04/08/2011 02:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB110 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 110 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
April 8, 2011
2:42 p.m.
MEMBERS PRESENT
Senator Dennis Egan, Chair
Senator Joe Paskvan, Vice Chair
Senator Linda Menard
Senator Bettye Davis
Senator Cathy Giessel
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Senator Bill Wielechowski
Senator Joe Thomas
COMMITTEE CALENDAR
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 110(FIN)
"An Act relating to the interest rate applicable to certain
amounts due for fees, taxes, and payments made and property
delivered to the Department of Revenue; relating to the oil and
gas production tax rate; relating to monthly installment
payments of the oil and gas production tax; relating to oil and
gas production tax credits, including qualified capital credits
for exploration, development, and production; relating to
certain additional nontransferable oil and gas production tax
credits; relating to the disclosure of certain tax information;
making conforming amendments; and providing for an effective
date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 110
SHORT TITLE: PRODUCTION TAX ON OIL AND GAS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/18/11 (H) READ THE FIRST TIME - REFERRALS
01/18/11 (H) RES, FIN
02/07/11 (H) RES AT 1:00 PM BARNES 124
02/07/11 (H) Heard & Held
02/07/11 (H) MINUTE(RES)
02/21/11 (H) RES AT 1:00 PM BARNES 124
02/21/11 (H) Heard & Held
02/21/11 (H) MINUTE(RES)
02/21/11 (H) RES AT 5:15 PM BARNES 124
02/21/11 (H) Heard & Held
02/21/11 (H) MINUTE(RES)
02/23/11 (H) RES AT 1:00 PM BARNES 124
02/23/11 (H) Heard & Held
02/23/11 (H) MINUTE(RES)
02/25/11 (H) RES AT 1:00 PM BARNES 124
02/25/11 (H) Heard & Held
02/25/11 (H) MINUTE(RES)
02/28/11 (H) RES AT 1:00 PM HOUSE FINANCE 519
02/28/11 (H) Moved CSHB 110(RES) Out of Committee
02/28/11 (H) MINUTE(RES)
03/07/11 (H) RES RPT CS(RES) NT 1DP 2DNP 4NR 2AM
03/07/11 (H) DP: FEIGE
03/07/11 (H) DNP: GARDNER, KAWASAKI
03/07/11 (H) NR: FOSTER, MUNOZ, DICK, HERRON
03/07/11 (H) AM: P.WILSON, SEATON
03/14/11 (H) FIN AT 8:00 AM HOUSE FINANCE 519
03/14/11 (H) Heard & Held
03/14/11 (H) MINUTE(FIN)
03/15/11 (H) FIN AT 8:00 AM HOUSE FINANCE 519
03/15/11 (H) Heard & Held
03/15/11 (H) MINUTE(FIN)
03/15/11 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/15/11 (H) -- MEETING CANCELED --
03/16/11 (H) FIN AT 8:00 AM HOUSE FINANCE 519
03/16/11 (H) Heard & Held
03/16/11 (H) MINUTE(FIN)
03/16/11 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/16/11 (H) Heard & Held
03/16/11 (H) MINUTE(FIN)
03/17/11 (H) FIN AT 8:00 AM HOUSE FINANCE 519
03/17/11 (H) Heard & Held
03/17/11 (H) MINUTE(FIN)
03/17/11 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/17/11 (H) Heard & Held
03/17/11 (H) MINUTE(FIN)
03/18/11 (H) FIN AT 8:00 AM HOUSE FINANCE 519
03/18/11 (H) Heard & Held
03/18/11 (H) MINUTE(FIN)
03/21/11 (H) FIN AT 9:00 AM Anch LIO Rm 220
03/21/11 (H) Heard & Held
03/21/11 (H) MINUTE(FIN)
03/21/11 (H) FIN AT 1:00 PM Anch LIO Rm 220
03/21/11 (H) Heard & Held
03/21/11 (H) MINUTE(FIN)
03/23/11 (H) FIN AT 8:00 AM HOUSE FINANCE 519
03/23/11 (H) Heard & Held
03/23/11 (H) MINUTE(FIN)
03/23/11 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/23/11 (H) Heard & Held
03/23/11 (H) MINUTE(FIN)
03/24/11 (H) FIN AT 8:00 AM HOUSE FINANCE 519
03/24/11 (H) Heard & Held
03/24/11 (H) MINUTE(FIN)
03/24/11 (H) FIN AT 5:00 PM HOUSE FINANCE 519
03/24/11 (H) Heard & Held
03/24/11 (H) MINUTE(FIN)
03/25/11 (H) FIN AT 8:00 AM HOUSE FINANCE 519
03/25/11 (H) Heard & Held
03/25/11 (H) MINUTE(FIN)
03/25/11 (H) FIN AT 3:00 PM HOUSE FINANCE 519
03/25/11 (H) Heard & Held
03/25/11 (H) MINUTE(FIN)
03/26/11 (H) FIN AT 10:00 AM HOUSE FINANCE 519
03/26/11 (H) Heard & Held
03/26/11 (H) MINUTE(FIN)
