SENATE FINANCE COMMITTEE January 27, 2015 9:01 a.m. 9:01:52 AM CALL TO ORDER Co-Chair MacKinnon called the Senate Finance Committee meeting to order at 9:01 a.m. MEMBERS PRESENT Senator Anna MacKinnon, Co-Chair Senator Pete Kelly, Co-Chair Senator Peter Micciche, Vice-Chair Senator Click Bishop Senator Mike Dunleavy Senator Lyman Hoffman Senator Donny Olson MEMBERS ABSENT None ALSO PRESENT Janak Mayer, Partner, enalytica; Nikos Tsafos, Partner, enalytica. SUMMARY ^PRESENTATION: OIL and GAS TAX CREDITS 9:03:02 AM JANAK MAYER, PARTNER, ENALYTICA, introduced himself. He announced that the current legislative session was his fourth consecutive session. His expertise had been utilized for oil and gas tax reform; and most recently for the Alaska Liquid Natural Gas (AKLNG) project. The prepared documents on the day's agenda: background on oil prices, and the fundamental causes for the movements in the market; and the impact of the lower oil prices on the tax credits within Alaska's production tax system. Co-Chair MacKinnon clarified that her last name is currently "MacKinnon." NIKOS TSAFOS, PARTNER, ENALYTICA, shared that he had worked for ten years as a consultant for ten years with a number of companies, with a focus primarily on gas marketing commercialization. He had also worked broadly on energy economics. He discussed the PowerPoint, "Impact of Oil and Gas Production Tax Credits at Low Prices" (copy on file). The presentation was intended to understand the oil market by outlining his process for evaluating the market. 9:05:32 AM Mr. Tsafos looked at slide 2, "Oil Price Drop: Higher Supply and Weaker Demand." The greatest recent issue in the oil market was the boom in oil production in the Lower 48. He pointed to the left chart and stated that the United States added almost 5 million barrels a day of additional production since January 2010. The world market was approximately 90 million barrels per day, so adding 5 million barrels per day had significant impact. However, there seemed to be occurrences such as accidents, civil wars, or matters of policy that restricted oil production in other parts of the world. The red line in the left chart represented the additional barrels from the U.S. The green line represented the unplanned outages. The sudden uptick of the green line represented the civil war in Libya, which took some oil of the market. There was also a civil war in Syria, so that oil was off the market. The U.S. and its allies tightened sanctions on Iran, so some of the Iranian crude oil came off the market. He stressed that the boom in the U.S. production did not have a benefit in pricing, because of the counter oil production loss in other parts of the world. The middle chart represents the global oil production. In 2010 and 2011, there was very little production growth, but 2012 saw increased production. There was very little production growth from 2012 to 2013. He stressed that with each U.S. addition, there was a reduction in another part of the world. There was a remarkable increase in production from 2013 to 2014 of approximately 1.5 million barrels by the time the outages halted, and other oil was added to the market. The oil price decline occurred in the first six months of 2014. The final chart represented the forecast for oil demand, provided by the International Energy Agency, which was part of the Organization of Economic Cooperation and Development as a forum for developed countries to coordinate energy policy. The forecast for January 2014 showed that the market would grow by 1.4 percent. He pointed out that the sudden decline was a result of Chinese development slowing down, quantitative easing from the federal government, crisis in the Euro zone, and other broad economic news. 9:11:29 AM Mr. Tsafos continued to discuss the right-hand graph on slide 2. He remarked that it was a 90 million barrel a day, so approximately 900,000 barrels per day is lost, reflecting a 1 percent decrease. In 2015, there was a 0.5 percentage loss. The supply that was previously flat was growing by 1.5 million barrels per day. The demand expectation, which was robust, had decreased by 1.5 million barrels per day. The combination was the reason for the extraordinary decrease in the price of oil, from a fundamental perspective. Excess supply and bare demand occurred at the same time, which applied great pressure to the oil price. Senator Hoffman wondered when the FY 15 forecast ended. Mr. Tsafos replied that each month represented the forecast for each year, as it devolves with each month. Vice-Chair Micciche commented that there was growth, but lower than predicted growth. Co-Chair MacKinnon surmised that the United States was benefitted from increased production, and the rest of the market was unaffected. The world chaos had great impact on the price of oil, and the other markets were back on line with the U.S. production. More oil was available in a relatively weaker global market. Mr. Tsafos responded that the U.S. was benefitting from the increased oil production, however there was no benefit of cheaper oil. He stressed that the consumers still pay international prices. The refiners were finally able to arbitrage between cheaper U.S. oil and more expensive internationally priced products. 