HJR 26-OFFSHORE OIL & GAS REVENUE SHARING  2:46:00 PM CO-CHAIR FEIGE announced that the next order of business would be HOUSE JOINT RESOLUTION NO. 26, Urging the United States Congress to provide a means for consistently and equitably sharing with all oil and gas producing states adjacent to federal outer continental shelf areas a portion of revenue generated from oil and gas development on the outer continental shelf to ensure that those states develop necessary infrastructure to support outer continental shelf development and preserve environmental integrity. 2:46:07 PM CO-CHAIR SADDLER, as sponsor of HJR 26, introduced the resolution. He said that oil and gas development in federal areas can be a boon for our country, providing revenue and jobs and secure sources of domestic energy, but it also creates costly impacts on nearby states, communities, and their residents. While the federal government recognizes these strains, they set policies in place to share proceeds from such development to help states offset the costs for the improvements and services necessary for safe and responsible development. The federal government shares 50 percent on onshore areas where the production occurs, in areas within three miles of shore, the near shore, it shares 27 percent, and for offshore areas, it shares 37.5 percent of the revenues. However, current federal law says the State of Alaska and similarly situated states don't receive any share of federal revenues oil produced out of prospects in areas such as the Chukchi or Beaufort Seas. CO-CHAIR SADDLER said many believe there is lots of oil in the outer continental shelf (OCS). The industry shares that belief in its investment of millions of dollars in leasing, exploration, and drilling. Just as onshore development on the North Slope requires infrastructure and investment, offshore development will require infrastructure investment in ports, roads, airports, utilities, housing, and more. Further, it would require additional state services such as oil spill emergency response, public health and safety, and environmental monitoring and mitigation. Right now might be the best opportunity in years in progress for OCS revenue sharing. He pointed out that U.S. Senator Lisa Murkowski is the ranking Republican member of the Senate Energy and Resources Committee. The new chair is U.S. Senator Mary Landrieu, Louisiana, a strong advocate for the oil industry and an advocate for OCS revenue sharing. These two senators have introduced the Fixing Americas Inequities with Revenue (FAIR Act), which would extend to all OCS states the same 37.5 percent share that the Gulf Coast states currently receive. This resolution, HJR 26, would send a strong message from the State of Alaska to the U.S. Congress in support of the FAIR Act or similar legislation that aims at a fair and sensible system of federal revenue sharing. 2:48:19 PM CO-CHAIR FEIGE opened public testimony on HJR 26. 2:48:45 PM CHARLOTTE BROWER, Mayor, North Slope Borough (NSB), speaking from written testimony, paraphrased, as follows: Good afternoon. My name is Charlotte Brower. I am the Mayor of the North Slope Borough and foremost am the wife of a whaling captain, mother of six children and grandmother of 25 so I have a dear investment in the North Slope. Thank you for the opportunity to speak on HJR 26, a resolution urging the United States Congress to provide for sharing with local areas the revenue from the oil and gas development on our outer continental shelf. On July 23rd of this past summer, I was invited to testify before the U.S. Senate Energy Committee in support of S. 1273, known as the "Fixing America's Inequities with Revenues Act of 2013" or "FAIR Act". Today I am here before you to express support for HJR 26 as a way to help secure passage of measures like S. 1273 in Washington D.C. By working together as Alaskans, we need to send a message for receiving a fair and equitable distribution of revenues that come from energy development on our Outer Continental Shelf (OCS). 2:50:44 PM MAYOR BROWER continued reading her written testimony, as follows: The Congress should pass legislation to ensure that state and local governments will have resources to keep up with infrastructure requirements, expand emergency response and search and rescue capabilities, take an active role in oil spill preparedness, and work to maintain healthy communities and a healthy ecosystem. The North Slope Borough is the largest municipality in the United States encompassing over 94,000 square miles, including more than 8,000 miles of Arctic coastline along the Beaufort and Chukchi Seas. The majority of North Slope residents are Inupiat Eskimos. We are heavily dependent upon marine mammals, such as Bowhead and Beluga whales, seals and walruses to sustain our physical health and our cultural and spiritual well-being. The importance of subsistence in our coastal communities and marine environment goes beyond the need for food. Our unique Inupiat culture, our traditions, and our links to our ancestors and history are also tied to our subsistence lifestyle, to our custom of sharing with others, and to celebrating our connection to the land and the ocean. We are mindful of the critical need to protect the environment and preserve our culture and our resources. However, we also recognize that our ability to continue to provide even basic services to our communities depends upon revenue from the oil and gas industry, which today primarily operates on state land in our region. Without these revenues, the North Slope Borough would not be able to maintain the airstrips, health care facilities, water and sewer, search