year-old age group.
Co-Chair Olson handed the gavel to Senator Merrick.
1:56:12 PM
MERRICK PEIRCE, SELF, FAIRBANKS (via teleconference), spoke
in support of the bill. He estimated that with $74/bbl oil
and a 500,000 barrels per day (bpd) throughput, there was a
roughly $13 billion gross value of oil taken from the state
each year, with a paltry return. He considered that the
bill was a very modest reform. He referenced the passage of
SB 21 and thought Senator Bishop had committed to making
changes if the bill did not work. He thought the damage
from SB 21 was quantifiable and asserted that since SB 21
the state had paid producers more to produce oil and in
credits than the producers had paid in production taxes.
Mr. Peirce thought before SB 21, the state received an
average of $3.8 billion per year in production tax revenue.
He thought that UA and the Alaska Marine Highway System
(AMHS) were worse off. He thought the state had spent from
savings and reduced dividends and estimated that the cost
to each Alaskan was over $50,000 per family of five. He
mentioned outmigration in the state, and thought the
governor supported a highly regressive sales tax. He
thought the sales tax would force the poor to subsidize oil
companies. He thought the credits paid to oil companies
under SB 21 had cost the state over $7.2 billion. He
thought a smart fiscal plan for the state would involve
passing SB 114, getting a fair value for the states oil,
and growing the Permanent Fund.
1:58:58 PM
LEILA KIMBRELL, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT
COUNCIL FOR ALASKA, ANCHORAGE (via teleconference),
testified in opposition to the bill. She explained that the
Resource Development Council of Alaska (RDC) represented
the states fishing, tourism, timber, mining, and oil and
gas industries. She mentioned expanding the states
economic base through development of natural resources. She
supported responsible fiscal policy balanced with a
meaningful spending limit, reducing the deficit, and
stability in tax policy. She did not support a substantial
increase of taxes on one industry.
Ms. Kimbrell mentioned a version of the bill that would
remove the ringfencing provision, which she thought had
created concerns with respect to current investment on the
North Slope. She thought there were concerns regarding what
she perceived as the targeted nature of provisions in the
bill pertaining to S Corporations. She thought the
provisions unfairly discriminated against one company. She
opposed the reduction in per-barrel tax credits. She
mentioned federal challenges with decisions limiting the
states development potential. She asserted that changing
tax policy in the state would worsen the investment climate
and threaten jobs and revenue.
2:02:07 PM
PETE STOKES, SELF, ANCHORAGE (via teleconference), spoke in
opposition to the bill. He relayed that he was a consulting
engineer that lived in Anchorage. He compared the bill to
Alaska's Clear and Equitable Share (ACES) and thought
passing the bill would decrease capital spending on
existing fields and result in decreased production and
state revenue and jobs. He asserted that SB 21 resulted in
a stable tax regime and North Slope exploration and
development. He mentioned Pikka and Willow and other
development areas. He thought any increase in state taxes
or decrease in credit would lead to decline.
2:04:06 PM
CATHERINE CHAMBERS, SELF, ANCHORAGE (via teleconference),
testified in opposition to the bill. She believed the long-
term impact of the bill would hurt the economy and result
in more people leaving the state. She discussed the problem
of outmigration.
2:04:53 PM
ALLEN STRAH, SELF, EAGLE RIVER (via teleconference), spoke
in support of the bill. He felt that the bill did not go
far enough to recapture the revenue that the state had
given away unwarranted. He thought the $8/bbl credit was an
abomination. He wondered about proposals to tax Alaskans
while providing benefits to oil company shareholders. He
referenced SB 21. He referenced royalties that were not
paid. He mentioned a decrease in development.
2:06:36 PM
EDWARD WESLEY, SELF, ANCHORAGE (via teleconference), spoke
in support of the bill. He was a 50-year Alaska resident
and former business owner. He relayed that he had
benefitted from the oil and gas industry and shared that
his wife had worked in the industry. He recognized that oil
and gas was the primary revenue generator for the state,
and also recognized the companies would prioritize
stockholders. He thought the state should take the same
approach and look out for its residents. He thought there
were other revenue generators within the state, and that
the state should support small businesses.