9:16:08 AM Senator Dunleavy wondered if Iraq was producing at its peak production, or had its civil war scaled back production. Mr. Tsafos replied that there were two ways to answer that question. He stated that there was a hope for Iraq three years prior, but Iraq as currently far off of peak production. Senator Dunleavy surmised that Iraq was off of peak production potential. Mr. Tsafos agreed. He stated that Iraq felt that they should be producing as much as Saudi Arabia. Senator Dunleavy stated that Syria was not at peak production. Mr. Tsafos agreed. Senator Dunleavy wondered if Libya was at peak production. Mr. Tsafos replied in the negative. Senator Dunleavy asked if Iran was at peak production. Mr. Tsafos replied that Iran was not at peak production, because of the sanctions. Senator Dunleavy remarked that there were a number of large producers that were not at peak production, but the price was driven down by over-supply. He surmised that the price of oil would be driven down even further, because of the greater supply. Mr. Tsafos replied in the affirmative. Senator Dunleavy stated that there were many oil predictions that showed an increase in oil production. He wondered if low oil prices should be expected for the near to distant future. Mr. Tsafos stated that he would respond to the question after two slides. Mr. Tsafos highlighted slide 3, "OPEC Behavior not a novelty." He stressed that the Organization of the Petroleum Exporting Countries (OPEC) did not control the price of oil. The top chart showed OPEC's market share since 1965. He remarked that the composition of OPEC had changed over time. The bottom graph showed the quotas. The chief mechanism through which OPEC attempts to manage the market was by setting quotas, which say how much oil OPEC countries would produce. He stated that OPEC was founded in 1960, but the quotas were not introduced until 1982. He remarked that different countries, at different times, had agreed to the quotas. He looked at the yellow line, which represented Ex. Iraq, which showed that Iraq had been exempted from quotas. He remarked that quotas were based on a concept of agreement. He shared that OPEC had attempted to set the price of oil up until the mid-1980s. The stabilization of OPEC was not intentional, but rather because of the volatility of some countries and the introduction of other locations to the market. From approximately 1986 to the Asian financial crisis in the late 1990s, OPEC had followed the market. 9:22:22 AM Mr. Tsafos continued to discuss slide 3, and the history of OPEC. There were a number of events in the late 1990s, where OPEC attempted to stabilize the market, which is reflected in the quotas. The graph showed some short, drastic adjustments, because OPEC was cutting and adding at a monthly basis. At that time there was an up and down jumble in the oil price, because there were continually tweaks. Eventually, OPEC realized that they could not micromanage the oil market, so OPEC began to follow the oil market. In 2007, OPEC abandoned quotas because the price of oil was so high. The most recent financial crisis caused OPEC to conduct a series of cuts, in order to arrest the price. The quota has been set and maintained at 30 million, and has stayed at that level for a few years. He stated that OPEC had not attempted to actively manage the price of oil since the mid-1980s. Rather, OPEC would step in to put a flow underneath a sudden shock in demand. He stated that the oil embargo in 1973 and the Iran revolution made oil very expensive. At that point, Alaska put oil into the market, because the price oil was profound at that moment in time. When the price of oil is high enough to cause new oil to be put on the market, there was not much that OPEC can do to halt that process. 9:27:09 AM Mr. Tsafos displayed slide 4, "US Production: Scalable, Diffuse, Variable." The three key words in the U.S. oil production were "scalable", "diffuse", and "variable." He discussed the work, "scalable." He looked at the Eagle Ford, Texas field which began as basically nothing in January 2010 to 1.6 million barrels per day presently. He stressed that the increase did not often occur in the world of oil. Alaska, Libya, and the North Sea were the only other locations that saw a similar rapid trajectory. He looked at the word, "diffuse." He stated that the top operator in Texas produced less than 10 percent of the state's oil production. The top thirty producers in Texas produced two-thirds of the state's oil productions. He stressed that one had to include up to eighty producers in order to examine the entire scope. He explained that one well could be thirty times more productive than its neighbor. He remarked that the job of forecasting oil prices in 2010 and 2011 was focused on two numbers: the marginal barrel and at what price did it need to come online. The marginal barrel was either in the deep water like Brazil or Angola; or it was in Canadian oil sands. The forecast was formulated by examining approximately 30 or 40 projects, and attempt to understand the economics of the projects. Another data point was examined by looking at the fiscal breakeven of OPEC countries. 