HJR 4-OFFSHORE OIL & GAS REVENUE SHARING  3:31:10 PM CHAIR GIESSEL announced HJR 4 to be up for consideration. 3:31:15 PM REPRESENTATIVE DAN SADDLER, Alaska State Legislature, Juneau, Alaska, sponsor of HJR 4, explained that this resolution calls upon the federal government to enact a fair and sensible system of federal revenue sharing in Alaska. He said that oil and gas development in federal areas can be a boom for the country providing revenues for the federal government, jobs and a secure source of domestic energy, but it also creates costly impacts to nearby states. The federal government shares the proceeds from such development with some states to help them offset the costs of improvements and services necessary for safe and responsible development. On inshore areas they share 50 percent of the revenue with states where that production occurs. In states within three miles of shore, it shares 27 percent and in the four states bordering the Gulf of Mexico it shares 37.5 percent (Gulf of Mexico Energy Security Act of 2006). But current federal law says the State of Alaska (SOA) receives a zero share of the federal revenues from the Chukchi and Beaufort Seas oil or from other OCS areas. The federal areas off the North Slope hold tremendous amounts of oil and gas. Shell's supplemental environmental impact statement (EIS) for the Chukchi Sea indicated 3 billion-plus barrels of oil. But just as onshore development on the North Slope required investments in infrastructure, development of Alaska's offshore oil and gas will also require investments. 3:33:03 PM REPRESENTATIVE SADDLER said investments will be required by the state for roads, ports, airports, utilities, housing, pipelines, and services such as oil spill and emergency response, environmental monitoring and mitigation and public health and safety. For example, the $2.75 billion generated by the sale of federal leases in the Beaufort and the Chukchik Seas several years ago would have brought the state about $1 million if the same revenue sharing applied in Alaska as applied in Gulf of Mexico states. In the future, Alaska will get zero percent from the Chukchi Sea development. He said this is an important resolution and comes at a time when the OCS sharing issue is ripe in Washington, D.C., where Senator Murkowski has pushed legislation in the last two years to insure a fair share in states other than Gulf of Mexico states. This will give her support as she pushes the issue again. The president proposed OCS expansion on the Atlantic Coast, but cut off the possibility of it in the Beaufort and Chukchi Seas. SENATOR STOLTZE said the resolution refers to 50 percent revenue sharing for oil leases whereas the Statehood Compact provided for 90 percent sharing, which Congress overruled, and asked if he was comfortable memorializing the 50 percent in the resolution. REPRESENTATIVE SADDLER responded that he shared his concern that the federal government hasn't respected the commitments they made to the state in the Statehood Act, however, in cooperating with Senator Murkowski, he did not want to raise the statehood issue, but rather wanted to strengthen her position on a 37.5 percent split. SENATOR STOLTZE said he did not think saying he has a moral and legal case for a higher percentage would diminish his argument and that the best way to get less than you want is to agree to ask for it before the negotiation is started. SENATOR COGHILL agreed with Senator Stoltze that the 90 percent should not be conceded in any form and had prepared conceptual statements to maximize what the state could get through revenue sharing. REPRESENTATIVE SADDLER said he respected the desire to assert the strongest possible case. SENATOR STEDMAN commented that his impression was that Back East wants to zero everyone out and to consider that in the word- smithing, because they might want to make everyone like Alaska, which is zero. SENATOR COGHILL agreed. CHAIR GIESSEL asked him if he was offering an amendment. 3:40:20 PM SENATOR COGHILL replied that he wanted to leave it on the table and give the sponsor time to digest the concept. 3:42:01 PM SENATOR WIELECHOWSKI supported the resolution and asked if the Statehood Act talks about 50 percent applying to offshore beyond six miles. REPRESENTATIVE SADDLER answered that there is a distinction between the revenue sharing from federal lands onshore and offshore and we should expect a 90/10 split onshore. That same provision does not apply offshore to the best of his knowledge. He clarified that this resolution does not call specifically for a 37.5 percent share; it calls for consistently and equitably sharing to allow for maneuvering room. He didn't see a problem with considering the conceptual language now, but wanted the chance to review it more thoroughly. SENATOR STOLTZE said the key prize is OCS revenue sharing and that anything is better than zero. He didn't think it would do any harm to accurately reflect what the consistent state position has been. SENATOR STEDMAN said the session still has plenty of time and they might think about broadening the concept to Wyoming coal to pick up as much support from resource states as possible. 