2:09:23 PM
RICHARD GUSTAFSON, SELF, HOMER (via teleconference),
strongly supported the bill. He relayed that he had tried
to testify previously but was unable to. He pondered how
much money the state made on a barrel of oil and thought
that since the passage of SB 21 the state was getting
short-changed. He did not want the state to offer credits
on Willow and Pikka.
2:11:05 PM
JESSE CARLSTROM, SELF, ANCHORAGE (via teleconference),
testified in opposition to the bill. He was a lifelong
Alaskan. He thought the bill would adversely affect
businesses.
2:11:40 PM
RICHARD FAULKNER, SELF, ANCHORAGE (via teleconference),
spoke in opposition to the bill. He commented that most all
money spent in the state came from oil companies and oil.
2:12:14 PM
CHRISTINE RESLER, ASRC ENERGY SERVICES, ANCHORAGE (via
teleconference), testified in opposition to the bill. She
mentioned that her organization had over 2,000 employees
that worked in the oil and gas industry. She thought the
bill represented a massive tax increase that threatened to
cripple the oil and gas industry. She mentioned higher
energy prices and a potential natural gas shortage in
Southcentral Alaska. She shared concerns about fewer jobs.
2:13:32 PM
Three additional individuals from ASRC Energy Services
testified in opposition to the bill.
2:14:06 PM
JOE MATHIS, SELF, ANCHORAGE (via teleconference), testified
in opposition to the bill. He had been in Alaska since
1975. He thought the industry was faced with an adversarial
federal government with an administration that was trying
to shut down the states oil and gas industry. He thought
the proposed legislation was negative. He thought the state
should put efforts into putting more oil in the pipeline.
He questioned whether the bill would put more oil in the
pipeline and thought not.
2:15:18 PM
ARLEIGH HITCHCOCK, SELF, FAIRBANKS (via teleconference),
spoke in support of the bill. She thought that for the past
40 years, oil companies had claimed to bring economic
prosperity to Alaska but had needed economic support from
the state. She thought the oil companies were the largest
recipient of welfare in the state. She referenced money
lost as stated by a previous testifier. She referenced the
states financial crisis and thought oil and gas companies
had posted record profits year after year since the passage
of SB 21. She referenced high fuel prices. She thought the
companies were bankrupting current generations and robbing
future generations of a livable climate. She thought the
additional funds from the bill should be used to support
communities and the transition off of fossil fuels. She
referenced the transition to renewable energy and the
estimate of 100,000 new energy jobs. She mentioned
outmigration due to lack of jobs.
2:17:28 PM
Senator Merrick noted that 2:15 p.m. was the cutoff to sign
up for public testimony.
2:17:37 PM
KELLY DROOP, SELF, ANCHORAGE (via teleconference), spoke in
opposition to the bill. She thought Alaska was on the brink
of job opportunities and future revenues from new oil and
gas development. She commented on the cost of production.
She thought producers would not continue to invest if oil
taxes were changed.
2:18:45 PM
CHRISTINE WILLIAMS, SELF, ANCHORAGE (via teleconference),
testified in support of the bill. She relayed that she was
a Certified Public Accountant (CPA) with a small local
firm. She thought permitting an S Corporation to profit off
the states resources was poor stewardship, and to offer
tax credits was very bad. She pondered whether there were
any other entities to buy BPs leases. She wondered if it
was possible to require Hilcorp to create a C corporation
for operations in Alaska. She thought elimination of tax
credits was appropriate. She thought the state should be
prudent with its share of the profits and investigate ways
to embrace alternative energy.
2:21:12 PM
LOIS EPSTEIN, SELF, ANCHORAGE (via teleconference), spoke
in favor of the bill. She was a licensed consulting
engineer and had over 20 years' experience weighing in on
oil and gas issues. She had served on two national
committees addressing infrastructure. She recounted that
she had worked to understand the impact of SB 21. She
thought that Hilcorps presence as a C Corporation had made
the state's revenue picture worse under SB 21. She thought
the modest adjustment of the bill was necessary. She
asserted that the drop in state revenues since the passage
of SB 21 had been dramatic.