9:32:19 AM Mr. Tsafos continued to address slide 4. He commented that the lower 48 destroys the logic of OPEC's forecasting of price. The scale showed that there could be a sudden increase of 4 million barrels a day of production over three years, which interrupts the forecasting ability. He remarked that the players within Alaska had expressed their intentions, because there were less than ten major players in Alaska. In Texas, however, there were 50 or 60 players with different incentives, capital structures, debt levels, etc. He remarked that gas had the same viability in production as oil, the rig count fell by one-half. The activity fell by half, but the production did not decrease, because only the very bad wells were eliminated. He stressed that it was becoming extremely difficult to understand the dynamics in the oil market. Many of the models that the industry had relied upon were not well- suited to the current world's pace, modern players, and breakeven prices in the real world at response to different incentives. Production responded to low oil prices in two ways: reducing drilling from the belief that there will be no revenue; and no money to invest in new drilling. 9:38:51 AM Mr. Tsafos referred to slide 2, which showed the U.S. decreasing because the players did not have enough cash. Many of the companies were small, so they chose not to produce because of lack of cash. He remarked that there may be more downward pressure on the price when the oil hits the market, but it was at the low level price that the marginal barrels could not keep producing. Senator Bishop wondered where the Monterey shale would go on the chart. Mr. Tsafos replied that he was not sure where the Monterey shale would be placed on the chart. Senator Bishop wondered if acquisition should be considered as one of the variable. Mr. Tsafos replied in the affirmative. He explained that some producers became financially strapped, and became bankrupt at the time the price of oil fell. Ten years ago, the major oil producers had decided to invest outside of the U.S., so the smaller independent companies began producing in the U.S. At that point the major producers returned to the U.S. He remarked that some of the diffusion would be consolidated, but was never at the level of a conventional basin like Alaska. The stated offered large land parcels. The lower 48 would divide similarly sized land parcels into 40 or 50 different pieces. 9:42:37 AM Senator Dunleavy surmised that it was previously extremely difficult to forecast oil production and price; but currently it was even more difficult to forecast. Mr. Tsafos agreed. Senator Dunleavy wondered if the market dynamics would put Alaska in the neighborhood of $40 to $50 per barrel. Mr. Tsafos replied in the affirmative. Senator Dunleavy felt that the Keystone Pipeline would provide the gateway from the oil sands. Some people may say that the oil sands were uneconomic, but the cheap energy may provide the ability to "cook the oil sands." He wondered where the corresponding increase supply of gas within the calculus. He remarked that there were some that believed that gas competed with oil in the market. He wondered how the play of gas impacted potential future oil prices, in addition to the greater supply. Mr. Tsafos replied that there was a growth in demand, but a decline in production. The industrial sectors saw a growth in demand for gas, but some biofuels. The transportation sector demanded mostly biofuels. He remarked that there was an intense U.S. response to high oil prices. He explained that the share of gas in the economy was on the rise, and the share of oil was falling. He stated that airlines began to fly on high utilization, so fuel was blamed for cancelled flights. The driving patterns of Americans had recently changed in vehicle ownership. There was a large number of vehicles that had been taken off the fleet in a five-year period, and a high number of motorcycles on the market. He remarked that fuel efficient car ownership was often in response to the high oil prices, but the lower oil prices did not make a person purchase a less fuel efficient car. He commented that the government subsidized the price of gasoline in Saudi Arabia, but the consumer still paid the same price. He remarked that there was demand in the world that did not experience price in the same way that the U.S. and Europeans experienced price. He remarked that many other countries had subsidies and bans that limited the changes in the oil price to the end user price. 