JOINT HOUSE FINANCE COMMITTEE SENATE FINANCE COMMITTEE November 8, 2007 5:38 p.m. CALL TO ORDER Co-Chair Chenault called the House Finance Committee meeting to order at 5:38:44 PM. HOUSE MEMBERS PRESENT Representative Mike Chenault, Co-Chair Representative Kevin Meyer, Co-Chair Representative Harry Crawford Representative Richard Foster Representative Les Gara Representative Mike Hawker Representative Reggie Joule Representative Mike Kelly Representative Mary Nelson Representative Bill Thomas Jr. HOUSE MEMBER ABSENT Representative Bill Stoltze, Vice-Chair SENATE MEMBERS PRESENT Co-Chair Lyman Hoffman Co-Chair Bert Stedman Senator Fred Dyson Senator Kim Elton Senator Charlie Huggins Senator Danny Olson Senator Joe Thomas SENATE MEMBERS ABSENT none ALSO PRESENT Senator Tom Wagoner. PRESENT VIA TELECONFERENCE Paul Kendall, Anchorage; Michael Tavoliero, Anchorage; Bill Warren, Kenai; Jan Brophy; Tom Lakosh, Anchorage; Bret Chambers; Steve Dentor; Lawrence Bredman, Manley Hot Springs; James Fisher, Soldotna; Fred Sturman, Soldotna; Rhonda Boyles, Fairbanks; Jerry Walker, Fairbanks; Mike Milligan, Kodiak; Donald Benson, MatSu; Eric Dompeling, The Alliance, Anchorage; Paul Laird, The Alliance, Anchorage; Jim Gilbert, President, Udelhoven Oilfield Systems, Anchorage; Maynard Tapp, Anchorage; Jeanine St. John, Anchorage; Jerry McCutcheon, Anchorage; Tara Sweeny, ASRC, Anchorage; Keith Sanders, CIRI, Anchorage; David Godstein, Backbone, Anchorage; John Shively, Resource Development Council, Anchorage; Jim Decker, Anchorage; Keith Silver, Anchorage; Harry McDonald, Anchorage; Tom Hendrix Jr., Anchorage; Bart Armfield, Brooks Range Petro. Corp., Anchorage; Matthew Fagnani, Nana Management Systems; Jim Orr, Employed by AK Public Employees Association; Marshall Byrd; Mary Whitmore; Caroline Bolar; Merrick Peirce; Frank Sepico [Many of the off-net testifiers did not identify their location]. GENERAL SUBJECT(S): ^STATEWIDE TESTIMONY ON OIL AND GAS ISSUE  The following overview was taken in log note format. Handouts will be on file with the House Finance Committee through the 25th Legislative Session, contact 465-6814. After the 25th Legislative Session they will be available through the Legislative Library at 465-3808. TIME SPEAKER DISCUSSION  5:39:16 PM Co-Chair Convened the Joint Senate and House Chenault Finance Committees in order to hear statewide testimony on oil and gas issues.  5:42:00 PM PAUL KENDALL, Referenced the testimony he submitted ANCHORAGE on file. He voiced support for PPT and added support for a gross percentage. He correlated the actual use in an average family home. Alaska is a source of natural gas. He recommended that the oil companies come forward to provide testimony. He was disturbed about the package currently before the Committee.  5:47:32 PM MICHAEL Addressed concerns with the fair share TAVOLIERO, concept and the process of how that ANCHORAGE would be implemented.  5:50:34 PM BILL WARREN, Testified in support of a fair share KENAI for the resources of Alaska. He supported exploration of Prudhoe Bay & supported testimony heard from British Petroleum (BP). He supported the 25% on the base tax with a high progressivity and urged movement on ANGDA.  5:53:59 PM JAN BROPHY, He pointed out all the places that the KENAI oil companies make money. He warned  that by 2030, the demand for oil will be quadrupled in order to supply the world's demand. He recommended a gross tax. The price per barrel of oil has doubled. He concluded that legislators represent Alaskan citizens not the oil companies.  5:59:49 PM TOM LAKOSH, Submitted his testimony. He stressed ANCHORAGE that the committee substitute versions before the Committees are unconstitutional as is the ACES bill because it does not protect public interest.  6:06:44 PM BRET CHAMBERS, Favored continuing the current PPT system to provide enough time to see if it can work.  6:07:50 PM STEVE DENTON, Addressed the issue of family values and fair share. He pointed out that his family has been involved in the resource industry for many years. Mr. Denton mentioned the permanent fund opportunities and how that meets the fair share promise.  6:11:21 PM LAWRENCE Recommended taking 1% of the final BREDMAN, number and raising the tax to fund MANLEY HOT transportation needs. The federal gas SPRINGS tax funds the current state transportation needs, but there are many roads that need attention. He mentioned the Dalton Highway and highway systems that support the Alaska North Slope.  6:16:45 PM RHONDA BOYLES, She opined that the free enterprise FAIRBANKS system is the most successful means of achieving economic justice. Alaska needs to take stewardship of the land compatible with the unique environment. She urged that legislation be adopted that supports that platform. She worried about less production on the economic resource. She supported a fair and balanced approach and noted support for the testimony of Mr. Hanley.  6:21:36 PM JERRY WALKER, Worried about potential failure of SELF, AGIA. He spoke in support of positive FAIRBANKS business and the need for fiscal security. He warned that the rules should not be continually changed. He supported the progressivity provision without change.  6:24:06 PM JAMES FISHER, He recommended an increase in the tax SOLDOTNA structure to the highest possible  number. He addressed the Gaffney Kline and Associates' analysis. He urged that the legislature take strong action.  6:26:45 PM FRED STURMAN, Spoke to fair share and reprimanded SOLDOTNA, legislators for taking citizens' fair share. He urged that the budget be cut and expenses lowered. He voiced opposition to any increases in government.  