03/28/11 (H) FIN AT 8:30 AM HOUSE FINANCE 519
03/28/11 (H) -- MEETING CANCELED --
03/28/11 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/28/11 (H) Heard & Held
03/28/11 (H) MINUTE(FIN)
03/29/11 (H) FIN AT 10:00 AM HOUSE FINANCE 519
03/29/11 (H) -- MEETING CANCELED --
03/29/11 (H) FIN AT 1:30 PM HOUSE FINANCE 519
03/29/11 (H) Moved CSHB 110(FIN) Out of Committee
03/29/11 (H) MINUTE(FIN)
03/30/11 (H) FIN RPT CS(FIN) NT 6DP 3DNP 2NR
03/30/11 (H) DP: T.WILSON, FAIRCLOUGH, HAWKER,
COSTELLO, STOLTZE, THOMAS
03/30/11 (H) DNP: GUTTENBERG, GARA, DOOGAN
03/30/11 (H) NR: JOULE, EDGMON
03/31/11 (H) BEFORE THE HOUSE
04/01/11 (H) TRANSMITTED TO (S)
04/01/11 (H) VERSION: CSHB 110(FIN)
04/04/11 (S) READ THE FIRST TIME - REFERRALS
04/04/11 (S) L&C, RES, FIN
04/08/11 (S) L&C AT 2:30 PM FAHRENKAMP 203
WITNESS REGISTER
DAN SULLIVAN, Commissioner
Department of Natural Resources
Juneau, AK
POSITION STATEMENT: Spoke about issues related to HB 110.
CLICK BISHOP, Commissioner
Department of Labor and Workforce Development
Juneau, AK
POSITION STATEMENT: Spoke about issues related to HB 110.
NEIL FRIED, Economist
Department of Labor and Workforce Development
Juneau, AK
POSITION STATEMENT: Answered questions regarding HB 110.
ACTION NARRATIVE
2:42:20 PM
CHAIR DENNIS EGAN called the Senate Labor and Commerce Standing
Committee meeting to order at 2:42 p.m. Present at the call to
order were Senators Menard, Giessel, Paskvan and Chair Egan.
Senator Davis arrived shortly thereafter.
HB 110-PRODUCTION TAX ON OIL AND GAS
2:43:31 PM
CHAIR EGAN announced the first order of business would be HB 110
and discussing employment issues. He said today the committee
would hear from Commissioner Click Bishop and Commissioner Dan
Sullivan.
DAN SULLIVAN, Commissioner, Department of Natural Resources
(DNR), said he would begin his remarks with good news. It is
important to remember that by any measure the North Slope of
Alaska remains a world class hydrocarbon basin. The North Slope
is also relatively unexplored compared to other major
hydrocarbon basins. He said he could provide an in-depth
briefing on these issues if the committee was interested.
2:47:26 PM
As DNR Commissioner he tries to keep an eye on global issues.
Right now there is a global oil and gas spending boom. Shell Oil
has announced a four-year, $100-billion plan; BP is looking at a
$16 billion dollar deal in Russia; Conoco Phillips has flat
spending in Alaska but is doubling spending in the Lower 48; and
ExxonMobil has announced goals of doubling US production by
2020. Today a Wall Street Journal article was about Chevron
looking at increasing spending in Texas. It is important to note
that the State of Alaska is rarely mentioned in these investment
strategies. Latest data shows Texas has 741 active drill rigs;
North Dakota has 153; Oklahoma has 162; Pennsylvania has 101;
New Mexico has 77; Wyoming has 47; Colorado has 66; Ohio has 9;
and Alaska has only 10 active drill rigs.
2:49:31 PM
He noted there is a qualitative difference between a drill rig
at Point Thompson and a shale gas drill rig in western
Pennsylvania, but this does give a sense of what is happening in
the Lower 48 and what is not happening here. DNR believes that
the state is not really even in the game. But it is not because
Alaska doesn't have a world class hydrocarbon basin.
COMMISSIONER SULLIVAN said many in the oil industry view Alaska
as economically challenged for a variety of reasons including a
harsh environment, high cost of exploration, remoteness, high
transportation costs, strict environmental regulations,
environmental group lawsuits, permitting inefficiencies, and
federal government anti-development policies. The view from the
industry is that Alaska is one of the highest tax regions in the
country, especially when oil prices are high.