9:50:30 AM Senator Dunleavy understood that there were some technological advances that helped to limit energy usage. He wondered how the impact on the environment affected the investment on the Alaska North Slope (ANS). He stated that the Alaska Liquid Natural Gas (AKLNG) project would be impacted the supply would be limited, if the line continued to extend beyond the graph's limit. He remarked that the line's extension would make the economics for the AKLNG project very difficult, because it would be expensive in a lower commodity environment. Mr. Mayer responded that one must think about the contrast between the nature of the investment cycle between Alaska and the lower 48. He explained that the need to look at the diffusion of the different players in the lower 48, and the point at which there was a press response to lower production, because the lower 48 quickly responded to declining prices. The lower 48 was continually determining the number of new wells that would be built in the near future. Those wells had steep decline curves that required continual replacement to maintain production. The nature of investment decision making in the lower 48 was extremely different than the nature of the investment decision on the North Slope. The North Slope investment structure was about spending billions of dollars by a couple of players to build enormous facilities, drilling pads, and bring very large projects online that would produce for the next few decades. He stated that the behavior of the North Slope was beneficial to Alaska in the current price environment, because the fundamental nature of the decisions were not about the upcoming six months or year. The nature of the decisions were about the next decade or longer. He stressed that there were two advantages to Alaska in the current price environment for long term investment: 1) Large players that make decisions in a fundamentally different way than the lower 48. He stated that there were some company executives that made it a point of pride to not know the price of oil on any given day, because it was not what drives their decisions; and 2) there was a fiscal system that looked competitive at the current lower prices. He added that there would be a different consideration, if there was another decade of continued lowered oil prices. 9:57:46 AM Senator Bishop felt that the reservoir capacity, and long term production in the fracking facilities were still unknown. Mr. Tsafos agreed. He stated that economists and geologists often clashed when it came to oil forecasts. He stated that there was a time in 2007 when he felt that geologists had the upper hand, because prices were extremely high, and there was no supply response. He stressed that the oil market, with all its imperfections, worked. He stated that the North Slope was one of the few places in the world where the oil market truly worked as a market on a large scale. Senator Bishop shared that he had read an article that asserted that without increased oil production, oil could return to $200 per barrel. Co-Chair MacKinnon felt that anyone can post an opinion to the internet. Co-Chair Kelly asked for more explanation of India's oil market. He stated that India was expected to have a strong oil boom, and it was slowly occurring. He wondered how the future of India would impact Alaska's oil market. Mr. Tsafos responded that the period of economic growth required addressing fuel subsidies. He remarked that removing subsidies increased the price of energy. He remarked that oil demand in India had more potential, and felt that India could drive the market. 10:04:49 AM Vice-Chair Micciche looked at the business model of North Slope versus the Texas models, noted the credit issue with those that were not producing. He remarked that the larger companies looked 20 years into the future, versus smaller companies. He wondered if there was a future in Alaska that included realistic production from smaller companies. Mr. Tsafos replied that there could not be a discussion of competitive landscapes without a geology discussion. He felt that 50 companies could not operate in Prudhoe Bay. The non-commercial gas market worked differently, because individual wells were drilled, rather than a massive reservoir. He stressed that there was an inherent limit in the geology, so there probably would not be 50 or 60 operators. Vice-Chair Micciche wondered if there was a possibility for a blending of the operators, where some smaller players would become more productive at 15 or 20 percent of North Slope production. Mr. Mayer replied that there had been a decade-long transformation on the North Slope for the smaller companies. He felt that, given the right conditions, which would continue to grow. Co-Chair MacKinnon explained that the documents for the day's meeting could be found on the State of Alaska website. Mr. Mayer addressed slide 5, "Net Credit Balance due to two flows." Revenues net of credits used against tax liability (big producers)-no cash outflow Credits paid out in cash to companies that do not have a liability 10:13:08 AM Vice-Chair Micciche felt that Alaskans should understand the sunset of the alternative exploration of Frontier Basin, and small producer credits in 2016. Mr. Mayer replied with slide 7, which charted the credits to 2018. He stressed that there was more uncertainty in the distant future, because there were less projects forecasted in TAPS. Vice-Chair Micciche understood that the liability of the credits would sunset most of the adverse effects that the state was currently experiencing. Mr. Mayer agreed, and wanted to highlight some of the positive benefits of SB 21 on the state's revenue. Mr. Mayer continued to address slide 5. He stressed that the producers paid taxes. The slide showed the high level tax