SENATE LABOR AND COMMERCE COMMITTEE Anchorage, AK October 23, 1997 10:37 a.m. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Jerry Mackie, Vice Chairman Senator Tim Kelly MEMBERS ABSENT Senator Mike Miller Senator Lyman Hoffman ALSO IN ATTENDANCE Representative Norman Rokeberg, Chairman of House Labor & Commerce Committee COMMITTEE CALENDAR PRESENTATION ON OIL PRICE HEDGING WITNESS REGISTER Michael Rothman, First Vice President, Global Commodity Research/Merrill Lynch Joined Merrill Lynch in 1984. As Senior Energy Analyst, he is responsible for the hedging and trading strategies for the petroleum and natural gas markets, as well as customized risk management research. Merrill Lynch's primary representative at the OPEC Conferences since 1986; served as an outside consultant on oil market matters to government and quasi-governmental organizations. He holds a BS in Agricultural and Business Economics and an MS in Applied Economics from Rutgers University. He is a member of the National Association for Petroleum Investment Analysis. Ronald F. Lawson, Resident Manager, Pacific Coast Futures Center/Merrill Lynch Fifth-generation Californian with long background in commodities and risk control. Received a BS in Livestock Production Management from UC Davis, he joined Merrill Lynch in 1982. After several years of specialization in agricultural and base metals hedging, he headed up the Cotton Trading Desk, handling approximately 10% of the world's hedged cotton. Named as the Western Division's Resident Manager for Commodities in 1994, he now supervises all of the firm's futures trading activities in the 17 Western-most states. In 1995, he established the Pacific Coast Futures Energy Desk which handles most, if not all, of the West Coasts major oil companies. He and his staff bring more than 100 years of experience when advising the world's largest corporations and governments on their risk management programs. Steven J. Brantner, Vice President, Private Client Group/Merrill Lynch Born in Juneau, Alaska, he received his BS in Mathematics from the U.S. Coast Guard Academy and served 17 years as a commissioned Coast Guard officer, including several tours of duty in Alaska as a foreign fisheries boarding officer and Acting Chief, Search and Rescue. He commanded a CG cutter homeported in San Francisco and he commanded one of the busiest rescue stations in nation. After receiving his MBA (Quantitative Analysis) from the University of Alaska Southeast, he left the Coast Guard to stay in Alaska and join a major financial services firm. With Merrill Lynch since 1995, he serves individuals, businesses, municipalities and non- profit organizations throughout Alaska. Brian C. Andrews, Financial Consultant, Private Client Group/Merrill Lynch A lifelong resident of Alaska, with 22 years of in-state financial management, portfolio management, and accounting experience with banks, credit unions, state government, and financial services firms. He received his BS from Colorado State University with majors in finance and accounting. He returned to Alaska with assignments in the financial community as a branch manager for National Bank of Alaska and as the general manager of the Alaska State Employees Federal Credit Union. He became Comptroller, Investment Officer, and Deputy Commissioner in the Department of Revenue for the state of Alaska. He joined Merrill Lynch in January 1994 and is responsible for development of institutional and retain financial services and products to new and existing clients in Alaska. Jeffrey V. Dikeman, Commercial Energy Specialist, Pacific Coast Futures Center/Merrill Lynch Began developing commercial futures hedge business and related administrative services for institutional clients in 1987. He was an integral member of an institutional team that developed customized commercial hedge programs based on technical and fundamental analysis. His commercial clients include major integrated oil companies, crude oil resellers, independent energy producers, mass-transit utilities, airlines, and energy trading groups. He has helped guide clients through the most tumultuous and volatile oil market events of the last 15 years. He joined the West Coast Energy Desk in 1995 and continues to advise commercial risk managers on their hedging strategies for oil and gas. ACTION NARRATIVE TAPE 97-25, SIDE A Number 001 CHAIRMAN LEMAN called the Senate Labor and Commerce Committee meeting to order in the Anchorage Legislative Information Office Conference Room at 10:37 a.m., and noted the presence of Senators Kelly, Mackie and Leman. Chairman Leman commented that it has taken several months to put the meeting on oil price hedging together, and he thinks there is merit in looking at the issue. He said he likes the concepts of stabilizing the state's revenues and to have a net gain in increasing the state's revenues. He then invited the individuals from Merrill Lynch to begin their presentations. Number 019 BRIAN ANDREWS, a financial consultant in the Juneau office of Merrill Lynch, stated it is time for us as a state to take a look at controlling the price of our oil as opposed to letting market conditions dictate the price of oil to us. Mr. Andrews then introduced Michael Rothman who has been with Merrill Lynch for 14 years. He said for the past 11 years Mr. Rothman has been attending the OPEC meetings, and he has the longest standing attendance of anyone at OPEC. Number 031 