DNR is very focused on working through a comprehensive package
of initiatives to address many of these challenges. Tax reform
is a cornerstone of that package of initiatives. The tax debate
has raised a number of issues. One is the urgency of the
situation. The decline in throughput, approximately 6 percent,
is a huge concern. Some have become numb to the issue because it
has been around for about 20 years, but he believed the day of
reckoning is sooner than most people realize. He was involved
with a TAPS shutdown and restart that took place in January. It
was a very challenging situation. He noted that Admiral Barrett
has testified that the best way to address technical challenges
is to get more oil in the pipeline.
2:53:13 PM
CHAIR EGAN noted the purpose of today's meeting was to talk
about employment.
COMMISISONER SULLIVAN related that for the last three months he
has been meeting with companies and leaders throughout the
state, in literally hundreds of meetings. Not one company has
provided an enthusiastic outlook on its North Slope activities.
He mentioned a speech given yesterday by the CEO of
ConocoPhillips, in which he said the service industry in Alaska
are taking their expertise and moving to other states to go
where the opportunities are. The industry needs these companies
here in Alaska. The governor wants to see 1 million barrels a
day going through TAPS within a decade. That is the vision he is
focused on.
2:57:28 PM
CLICK BISHOP, Commissioner, Department of Labor and Workforce
Development (DOLWD), brought small models of heavy equipment to
show the committee and introduced economist Neil Fried.
Commissioner Bishop said he had provided committee members with
slides that were very succinct, and that he wanted to put a face
on the employment discussion.
3:00:43 PM
The first one shows Alaska's oil industry employment and percent
of nonresident workforce, state-wide and in the North Slope
Borough. It starts with the year 2000 and goes through 2010
(2010 has only preliminary figures). Annual average oil industry
statewide employment in the year 2000 was 8,800; 27.9 percent
were non-resident workers. In the year 2006, the average annual
employment was 10,100 and 30.8 percent were non-resident. In
2010, the annual average employment statewide was 12,800, and
the department doesn't have the figures for non-resident hire
yet.
3:03:24 PM
In 2006 and to a certain degree 2007 and 2008, he believed the
increase in employment numbers could be attributed to repair and
testing after the TAPS spill. He emphasized these were statewide
figures in the three categories the department uses for oil and
gas employment.
In the North Slope Borough, the annual average oil industry
employment in 2000 was 3,355; non-resident workers were 32.5
percent. In 2006, average annual employment was 6,295 with 37
percent non-residents. In 2009, the annual average was 8,429
with a non-resident rate of 35 percent. For comparison, in 2006
all industries statewide employed 283,800 individuals and 17.9
percent were non-resident. In 2009, the total was 320,900 with
19.1 percent non-resident.
3:06:40 PM
SENATOR PASKVAN asked if he had a rough estimate of 2010 North
Slope numbers and percent of non-resident workers.
NEIL FRIED, Economist, Department of Labor and Workforce
Development (DOLWD), answered that the first three quarters of
2010 look similar to the first three quarters of 2009. Fourth
quarter figures will be available at the end of April. Non-
resident data lags by one year.
SENATOR WIELECHOWSKI asked him to explain why in the book
provided to legislators new hires by residency figures don't
seem to jibe with the DOLWD figures.
MR. FRIED answered the data from today's DOLWD handout is
looking at overall oil industry figures. The other handout is
looking at new hires, which is a subset of the first data.
CHAIR EGAN said so that is not the total amount.
MR. FRIED answered yes; it represents new hires for the entire
year. The majority of employees were not new hires.
SENATOR PASKVAN noted that Commissioner Galvin indicated
employment in the oil industry had increased steadily since the
implementation of PPT and ACES. Recent DOLWD numbers indicate a
19.1 percent increase. He asked how they reconcile increased
employment numbers with statements that employers are hurting.
3:12:13 PM
COMMISSIONER BISHOP responded he intended to discuss that in his
closing remarks, but he could skip to it if the committee wished
him to.
CHAIR EGAN said he could go there whenever he wished.
COMMISSIONER BISHOP said there is an uptick in employment. But
he believes that it is due to the spill in 2006 and to increased
maintenance and repair requirements of an aging pipeline. He
recently asked the Alaska Railroad how much drill casing had
been shipped from Fairbanks to Prudhoe Bay. In 2005, the figure
was 109 million pounds. In 2010, it was 42 million pounds. He
stressed this information should be included in the record, but
that it doesn't there is a decrease in drilling activity on the
North Slope. This leads to the issue of decreased flow.
Exploration wells this year are down to one. This does back up
what the oil industry says.