calculation to say that DOR accounted for two separate credits that were accounted: credits used against a producer's tax liability and credits for potential purchase. He looked at the line of production tax revenue of $524 million in 2015, it was net of all claimed credited by producing companies. The greatest component was the dollar per barrel credit, with current low oil price was approximately $8 per barrel. Co-Chair Kelly wondered if $2.5 million in FY 14 was the net profit. Mr. Mayer replied in the affirmative. Co-Chair MacKinnon shared that many Alaskans thought "producer" only referred to three large oil companies, and was exclusive of other companies. She noticed that the presentation referred to producers that were inclusive of an overall tax structure that included many tax payers. Mr. Mayer agreed. Co-Chair MacKinnon stressed that the producers were referred to every tax paying producer in the state. Mr. Mayer agreed, but furthered that the majority of the taxes came from the larger producers. Mr. Mayer continued to address slide 5, and explained that it may be a misnomer to refer to the tax liability credits as beneficial credits to the producers. 10:19:33 AM Mr. Mayer looked at slide 6, "Tax Credits and SB21; positive impact of SB21 on revenues." Under RSB assumptions for oil price and production, SB 21 brings more revenue than ACES would have in both FY 2015 and FY 2016; in fact, in FY 2016, under ACES producers would pay no tax and carry a credit forward. Main differences are binding gross minimum and elimination of capital credits. Mr. Mayer looked at the bottom six sections of the table on slide 6. He began with $12 billion of revenue from production; and reduced by $1.5 billion in transportation costs and $7 billion in lease expenditures. The production tax value would equate to approximately $3.7 billion, in terms of the total taxable value under either Alaska's Clear and Equitable Share (ACES) or SB 21. He stressed that there was a 35 percent base rate under SB 21; and a 25 percent base rate under ACES. He stated that ACES would not affect any calculations the low price and high investment environment. He looked at line 4, which the Revenue Source Book forecasted the reduction of $720 million against the tax liability claimed by the producers in the North Slope. He pointed out that the total tax after credits in FY 15 was $605 million under FY 21. He remarked that ACES would have a significantly different outcome. 10:25:53 AM Vice-Chair Micciche surmised that the difference between SB 21 and ACES in FY 15 was approximately $380 million that would not have under ACES. He further asserted that the difference in FY 16 was $529 million. The total difference was approximately $1 billion. Mr. Mayer replied in the affirmative. He stressed that the liability should be considered, and its impact on future revenue. Vice-Chair Micciche surmised that the estimate in the low price environment was healthy for the general fund, and would possible slow the decline. He felt that Alaska would expect a greater positive influence from the tax change, following the expiration of the tax credits in 2016. Mr. Mayer agreed, and remarked that ACES focused on high oil prices and low investment. Co-Chair Kelly felt that many members of the press had not been fair in their reporting of SB 21. Co-Chair MacKinnon felt that the change to Alaska's tax structure had an impact on Alaska's bottom line. Vice-Chair Micciche remarked that the presentation for FY 15 was based on actual numbers, and remarked that the benefit of SB 21 brought $380 million to GF, which would not have occurred under ACES. He stated that the FY 16 forecast assumed an additional $525 million under SB 21. 10:31:53 AM Senator Hoffman asked for a review of the reconciliation on line 4, specifically the difference from the previous slide. Mr. Mayer replied that the slide was an abstracted, high level outline of the tax credit, rather than the detailed analysis of DOR. He explained that the $720 million on line 4 referred to the credits claimed against liability for the North Slope. The previous figure of $750 million also included the Cook Inlet. Co-Chair MacKinnon stressed that the presentation was an aggregate look at the performance of two different systems. Mr. Mayer agreed. Senator Dunleavy remarked that a major component of SB 21 was to provide a favorable investment environment, because of decline in production. He furthered that the secondary focus of SB 21 was to capture revenue on the low price of oil. He noted that the state's revenue was larger under SB 21 versus ACES. He hoped that the low oil prices did not deter investment, and encouraged the producers to continue to invest in the state. Mr. Mayer replied that Alaska still looked competitive, and was well served in the nature of investment opportunities. Senator Bishop suggested that it may be cheaper for Alaska to explore other credit options. Mr. Mayer continued to discuss slide 6. He stressed that SB 21 affected the way that credits interacted with the 4 percent gross minimum floor. The 4 percent gross minimum floor was in the tax statute under ACES, but it was never binding, because of the capital credit functions. The 4 percent floor, under ACES, only applied to line 1. Any substantial producers that made major new investments could take their tax liability below the 4 percent of gross revenue on their tax liability. He explained that SB 21 replaced the credits with the dollar per barrel allowance that would reduce the tax liability at low price levels, but the dollar per barrel amount could not fall below the 4 percent floor. 