and rescue or other services we provide in our villages. What many people in the Lower 48 do not understand is that the infrastructure enjoyed today by other coastal states - paved roads, deep water ports, and modern communications - those don't exist in the North Slope region. Most people do not understand the challenges Alaska's rural governments' face. As one example, a gallon of milk costs $10 today in Barrow. That same gallon of milk might cost $18 or more in some of our villages. Other food items such as fresh fruits and vegetables are even more expensive relative to the Lower 48 or even other parts of Alaska because the cost of transportation in our region is very high. And now imagine the cost to the North Slope Borough for new roads, upgrades to airstrips, new health care facilities or new water and sewer or gas lines that must be built through permafrost. 2:54:09 PM MAYOR BROWER continued reading her written testimony, as follows: We also face threats to the infrastructure we have in place today. With the Arctic Ocean now ice free for a longer period every spring and fall, storms are eroding the land around our villages - in some cases over five to six feet per year. [A] moderate storm once consumed more than a million dollars in response costs from our borough. Over the last ten years the coastline near Barrow has receded toward an old landfill that holds tens of thousands of barrels of [U.S.] Navy and {U.S.] Air Force waste. Ten years ago, the ocean was 200 feet away from the landfill. Now it is only 120 feet away. Coastal erosion also threatens Barrow's utility system, which is an underground system of tunnels designed to protect the city's utilities from the cold. This system provides indoor plumbing to our residents and eliminates the need for outhouses and water delivery by truck. And like most other things in the Arctic, it is very expensive. 2:55:30 PM MAYOR BROWER continued reading her written testimony, as follows: I would also like to note that the oil and gas industry, researchers, and federal agencies, including the U.S. Coast Guard, all use our local infrastructure - our airports, roads, and hospitals. We welcome people to our community and we are grateful for the [U.S.] Coast Guard's presence in Barrow during the 2012 drilling season, but Congress must recognize the cost to our community of maintaining and expanding critical infrastructure as industry develops offshore resources. There is also a great [deal] of scientific research needed to understand how best to mitigate the impact of oil and gas development on the Arctic Environment and the North Slope Borough can and should be part of that effort. The last thing I would like to emphasize is the role of the state and local governments in emergency preparedness associated with offshore energy development, including oil spill response. Let us pray that our good Lord will prevent the need, but in the event of an emergency it will be the brave men and women from the North Slope Borough Search and Rescue Department and the Alaska Department of Public Safety's troopers and the village [police safety officers] VPSOs who will most likely be first on the scene. In summary, the people of the North Slope live in one of the most undeveloped regions in our nation. Investments must be made in the infrastructure necessary to ensure that the OCS development can be conducted safely and responsibly. And the burden of providing such infrastructure should not fall solely on the people [who] have the most to lose in case of an oil spill. Thank you for sponsoring HJR 26 [and] to help the people of the North Slope Borough [to] send this message to the United States Congress. 2:57:59 PM CO-CHAIR SADDLER remarked that it is appropriate to have Mayor Brower and Inupiaq spoken in the House Resources Committee room as the committee discusses the impact of the OCS on the North Slope. 2:58:31 PM SARAH ERKMANN, External Affairs Manager, Alaska Oil and Gas Association (AOGA), stated that AOGA supports HJR 26. She related that AOGA is the business trade organization representing the majority of oil and gas producers, explorers, refiners, transporters, and marketers in Alaska. With 15 member companies, the AOGA represents both large and small companies with interest on the North Slope, in the Cook Inlet, and in the OCS [often referred to as the "Offshore"]. MS. ERKMANN said the AOGA appreciate the focus on developing Alaska's offshore resources in a way that recognizes Alaskans' interest in advancing the issue because the Offshore is considered the "next generation" of oil and gas development in Alaska. It is truly a world-class resource with an anticipated 27 billion barrels of oil to produce. She said, "AOGA can say at a high level that we support an OCS revenue-sharing program as long as additional costs are not passed on to the offshore oil and gas industry in the form of bonuses, rent, or royalties." The AOGA appreciates the legislature's efforts as well as efforts made by Alaska's Congressional delegation to keep the Offshore Revenue Sharing alive at the federal level. She thanked members for the opportunity to testify. 