6:28:37 PM DONALD BENSON, Encouraged the members of the MAT-SU Committees to support the Senate Judiciary Committee version and the House Resources Committee version of PPT, which he felt brought back a fair share of Alaska revenues. He stressed the Governor's support throughout the State and maintained that ACES ensures that Alaska will be treated as a fair partner.  6:31:46 PM MIKE MILLIGAN, Drew attention to the New York Times KODIAK article regarding 77% of the world's oil being held in reserve by the oil companies with no national equity. He suggested the creation of another oil company similar to ARCO.  6:34:56 PM ERIC Spoke about the decline in production DOMPELING, development. He observed that Alberta THE ALLIANCE has seen a slow down of resource ANCHORAGE, development due to an increase in Anchorage taxes. He warned about dipping into the Capital Budget Reserve (CBR). He questioned the current plan. He urged that long term jobs and opportunities not be sacrificed for a short term gain.  6:37:54 PM PAUL LAIRD, He expressed concern regarding further THE ALLIANCE, raising taxes on the oil companies and Anchorage how this impacts investments of oil companies. He went on to say that "fair share" means keeping oil companies operating in Alaska. He supports keeping PPT in place.  6:40:35 PM JIM GILBERT He said the state should not raise PRESIDENT, taxes on oil companies. He pointed out UDELHOVEN the extensive operations of the oil OILFIELD companies. He went on to outlined the SYSTEMS, number of contributions his employees Anchorage provide to his community. He further underlined the importance of a partnership with oil companies rather than viewing the relationship as adversarial.  6:45:54 PM MAYNARD TAPP, He urged the Committee to NOT raise Anchorage taxes. He stressed that any changes should make oil development more attractive.  6:47:33 PM JEANINE ST. Defined "fair share" as good jobs & JOHN, good future. She urged the committee Anchorage not to raise taxes.  6:49:54 PM JERRY Referenced the topping plant/refining MCCUTCHEON, issue. He did not support supplementing Anchorage companies refining plants.  6:52:18 PM TARA SWEENY, Referenced sec. 36 and sec. 34 of ASRC, HB2001. Privately owned data used for Anchorage the state benefit should remain confidential. She underlined that this was a right of the company.  6:55:48 PM KEITH SANDERS, Echoed concerns of previous the speaker CIRI, regarding having to release seismic Anchorage data.  6:57:42 PM DAVID He noted the balance of attempting to GODSTEIN, receive fair share without dampening BACKBONE, investment. He said the companies will Anchorage not pull out of Alaska or stop investing because of a tax increase. He supported the 25% tax with .4 progressivity, and an increase penalty.  7:01:37 PM JOHN SHIVELY, He spoke against raising taxes on the RESOURCE oil companies.  DEVELOPMENT COUNCIL, Anchorage 7:06:24 PM JIM DECKER, He noted that he works in oil and gas Anchorage industry and spoke in support of PPT. He is opposed to the proposed ACES plan. He referred to AS 43 and noted that the word "reasonable" was added before "cost". He felt this would increase litigation and have the unintended consequences of acting as a disincentive. He went on to say that government has grown considerably and can not be sustained. He felt the industry would perceive that taxes would be raised to support government. He said excess revenues should be placed in a reserve.  7:12:37 PM KEITH SILVER, He observed that he is a 45 year Anchorage resident. He expressed concern over raising taxes and the potential of creating an unstable environment, which would make oil companies less receptive to exploration and development.  7:14:57 PM HARRY He stated he is the owner of a trucking MCDONALD, company. He urged the committee to  Anchorage leave the current tax system in place.  7:17:40 PM TOM HENDRIX He emphasized that he works for a JR., Anchorage company that benefits from the prosperous partnership with the oil companies. He urged the committee to pass legislation that encourages exploration and development. He did not support raising taxes  7:20:03 PM BART ARMFIELD, He anticipated that his company would BROOKS RANGE make significant investments under PPT, PETRO. CORP., but cautioned that any change to the Anchorage tax would bring uncertainty. He went on to note that ACES would decrease capital expenditures by companies and companies would go elsewhere.  7:23:35 PM MATTHEW He observed that his company thrives FAGNANI, NANA when oil companies are thriving. He MANAGEMENT maintained that raising taxes on the SYSTEMS industry will not aid the state and will discourage exploration and investment, which in turn effects companies like his.  7:27:06 PM JIM ORR, He referenced the provision in the bill EMPLOYED BY AK regarding auditors and the exemption of PUBLIC specific employees.  EMPLOYEES ASSOCIATION 7:31:06 PM MARSHALL BYRD He felt that the administration's proposal of raising taxes is a emotional reaction. He supported the PPT under the current law.  7:34:11 PM MARY WHITMORE She supported leaving the current law in place and did not support raising taxes. She noted that 30 days is not enough time to make good tax policy  7:36:00 PM CAROLINE BOLAR Asked if Alaska is getting a fair share from any industry. She supported putting addition revenues into the Permanent Fund.  7:40:34 PM MERRICK PEIRCE Noted that Alaska's crude oil is worth $25.7 billion. He felt that the current law is not giving Alaska its fair share. He went on to express concerns about fuel costs in Fairbanks and noted that the effects on the housing market. He supported investing additional revenues.  7:43:20 PM FRANK SEPICO Supported not raising taxes.  7:45:18 PM #ADJOURNMENT The meeting was adjourned at 7:44 PM