MICHAEL ROTHMAN, First Vice President, Global Commodity Research, Merrill Lynch, said that, in general, when he looks at the oil market fundamentals or the key driving factors, there has been, in his opinion, a very distinct shift in the underlying pressures in the oil bands. He added he thinks these underlying pressures are bullish. In looking at oil prices there tend to be two basic characteristics: one is prices staying within a band; and the other is the actual band itself. Oil price movements within a given price band are a function of supply and demand fundamentals. The oil price band is a function of geopolitical considerations which include the desires of OPEC's key members. Mr. Rothman said in the last 20 years there have been four basic oil price bands, and that he would talk briefly about each of those periods. It is his opinion that 1996 marked the beginning of a new higher oil price range. He said 1979 saw the fall of the Shah of Iran, and Iran's oil production went from 7 million a barrels a day down to zero. Then in September 1980, Iraq invaded Iran. The loss of supplies from both of these countries and concerns about additional interruptions in flows from the Persian Gulf, pushed oil prices up from about $15 a barrel, before the crisis, to $40 a barrel. Prices essentially stayed in a range of between $28-$40 for the next three years. Mr. Rothman noted that between 1975 and 1985 there were about 10 million barrels a day of non-OPEC supply, not the least of which was the development of Alaska's reserve and production. Between new output, a contraction in demand globally between 1980 and 1983, there was pressure on the oil price structure which resulted in a meeting in London called the OPEC Marathon Meeting. At that meeting the OPEC countries set up an overall quota of 17.5 million barrels a day with Saudi Arabia's share set at 5.5 million barrels a day. The decision at that meeting was that the Saudis would act as the balance wheel within OPEC; they would let their production vary in order to defend OPEC's target price which was $28 a barrel. Those conditions transpired into a range of about $25 to $30 a barrel for two years. Addressing the third oil price band, Mr. Rothman said it evolved following a number of events in 1985. In May 1985, the King of Saudi Arabia made a pronouncement that the Saudis could no longer afford to be the OPEC "swing supplier." Their production went from about 5.5 million barrels a day in March of '83 down to about 2.5 million barrels a day at that time, and the average price of oil actually declined, so daily oil receipts fell by about 70 percent. The King's decision led directly to OPEC's policy change at the December 1985 meeting to "defend marketshare." In a four-month period of time, oil prices went from about $34 a barrel down to $10 a barrel. In the summer of '86, then Vice President George Bush was visiting Saudi Arabia and he uttered a very famous comment that oil prices are too low. That meeting signaled an understanding between the United States and Saudi Arabia about trying to find the right price, something which would be good for producers and something which would be good for consumers. At the December '86 meeting, there was a decision to adopt an $18 reference price as the target. Quotas were shifted around, and this notion of the right price essentially created a 10-year band of $15-$20. The only time prices really went out of this range for any appreciable period of time was in the aftermath of Irag's invasion of Kuwait in the Gulf War, and even that spike in oil prices, which took it up to over $41 a barrel, only lasted for five months. Mr. Rothman said it is a little difficult for people to understand that the arguments about having that oil price band have really changed, but they have. The notion of a right oil price in 1986 was that it would allow for sufficient revenues to the OPEC countries, it would allow for continued healthy economic growth in the developing and industrialized economies of the world, and it was supposed to limit non-OPEC supplies. As time wore on, the arguments essentially lost most all of their validity. Refined products are taxed at a very high rate which eroded OPEC's "economic rent"; the non-OPEC producers learned how to live with the low oil price; and there was deterioration in the last five years between the American administration and the Saudi leadership. He said the reality of this relationship having come under some pressure in the last few years has essentially made the Saudis feel less compelled to keep oil prices at what they believe is an artificially low level. Mr. Rothman said in looking forward, his opinion is that underlying oil balance itself has fostered increasingly greater pressure on available supply. OPEC's key members, and Saudi Arabia in particular, feel that if the average price of oil were to be elevated a few dollars per barrel higher than what was witnessed during the 1986 to 1995 period, that it will not derail global economic activity. Non-OPEC supply is unlikely to change much if oil prices were to average a few dollars per barrel higher. There is pressure within the OPEC countries, particularly Saudi Arabia, for more fiscally conservative measures and pressures for higher oil revenues. He said the Saudis are not inclined to keep it at a level which they think is "too low." Speaking to the new oil price band he referred to earlier, Mr. Rothman