3:45:26 PM CHAIR GIESSEL asked him to say more about the Land and Water Conservation Fund on page 3, line 3. REPRESENTATIVE SADDLER answered that it is generally considered a mitigation fund. He cautioned against broadening the resolution, because it was designed specifically to bolster the U.S. Senate delegation as they work specifically on offshore issues. SENATOR COGHILL said that was an important point, because Alaska will be joining all the Gulf Coast states as well as California on this the OCS issue, especially since we have leases that have both been leased and now are being withheld by this president. He said his amendment would effectively delete the first two whereas clauses and replace them with his whereas clause that inserts equitable revenue sharing. But the final statement has to be in support of the Gulf Coast states. SENATOR STOLTZE said some rural entities outside of our Congressional delegation have more of an aggressive lobbying presence than Alaska does at times on revenue sharing issues. REPRESENTATIVE SADDLER said that was a fair observation. 3:51:03 PM SENATOR COGHILL asked if any study had been done on the Land and Water Conservation Fund and Gulf of Mexico Energy Security Act. REPRESENTATIVE SADDLER responded that he would review the functioning of the Land and Water Conservation Fund and what the balance is in time for the next meeting. It is an important factor for passage of federal legislation, because they might pick up more support if they can show that development of oil and gas resources was going to what some perceive as the greater good of environmental conservation or remediation. 3:53:02 PM CARL PORTMAN, Deputy Director, Resource Development Council (RDC), Anchorage, Alaska, supported HJR 4. He said like the Gulf States, Alaska also contributes to national energy security through onshore oil and gas development and has generated billions of dollars to the federal treasury through offshore leasing. These leases could contain tens of billions of barrels of oil which in turn could generate hundreds of billions of dollars in revenue. RDC has consistently supported federal revenue sharing to benefit the State of Alaska and local communities agree that states sustaining offshore energy development and production deserve a share of the revenue generated because they support offshore operations and experience impacts to local services and infrastructure. Federal government grants are inadequate in addressing the need for additional investment in state infrastructure or the increased demands on state and local government resources resulting from offshore development, especially in Alaska which has more coastline, more rural communities, and less infrastructure than any other state. RDC supports HJR 4 especially the concept behind it. 3:55:20 PM KARA MORIARTY, President and CEO, Alaska Oil and Gas Association (AOGA), Anchorage, Alaska, had technical difficulties and couldn't continue her testimony. 3:56:02 PM PETE STOKES, Alaska Support Industry Alliance (ASIA), Anchorage, Alaska, supported HJR 4. He works as a petroleum engineer with Petrotechnical Resources of Alaska, is a board member of the ASIA, and also serves on the Oil and Gas Competitiveness Review Board. He said Alaska became the 49th state and could sustain an economy only through resource development. It is important for Alaska to share in the OCS royalty revenue as the state is the entity that provides infrastructure and social fabric (schools and other state government spending) that support the OCS development. MR. STOKES said similar to the OCS Gulf of Mexico, Arctic OCS development is important for the nation's energy security and the host state should receive benefit in support of this effort. This is currently the practice in the Gulf of Mexico and should be adopted for the Arctic OCS as the state gives the necessary support for developing oil and gas in the harsh Arctic offshore environment. An additional precedent is the sharing with Alaska of 90 percent of federal onshore royalties. Since the federal government has put many onshore areas, such as the NPR-A off limits to development and continues to prevent exploration and development in ANWR, it is even more important for the state to receive benefit from federal OCS development. CHAIR GIESSEL thanked Mr. Stokes and finding no further comments said she would keep public testimony open and hold HJR 4 in committee.