10:37:43 AM Co-Chair MacKinnon remarked that there had been a debate about connecting a tax credit with a barrel of oil. She wondered if there was a credit tied to a barrel of production sold on its behalf, or was it part of the formula. Mr. Mayer responded that he did not fully understand the question. He explained that there was a dollar per barrel credit of a variable amount. He restated that it was a credit, but it was more a feature of the tax system that existed to reduce the tax rate in lower price environments. Co-Chair Kelly surmised that if there was no production there would be no credit. Mr. Mayer replied in the affirmative for the major producers. Senator Dunleavy wondered if there was any aspect of ACES that would be favorable in the current environment. Mr. Mayer replied that ACES was a good tax system in a harvest environment, but did not feel that ACES was a good system in the current environment. Co-Chair Kelly remarked that ACES did not have a credit associated with production. Mr. Mayer agreed. Co-Chair Kelly felt that ACES would not ever be an advantage, whether prices were high or low. He stressed that there should always be production. Mr. Mayer replied that SB 21 eliminated the capital credit of ACES, and replaced it with the dollar per barrel amount that was tied to production. He stressed that capital credits existed as a means of state support for spending. He stated that SB 21 took less of the revenue, but the dollar per barrel was intended to reduce the tax rate. Co-Chair MacKinnon remarked that the result of ACES was depositing a substantial amount of money in the state's reserves. 10:43:00 AM Co-Chair Kelly wondered if ACES incentivized "harvest mode." Mr. Mayer stressed that ACES incentivized capital spending. Senator Olson wondered how to protect Alaska's revenues in the following stage of the regime. Mr. Mayer replied that Alaska's disadvantage was the instability of previous oil tax structures. Senator Hoffman felt that term "harvest mode" referred to the maximum amount of oil that could be recovered. He understood that the change was to reverse the downtrend of production. Co-Chair MacKinnon agreed that there should be more production. 10:48:56 AM Mr. Mayer discussed slide 7, "Tax Credits and SB21; positive impact of SB21 on revenues." He stated that the slide represented a broad outlook of the DOR figures for the following four years. He explained that the yellow line referred to the credits used against tax liability and the green line represented the credits for purchase by the state. Mr. Mayer highlighted slide 8, "Tax Credits and SB21; credit eliminations and transitional arrangements": Sunset for small producer-focused credits Alternative Credit for Exploration Frontier Basin Credit Small Producer Credit - Collectively cost $113 million in FY2014 Impact of transitional arrangements Support for small producer spending at 45 percent until January 2016 (same as ACES) Reduced to 35 percent thereafter 10:53:18 AM Senator Dunleavy requested an analysis of Cook Inlet credits versus North Slope credits. Co-Chair MacKinnon replied that the analysis could not be run because of the limited number of tax payers in those regions. Mr. Mayer addressed slide 9, "Cook Inlet remains heavily subsidized": Production essentially a continuation of 'ELF': Low, fixed rate on gas Generally no tax on most oil production But significant credits to Cook Inlet producers: 20 percent capital credit 40 percent well expenditure credit 25 percent carried-forward annual loss credit With no profit-based production tax, credits are not, as on North Slope, an investment in future production tax revenue Could other solutions - such as state financing - offer a better solution to ease capital constraints? 10:57:00 AM Vice-Chair Micciche stated that there were two types of oil and gas production in Alaska: the production that was destined for GF on the North Slope; and the production that was destined for the furnaces, water heaters, and vehicle fuel tanks. He stated that there were conversations about for Fairbanks from Cook Inlet. He stated that he hoped to continue the conversation about availability of natural gas to Alaskans. Senator Hoffman shared that he was looking to reduce the energy costs for 100 percent of Alaskans. Mr. Mayer displayed slide 10, "Conclusions": Oil price drop due to excess supply and bearish demand-and OPEC acknowledging reality Big producers still paying large sums but not enough to offset credits paid to small companies SB 21 placed a more secure floor under state revenues when oil prices fall and eliminated many credits Cook Inlet production still receives substantial state support-is the policy mix right? ADJOURNMENT 11:00:45 AM The meeting was adjourned at 11:00 a.m.