said the key end of it is that he thinks the bottom end of the band that occurred between '86 and '95 has been elevated by about $3 per barrel. The bottom end of the band for West Texas International (WTI) crude oil is now $20 per barrel and the top end of the range is somewhere between $25 and $27. He said he has had indications that the Saudis really don't care how high oil prices go so long as they don't go over $30 a barrel. Mr. Rothman said global economic activity and demand pretty much move hand in hand. The ratio of the growth in oil demand to global economic activity ranges somewhere between 0.55 and 0.6, meaning that for every 1% increase there is in global economic activity, global oil demand will go up 0.55% to 0.6%. In terms of the projections for this year and next year, global economic activity is expected to be about 4.5% and oil demand growth rates will be about 2.5% He said this ratio tends to be very stable, and short of a global economic recession, they expect to see continued health economic gains. Mr. Rothman said a question raised by a lot of people is what is happening with the currency debacle developing in Asia that is going to affect Asian economic growth and, therefore, oil demand growth in the region. He said the question merits a lot of attention because if you look at the total increase in global oil demand this decade, two-thirds of it came out of the developing Asian economies. The four countries that are the focus of currency devaluations are Malaysia, Philippines, Thailand and Indonesia. There is expected to be some slippage, but it is still healthy economic growth on balance. Oil demand in these areas is projected to grow about 7% next year. The other side of the equation is what is happening on supply. Mr. Rothman predicted that next year there will be about a 1.2 million barrels per day gain in total amount of OPEC supply, and this is the scenario he expects to be repeated for the next several years. He said there is a risk when we look at prices and the question raised is where is this gap going to be made up from, questions such as: is it going to be from Iraq returning to the market; and is there going to be competition with an OPEC for those additional barrels because of expansion plans from certain countries. This is where the downside risk in the outlook over the next couple of years comes from. Mr. Rothman said the reality of doing oil balance analysis is that a lot of the data is very problematic. Once you get outside the OECD group of countries, the quality of the information breaks down, not only on a timeliness element but on an accuracy element. He said they talk to the International Energy Agency regularly, and they get updates now for countries that are lagging by three and four years. The numbers that they rely on are the available data which come out for the OECD countries. The non-OECD inventories are not part of this picture for two reasons. The first and foremost is that there is no inventory data for countries like Russia or China. He said that if you talk to the main international oil companies that have large marketing presences in different regions of the world, they will tell you that developing countries basically go hand to mouth with oil; there is no discretionary oil in storage. For example, South Korea was struggling to try to get enough oil into their inventories in order to meet the minimum OECD requirements. Mr. Rothman noted there was a story that there was this tremendous stock overhang created during the second and third quarters of the year, which was supposed to be approximately 260 million barrels, however, he said he and others can only find 62 million barrels of it. The reason this has significance is that winter inventories are going to be at a level which are fairly lean, and he believes this will result in pressure on available supply. Last winter, which was the warmest winter on record, oil prices declined down to about $20 a barrel despite ups and downs with Iraqi oil exporters and other developments which people thought would lead to more supply. He said this whole notion of a higher high is testimony to the oil companies themselves believing that the Saudis want a higher band and the fact that the balance itself is not burdensome with extra oil. Number 342 SENATOR KELLY asked how there could be a discrepancy in the amount of oil available. MR. ROTHMAN explained that when you work on an oil balance, by definition it is a simplification of reality. Most people, including himself, rely on the International Energy Agency for historical data, but much of this data is lagging by three to four years so there is this lack of timeliness in the data received. He has found that the inventory data is simply not available outside the 22 nations in the OECD so it is a guesstimate on what's out there. Number 413 CHAIRMAN LEMAN commented that so many of the actions, especially with some of the major players are either calculated, and we may not know what they are, but they have big effects on the marketplace and how to manage within those actions. He said it has got to be a difficult task in making sense out of all of this. MR. ROTHMAN said his fiduciary responsibility to Merrill Lynch and its clients is to essentially lay out what he sees as the higher probability scenarios looking forward. It is not an exact science, but the notion is where the pressure is going to be greatest. There is