SENATOR THOMAS noted that this means there is a change in the
workforce, more maintenance rather than drilling. So there are
more people but they are doing different tasks. If that is the
case, the work is up and the non-residents are still there. Each
year Alaska has more and more non-residents becoming residents.
So it is no mystery that Alaskans are not working at Prudhoe
Bay, because they are being displaced by companies and workers
from Outside. He asked if this is because Alaska doesn't have
people with the required skills for the current work.
3:18:49 PM
COMMISSIONER BISHOP answered that is probably correct. He agreed
that many non-resident workers are becoming residents.
SENATOR PASKVAN asked in looking at the 2005 numbers, is he
saying that the industry shifted after the spill to a
maintenance function and rebuilding of feeder lines, which has
caused the employment numbers to increase.
COMMISSIONER BISHOP read a quote from Conoco Phillips CEO Jim
Mulva:
Even with the industry investments over the past
several years of $4 billion annually, we have been
unable to stop the state's production decline. More
and more of these investments that we are making are
consumed, and rightfully so, in maintaining and
upgrading the older pipelines and facilities and not
on developing new oil.
3:22:09 PM
COMMISSIONER BISHOP said he has tried to get Alaskans trained
into these jobs. He still believes many of these employment
increases are due to the maintenance needs of old pipelines.
This morning he asked the Joint Crafts Council where they are in
terms of employment and some unions are down 30 percent. Normal
pipeline season on the North Slope is from December through
April because they work off of ice roads which starts typically
on December 15 when the frost and the cover are both one foot
deep. Some of the labor workforce by craft is down 30 percent,
some are down 45 percent and some are down 50 percent over the
last two-year period.
He said he meets regularly with the oil industry and he wants to
put as many Alaskans as possible into those jobs. As recently as
March 21 the DOLWD Trends Magazine says Alaska's oil industry is
a top employer of non-resident workers, and he has written 11
letters to the heads of these oil companies that he copied
everyone, thanking them for hiring Alaskans and saying that he
would like to help them improve on it. He referred to a book
titled "What Happened to Fairbanks?" written in 1978. He read a
quote from the book, as follows:
Although the oil pipeline construction project had
been anticipated since 1968, it was not until March of
1974, just one month before actual construction began,
that the state Department of Labor formulated its
training plan to train Alaskans for pipeline jobs.
3:28:02 PM
He said the legislature and the Department of Labor and
Workforce Development (DOLWD) had the foresight four years ago
to develop a training plan for Alaskans. He has now switched
gears and is repackaging that document as "The Oil and Gas
Training Plan: for Alaskans Now and For the Future." He believes
Alaska has a bright future because some pretty exciting things
have been heard in this building in terms of other sources of
oil plays and the state is moving in the right direction on
Alaska hire. It's not happening fast enough, but the department
and industry are having those discussions. He concluded saying
"Yes, let's fill the pipeline, because it is declining, but
let's also fill Alaska's workforce pipeline with Alaskans."
CHAIR EGAN thanked him for coming and stopped questions from the
committee because they were out of time.
SENATOR GIESSEL said this has been compelling testimony. She
noted that HB 110 has been heard 26 times in the House; its
companion bill has been heard six times in this body. Therefore,
she moved to report HB 110 [CSHB 110(FIN)] from committee so it
could join its companion bills in the next committee of
referral.
SENATOR PASKVAN objected.
SENATOR MENARD moved that the Senate Labor and Commerce
Committee stand in recess until Saturday, April 9, at 1 p.m. in
order to complete and conclude these deliberations and allow HB
110 to be available in Senate Resources as soon as possible.
CHAIR EGAN asked if there was any objection to having the
meeting at 1 p.m. on Saturday.
SENATOR PASKVAN objected.
SENATOR MENARD stated this was a privileged motion and not
subject to debate. She said a roll call vote was needed.
A roll call vote was taken on the motion to meet on Saturday.
Senators Giessel and Menard voted yea; Senators Davis, Paskvan
and Egan voted nay; therefore the motion failed.
A roll call vote was then taken on the motion to move the bill
from committee. Senators Menard and Giessel voted yea; Senators
Paskvan, Davis, and Egan voted nay; therefore the motion failed.
CHAIR DAVIS stated that she voted no because she felt the
committee was not yet ready to move the bill. She didn't know
what they really got out of this meeting that would allow them
to do that. She appreciated the points that were made, but they
hadn't gotten a chance to ask any questions. They might have had
100 meetings in the House but she wasn't in any of them. She
felt it was wrong to move the bill from committee without doing
any work on it.
3:35:00 PM
CHAIR EGAN suggested they continue the meeting at 2 p.m. on
Monday. Seeing that several members were not available at that
time, he announced he would reschedule the meeting and notify
the members of the new time. He then adjourned the meeting at
3:35 p.m.
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