2:23:18 PM
LAURIE FUNYANI, SELF, ANCHORAGE (via teleconference), spoke
in opposition to the bill. She was a business owner in
Anchorage and was a direct service provider to oil and gas
producers. She relayed that as the oil and gas industry
expanded and contracted so did her employee base and bottom
line. She thought the reduction in per-barrel credits would
result in less money producers would invest in production.
She mentioned ACES and thought it had made for a drop in
production. She thought Alaska should help grow the number
of producers rather than the government take.
2:25:38 PM
GEORGE PIERCE, SELF, KASILOF (via teleconference),
testified in support of the bill. He thought the bill
needed amendment. He asserted that oil and gas could be
taxed. He thought oil companies invested profits outside
the state. He mentioned that Prudhoe Bay had declined. He
stressed that Alaska needed a fair share of its oil. He
discussed producers that paid no income tax, and
unfulfilled promises from oil and gas companies. He
lamented a lack of growth for the PFDs.
2:28:13 PM
KATIE CAPOZZI, PRESIDENT, ALASKA CHAMBER OF COMMERCE,
ANCHORAGE (via teleconference), spoke in opposition to the
bill. She relayed that the Alaska Chamber of Commerce was
founded in 1953 and was the states largest statewide
business advocacy organization. The chamber had a
supportive position of the oil and gas industry in Alaska.
She testified that the chamber had a specific position to
support and encourage a positive investment climate that
provided certainty and stability for statewide oil and gas
activities, and to oppose efforts to increase oil and gas
taxes. She thought the bill provisions could cripple the
states economy and pointed out that one in four jobs in
the state was related to the oil and gas industry. She
thought the provision targeting S corporations was of great
concern and could lead to other additional taxation of S
corporations in other sectors.
2:30:08 PM
DONALD BULLOCK, SELF, DOUGLAS (via teleconference),
testified in opposition to the bill. He was a retired
attorney and his family had moved to the state in 1955. He
did not think the bill had proper consideration by the
legislature. He was concerned with the production tax
provisions of the bill. He discussed production tax. He
thought Alaska had a relatively low well-head value
compared to other states. He thought the production tax was
complex. He thought deductions and credits had to be
considered in light of the production tax value to get a
true picture of how competitive the state was. He discussed
wellhead values. He thought the need for revenue was a poor
reason for changing the tax on the industry that he thought
provided the most to Alaskans.
2:32:37 PM
CARL BERGER, SELF, ANCHORAGE (via teleconference), spoke in
support of the bill. He was a 58-year resident of the
state. He thought the bill would apply the corporate income
tax to all major oil producers in the state regardless of
what form the company took in the state. He mentioned
Hilcorp. He thought the bill would still not provide the
state a fair return on its oil but was a step in the right
direction. He emphasized that the state needed to get its
fair share of oil profits in order to solve the problems in
the state. He mentioned the outmigration of young people.
He emphasized the need for job creation, education, and
state services.
2:34:37 PM
LAURA BONNER, SELF, ANCHORAGE (via teleconference),
testified in support of the bill. She had listed previous
testimony by the Alaska Oil and Gas Association (AOGA). She
thought testifiers had not addressed the fact that the
passage of SB 21 had not increased production or
investment, nor that the number of jobs had plummeted. She
thought the most compelling testimony for the passage of SB
114 was from Dr. Mark Meyers, former DNR commissioner. She
hoped that the committee would keep the comments under
consideration. She thought passage of SB 114 would generate
needed revenue and reform the poor tax system established
by SB 21.
2:36:37 PM
Senator Merrick CLOSED public testimony.
SB 114 was HEARD and HELD in committee for further
consideration.
2:36:39 PM
AT EASE
2:36:58 PM
RECONVENED
Senator Merrick discussed the agenda for the following day.
ADJOURNMENT
2:37:22 PM
The meeting was adjourned at 2:37 p.m.
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