an element of keeping your finger on the pulse of what's happening and trying to stay on top of issues, which may not mean anything right now, but they may have a certain amount of significance on either impact and supply or impact and demand at some point in time. Number 548 REPRESENTATIVE ROKEBERG asked why the Saudis wouldn't lift more oil than they are presently lifting if they were able to keep the price stable in the existing band rather than jump to a higher band. MR. ROTHMAN responded that the Saudi's spare capacity right now is about 2 million barrels a day. For them the question has not been why not produce more oil, instead, if they want a higher price, why not just cut back. For them their considerations are not just the idea of getting the higher price. The Saudis don't think they have to cut their production to get a higher price because of underlying pressures within the oil balance. TAPE 97-25, SIDE B Number 020 RONALD LAWSON, Resident Manager, Pacific Coast Futures Center, Merrill Lynch, said he thinks everyone agrees philosophically that there appears to be a need in some way to even out the humps and valleys of the revenues generated by the oil sales out of the state. There are a number of events that could or could not affect the price of oil. He suggested that supply and demand generally shape the band of prices of any given commodity, and what they try to do is give their best estimate of price given the statistics, however, they have to look at the things that could or could not affect the market. There are things that can affect the oil market, and he thinks those are the things that the state needs to be concerned with, such as an unwarranted or temporary drop in prices. Mr. Lawson introduced Jeff Dikeman, who, he said, was one of the top world traders on the west coast for Merrill Lynch, and who would be presenting ideas on how the state of Alaska can take some precautionary moves to protect against the bad times and the downsides without limiting the upside potential of the market moving higher. Number 055 JEFFREY DIKEMAN, Commercial Energy Specialist, Pacific Coast Futures Center, Merrill Lynch, said one thing that is always of a concern is the volatility of the market, and the way they like to address volatility is to try to manage it with the use of options. Options act like insurance and have the following key components: the strike price (the insurance deductible); the premium (the insurance premium); calls (right to buy a futures contract) and puts (right to sell a futures contract); and volatility (the degree of risk or reward). He directed attention to a chart showing a call option versus a put option. He said buying a put option in what are the utilities of the state guarantees a floor area, but it is not ultimately locked into the prices if the market comes back to a higher level. Mr. Dikeman then explained some examples of previous oil hedges and discussed the type of organization that took place in these trades. Number 182 MR. LAWSON noted that he can develop a hedging program quite simply with three pieces of information: how much you are trying to protect; how long is the window of risk; and which way the market is going. As an oil purchaser, the market moving up generally helps, unless that production has already been sold. He said the ultimate cost is not the initial expense, it is the net result of when you purchase the option and then sell it back. SENATOR KELLY asked who the money is paid to. MR. LAWSON explained that when you purchase the option you are buying an option on a futures contract and the money that is spent on that option is then forwarded to those that sell the option. STEVE BRANTNER, Vice President, Private Client Group, Merrill Lynch, said what they are suggesting as a strategy for the state is to take the more conservative tactic, which is just ensuring that it gets a minimum price under any scenario, with no cap to the upside. If the oil prices track upward, the state will obviously capture that as well. The state is essentially, in this case, purchasing insurance that says that no matter what happens, the state's revenue will be guaranteed at this certain floor. MR. LAWSON explained that the state will continue to sell its oil the way it does now. This is an attempt to take the risk out of the market price fluctuating on the cash side of the ledger, and the goal is to put profits on the other side of the ledger for losses on the wet barrel side. In order to do that, it will cost the state in the form of an insurance premium. If the market goes up, the state will get all the profits on the wet barrel side of the ledger, just like it does now. The only cost will be is what that insurance premium was on the other side of the ledger. If the market comes down and the state is receiving less for its wet barrels, the insurance premium grows offsetting that loss on the other side of the ledger. They are suggesting that the state lock in at a higher price for the same amount of money spent. Number 375 SENATOR KELLY asked what kind of people can take those kinds of downside risks. MR. LAWSON clarified that of all the puts and calls that are bought and sold, 85% go away worthless. The idea is that people will be buying protection or they will be taking in money to give somebody else the right to have that protection. When you buy insurance, insurance companies sell you an option because on the bulk the money