3:00:15 PM ADRIAN HERRERA, Washington D.C. Coordinator, Arctic Power, asked to speak in support of HJR 26. He related that Arctic Power is a 501 (c) (6) not-for-profit citizens' based organization arguing for the environmentally responsible development of oil and gas resources in the Arctic region of Alaska. The Arctic Power strongly supports HJR 26 and support for OCS revenue sharing nationwide as well as in the state. Two prime reasons are to bring parity with the rest of the nation, in particular, with the Gulf of Mexico states, which receive 37.5 percent. Additionally, Arctic Power works to mitigate impacts to coastal communities in Alaska and the state as a whole. The current status of zero percent revenue sharing does nothing to encourage the State of Alaska or any other coastal state to pursue offshore development nor does it provide any mitigation costs against problems or impacts to the environment or coastal communities. As previously mentioned, a bill is before the Congress, S. 1273, the "Fair Act", which is probably the prime target HJR 26 will be used for although another bill, S. 199 by U.S. Senator Mark Begich. He advised that S. 199 carries much the same language as S. 1273, except it is geographically limited to the State of Alaska. It has received strong support and U.S. Senator Begich has signed on as a sponsor of S. 1273, which will likely be the vehicle. Thus, Alaska has full support for the OCS revenue-sharing bills currently active in the U.S. Senate, he said. Last year, in the U.S. House of Representatives, H.R. 2231, an OCS revenue-sharing bill, passed carrying the same figure of 37.5 percent to the state closest to the development, which was sponsored by U.S. Representative Richard Norman "Doc" Hastings, Chair of the Natural Resources Committee, representing Washington's 4th district. 3:02:43 PM MR. HERRERA related that the White House has expressed strong concerns against revenue sharing towards states not receiving it, such as Alaska due to the loss of revenue to the federal government. He noted that taking 37.5 percent from the entire OCS royalties and revenues going to states would represent a loss to the U.S. Treasury. Similarly, based on a bill passed in 2006 called the "Gulf of Mexico Energy Security Act of 2006 (Pub. Law 109-432 [GOMESA], drafted by U.S. Senator Mary Landrieu, allow 37.5 percent of royalty and revenue to the local communities up to a cap of $500 million per year. The "FAIR Act" reduces that cap to zero in 2025 and the White House and U.S. Treasury finds this to be "stealing money from the treasury." In fact, during hearings U.S. Senators stated this concern. MR. HERRERA said another front mentioned by the White House and the Department of the Interior relates to the environmental mitigation programs specific to the Land and Water Conservation Fund (LWCF). The Land and Water Conservation Fund so far has been a boondoggle because it has been raided by various presidents and Congressional committees to fund other projects not related to environmental conservation or environmental mitigation. He reported that the President seeks to fund the LCWF with $900 million, noting it already receives $125 million under GOMESA and will receive $62.5 million under the proposed FAIR Act. During debate on the proposed FAIR Act in July the Chair and ranking member Senator Murkowski both stated for the record that LWCF should not be reduced. However, in the Arctic Power's opinion the proposed $900 million for future OCS revenue for the LCWF is really a "pie in the sky" and would not receive that type of support in the Congress, he said. He reiterated that the Arctic Power supports the clause in HJR 26 that addresses this. 3:05:45 PM MR. HERRERA pointed out that the delegation agree that the purpose of the change in revenue sharing is to bring parity between onshore development, which receives 50 percent from federal lands going towards the state; parity between the Gulf of Mexico under the GOMESA Act of 2006, which receives 37.5 percent; and parity between the entire nation as a whole. He questioned why one state would receive some funds but another state, such as Alaska receives nothing at all, particularly since the state has more coastline, more rural area, and is closer to development than any other state. MR. HERRERA said the second point brought up by U.S. Senator Murkowski was impact. She indicated that it doesn't matter if it is one mile offshore or 50 miles offshore, the impact to the shoreline is still very high. Finally, in his organization's opinion, the White House has been taking a very myopic view in that it "doesn't look at the big picture." For example, if one increases the attractiveness of development by allowing infrastructure to be built on the shoreline, more companies will take advantage of that and develop offshore. Further, greater offshore development leads to greater revenue streams and under the proposed FAIR Act and GOMESA Act of 2006, additional environmental mitigation would exist. The proposed FAIR Act allows for 10 percent of the entire OCS revenue nationwide to be spent by coastal communities on environmental mitigation and also on alternative energy development. In closing, he said the Arctic Power believes this will address the views of President Obama, the White House, and the DOI. He offered appreciation for HJR 26 to address these issues. 3:08:44 PM CO-CHAIR FEIGE, after first determining no one else wished to testify, closed public testimony on HJR 26. 3:09:03 PM REPRESENTATIVE JOHNSON moved to report HJR 26 out of committee with individual recommendations and the accompanying fiscal note. REPRESENTATIVE JOHNSON said he would like the committee to take a roll call vote on this measure. REPRESENTATIVE SEATON objected to reporting HJR 26 from committee. The committee took a brief at-ease. 3:09:57 PM A roll call vote was taken. Representatives Johnson, Olson, Seaton, Feige, and Saddler voted in favor of reporting HJR 26 out of committee. [Representatives Hawker, P. Wilson, Tarr, and Kawasaki were not in the room]. Therefore, HJR 26 was reported out of the House Resources Standing Committee by a vote of 5-0.