that comes in offsets the risk that they're giving up. Almost anybody in the market is willing to take that risk because they may be selling one option while buying another. MR. DIKEMAN added that this is the function of the New York Stock Exchange. They can go to the Exchange and find out what they'll give them for a floor at a certain price, and they will monitor that to find out where the best available insurance premium is guaranteeing that they can get a $20 floor. MR. ROTHMAN pointed out that the integrity of the Exchange is backed up by the clearing house members, of which Merrill Lynch is the largest. If one clearing house member has a problem, all other clearing house members have to make good on it. Number 425 Responding to a question from Senator Mackie, MR. DIKEMAN said the key to the overall program is to find out where they can insure and the state can budget to have a good steady stream of revenue without much of a downside risk. MR. ROTHMAN added that there is some risk if the price of Alaska North Slope oil and WTI oil move out of step with one another. MR. LAWSON advised that if Alaska North Slope oil dropped precipitously and the New York prices, which are based on West Texas oil, don't follow it, or if the difference between the two should widen greatly, you may not get as much protection from the put option as you were losing because of the Alaska price dropping faster. SENATOR MACKIE asked if there is way to zero in on a particular number regardless of what happens with West Texas or anything else. MR. ROTHMAN responded it might be plus or minus a small percent. MR. LAWSON said they are not trying to lock in an absolute fixed price for what the state sells its product at for the next year. The risk that the state takes for the difference between the two prices is paid for with a little bit of upside potential. SENATOR KELLY asked if the state wanted to hedge its entire production, say it is 400 million barrels a year, does Merrill Lynch deal in those kinds of numbers. MR. LAWSON acknowledged that they do it now. SENATOR KELLY inquired as to the amount of the current production contract. CHUCK LOGSDON, Chief Petroleum Economist, Department of Revenue, informed him that this year the amount will be about 475 million barrels, and the state's royalty share will be 100 million barrels. TAPE 97-26, SIDE A Number 004 SENATOR MACKIE said the biggest fear is the bottom falling out and what we are having to do after we've written our budget based on prices a year in advance. He asked if there was any way to guarantee a floor but to get a portion of the upside. MR. LAWSON replied that is what you are doing because when you buy a put, if the market goes up, the price of oil goes up and it can be sold at the higher price. MR. DIKEMAN commented that if the market was right at $20, the protection to sell at $20 is going to be more expensive than if the market was at $24 and you were trying to protect $20. MR. LAWSON noted that they are looking at 50 cents a barrel as what the state should spend on protection. If it happens that the market allows buying a $22 floor for 50 cents, that's what should be done. MR. ROTHMAN added that if the state can lock in as high a price as possible, it would want to do so. SENATOR KELLY said if the state wanted to lock in its production this year, that is in the neighborhood of $240 million. He asked what the rule of thumb is now on a dollar in the price of oil for state revenues. MR. LOGSDON responded that the state is getting close to $100 million for every dollar. SENATOR KELLY concluded that the state's cost for protection would be $50 million a year. MR. LAWSON clarified that $50 million may be the cost to purchase that protection, but he said you are going to sell that insurance as you price your oil. Number 083 SENATOR KELLY inquired if there has been legislation introduced that relates to this topic. CHAIRMAN LEMAN responded that this was a background meeting and that he was not aware of any such legislation, or if it would even be necessary. MR. ANDREWS advised that when he worked for the Department of Revenue, they reviewed the statutes on this and concluded it could be handled within the existing statutes. SENATOR KELLY then concluded that the governor could probably arbitrarily make a decision to do this. MR. ANDREWS acknowledged that was their belief, but he suggested that from a practicality standpoint a resolution from the Legislature would also be in order. Number 141 SENATOR KELLY asked if the premium would be paid up front or can it wait until the end of the transaction. MR. LAWSON responded that he doesn't believe it is necessary, but, as a firm, Merrill Lynch can finance the purchase instead of putting up the state's money. If cash flow constraints are restrictive, they can finance the purchase, which they do for quite a few international companies. What would be seen on the balance sheet is purchase and sales of the options at either a loss or profit and then there is cost in the form of commission. In response to an inquiry from Senator Kelly, MR. LAWSON clarified that New York and Chicago are the two areas where the commodity markets trade the greatest volume domestically in the United States. He said the best analogy is that the New York Stock Exchange is where to go to buy and sell stocks, and in this case, the New York Mercantile Exchange is where to go to buy and sell oil. MR. LAWSON also explained that their company helps corporations set up their "hedging team" and typically it is compiled of a number of different areas from within the structure that already exist such as the oil and gas division and treasury. Usually the transfer of benefit from the hedge to the risk in the oil and gas, the actual wet barrels, occurs at the treasury level. Merrill Lynch's bylaws mandate that whenever a coporation or an entity such as a state or a municipality has a trading relationship with the firm, they have reporting levels in three separate area of the firm so that there is a constant flow of information back and forth. Number 335 CHAIRMAN LEMAN invited Mr. Logsdon to give his response on behalf of the Department of Revenue. CHUCK LOGSDON, Chief Petroleum Economist, Department of Revenue, said in terms of their experience at the Department of Revenue with the whole concept of hedging the oil, they've been down this road on quite a number of occasions over the last 10 years with a lot of formal presentations and a number of workshops. Mr. Logsdon related that under the department's projections, even with withdrawing for the next three years, the state will have $3.5 billion in the Constitutional Budget Reserve, so the state is effectively self-insuring. When a price goes up like it did this last year, they went over budget so they put back in, and when they go under budget, they take out. Mr. Logsdon said Commissioner Condon is very aware of risk management, which they do all the time in the treasury. Right now they are managing about a $7.7 million cash flow, and that doesn't include the permanent fund which is a $25 billion asset. He said Revenue is trying to diversify a lot of the financial risks that the state has. Mr. Logsdon pointed out that a hedging program is hard to sell to a public entity because it is dealing with public money, and it very difficult to put together a consensus among the people that need to make the decisions. Also, there is the cost factor because a hedging program is going to cost money and the Legislature will have to appropriate the money to put it into place. Mr. Logsdon related that at a workshop held at the University of Alaska, a lady from Texas, who set up their pilot hedging program, told them it worked out pretty well for them, but when it came to justifying their program every year to the Finance Committee against other important programs, it was tough because state budgets are under pressure everywhere. Mr. Logsdon acknowledged that hedging is an issue that the state should be revisiting and that it is a very attractive and sort of logical thing to do, but he cautioned there are a lot of elements to it that have to be considered. He said Commissioner Condon wanted him to relate that this is something that the department is looking at periodically, and, at this point in time, they think they are doing the right thing by going down the self-insuring route. Number 437 SENATOR KELLY asked if the department can institute a hedging program on their own, or would they need permission from the Legislature. MR. LOGSDON did not have an opinion on that, but he does know that they have specific guidelines that give them flexibility in managing a lot of different funds through the treasury. He added that Commissioner Condon has spent a great deal of time over the two last years developing investment policy guidelines for managing the state's revenues, but he does not believe hedging is a part of those guidelines. MR. LAWSON said Merrill Lynch, as a firm, would not allow the state to trade without full disclosure to the Legislature and every interested department within the state. MR. ANDREWS pointed out that the program, as it would be envisioned, doesn't necessarily mean that all the trade would go to Merrill Lynch. He also noted that when he was working in the Department of Revenue they did put a hedge on gold at about $500 an ounce. When the price of gold went to between $400 to $425, they unwrapped the hedge and came out of it, so the state lost money on it. MR. LAWSON suggested that at that time if they had used options instead of futures, the results would have different. Number 524 SENATOR KELLY asked if the permanent fund has title to the 25% to 50% oil royalty it receives or does the state collect all the royalties and give them a check. MR. LOGSDON explained there is a process for the royalty barrels by which the state can take title (in-kind) to the barrels, and those barrels are sold to the refineries. The permanent fund gets a share of the proceeds from the sale of the in-kind barrels, or they get a share of what the state takes from the companies when they pay them in value. So all of the royalty money comes into the state treasury, but the share that goes to the permanent fund goes into their pot and is managed by them. MR. LAWSON pointed out that you can't hedge the production; you can simply hedge the value of production. Number 567 MR. LOGSDON related that the department will be coming out with their forecasts in approximately three weeks, and they are looking at about the same kind of revenue stream that they expected this last year when they brought in about $2.5 billion in unrestricted general funds. They expect this year the price will be back down to around $18 ANS. There being no further comments or questions, CHAIRMAN LEMAN thanked all of the participants and adjourned the meeting at approximately 12:20 p.m.