Legislature(2015 - 2016)BARNES 124

03/14/2016 01:00 PM RESOURCES

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01:00:51 PM Start
01:01:43 PM HB247
02:58:57 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony --
+ Bills Previously Heard/Scheduled TELECONFERENCED
           HB 247-TAX;CREDITS;INTEREST;REFUNDS;O & G                                                                        
1:02:24 PM                                                                                                                    
CO-CHAIR  NAGEAK announced  that the  only order  of business  is                                                               
HOUSE BILL NO. 247, "An  Act relating to confidential information                                                               
status and public record status  of information in the possession                                                               
of the Department of Revenue;  relating to interest applicable to                                                               
delinquent tax; relating to disclosure  of oil and gas production                                                               
tax credit information;  relating to refunds for  the gas storage                                                               
facility tax  credit, the liquefied natural  gas storage facility                                                               
tax   credit,   and   the   qualified   in-state   oil   refinery                                                               
infrastructure expenditures  tax credit; relating to  the minimum                                                               
tax for certain  oil and gas production; relating  to the minimum                                                               
tax  calculation for  monthly installment  payments of  estimated                                                               
tax;  relating to  interest on  monthly  installment payments  of                                                               
estimated  tax; relating  to limitations  for the  application of                                                               
tax credits; relating  to oil and gas production  tax credits for                                                               
certain  losses and  expenditures;  relating  to limitations  for                                                               
nontransferable oil and  gas production tax credits  based on oil                                                               
production  and  the  alternative  tax credit  for  oil  and  gas                                                               
exploration;  relating to  purchase  of  tax credit  certificates                                                               
from the oil  and gas tax credit fund; relating  to a minimum for                                                               
gross  value  at  the  point of  production;  relating  to  lease                                                               
expenditures  and tax  credits for  municipal entities;  adding a                                                               
definition   for  "qualified   capital  expenditure";   adding  a                                                               
definition for  "outstanding liability  to the  state"; repealing                                                               
oil  and   gas  exploration  incentive  credits;   repealing  the                                                               
limitation on  the application of  credits against  tax liability                                                               
for  lease   expenditures  incurred   before  January   1,  2011;                                                               
repealing provisions related to  the monthly installment payments                                                               
for  estimated tax  for oil  and gas  produced before  January 1,                                                               
2014;  repealing  the  oil  and gas  production  tax  credit  for                                                               
qualified  capital expenditures  and  certain well  expenditures;                                                               
repealing   the  calculation   for  certain   lease  expenditures                                                               
applicable before January 1,  2011; making conforming amendments;                                                               
and providing for an effective date."                                                                                           
1:03:40 PM                                                                                                                    
CO-CHAIR NAGEAK opened public testimony on HB 247.                                                                              
1:04:18 PM                                                                                                                    
DAVID HANSON  stated he  is testifying  in support  of HB  247 on                                                               
behalf of  himself and his  family.  He said  HB 247 needs  to be                                                               
passed because the  state cannot afford the existing  system.  As                                                               
was pointed out  by Gunnar Knapp of the Institute  for Social and                                                               
Economic Research  (ISER), this  coming year from  oil production                                                               
taxes the state  may only receive $12 million if  the average oil                                                               
price  is $35  per  barrel,  versus $1  billion  in credit  costs                                                               
without any changes.  This system  of credits has done much good,                                                               
but it  has also gotten a  bit out of  control.  The word  on the                                                               
street is  that some of  it is being  used to help  companies get                                                               
out  of bankruptcy.   However,  the real  reason it  needs to  be                                                               
changed is  that the state cannot  afford it.  The  bill's fiscal                                                               
note  needs  to be  reduced  to  match the  legislature's  budget                                                               
efforts.   Large cuts are being  made to all programs  across the                                                               
board,  which is  necessary given  the state's  fiscal situation.                                                               
Monies   required  for   this  credit   program  transition   are                                                               
speculative given that most things  are confidential.  The fiscal                                                               
note cost of  $1 billion could probably be reduced  to maybe $850                                                               
million.  In  his work as a businessman and  in government he has                                                               
found  that the  more  money  set aside  for  something the  more                                                               
certain  it is  that the  money will  be used.   The  legislature                                                               
never guaranteed the credits would  be paid every year since they                                                               
were  subject to  annual  appropriation.   This  program and  its                                                               
fiscal  note   need  to  reflect   the  state's   current  budget                                                               
situation.  Raising  the [minimum tax] floor from 4  percent to 5                                                               
percent for companies  under the program probably  makes sense to                                                               
help  the state's  current budget  situation.   Mr. Hanson  noted                                                               
that two arguments  are used against this.  One,  many people say                                                               
that the oil industry is  already paying royalties and [property]                                                               
taxes.   But, he pointed  out, the royalties  pay for the  use of                                                               
the oil  and the property taxes  pay for the use  of the property                                                               
for  facilities and  are  unrelated  to the  production  tax.   A                                                               
second argument he has heard is  that the Alaska's oil tax regime                                                               
cannot  keep being  changed all  the  time because  it makes  for                                                               
instability.  In essence, he  noted, it should be remembered that                                                               
the oil  industry itself wanted  certain of the tax  changes that                                                               
have happened in the last six years.                                                                                            
1:08:47 PM                                                                                                                    
JAKE JACOBSON said he is testifying  on behalf of himself and his                                                               
family.  The information he  will be referring to comes primarily                                                               
from  Alaska newspapers,  he noted;  unfortunately a  lot of  oil                                                               
company  dealings are  kept secret  and that  should change.   He                                                               
said he finds  it strange the Gunnar Knapp's  extensive study was                                                               
not given  time or money to  include factoring in effects  of oil                                                               
taxes  and  credit  regimes.    Credits  paid  to  oil  companies                                                               
sometimes exceed actual  expenses and there is no  way of knowing                                                               
if the credit  claims are legitimate.  The state  is paying up to                                                               
65 percent  of the cost of  some oil projects.   Exploration is a                                                               
gamble; that the  state pays any credits at  all seems ridiculous                                                               
to him.  This is forcing  Alaska residents to take the risk while                                                               
big oil  reaps the  profits -  new oil is  not taxed.   Currently                                                               
credits to big  oil amounts to about $1,000  per Alaska resident.                                                               
This is about what the governor  wants to take from each resident                                                               
by a  reduction in the permanent  fund dividend (PFD).   Stop the                                                               
credits  and  leave  the  permanent fund  dividend  alone.    The                                                               
proposed  $100 million  in new  taxes on  oil companies  is about                                                               
half of  what would come  from the  debated 6 percent  of federal                                                               
income taxes  if Alaska  instituted an  income tax  on residents.                                                               
That $100 million is double the  amount that would be gained from                                                               
an increase in motor fuel taxes.   The state needs to tax the oil                                                               
companies that  $100 million.   The state's accounting  office is                                                               
years behind  on checking payments  from big oil companies.   The                                                               
court  case of  Alaska v.  Amerada Hess  et al.  found that  from                                                             
1977-1992 companies  were guilty  of deliberate  falsification in                                                               
computing the  price paid  to Alaska  for its  royalty oil.   The                                                               
case ended  with the judge  saying that  the state was  guilty of                                                               
inexcusable  trustfulness  in  dealing with  big  oil  companies.                                                               
Contrary to  its television ads,  ConocoPhillips is  not Alaska's                                                               
oil company, it  is owned by stock holders, most  of whom are not                                                               
Alaskans.  But Alaskans are  essentially stockholders of the PFD.                                                               
Alaska should  look at an ad  valorem tax on product  left in the                                                               
ground since  it might enhance  state income close to  the amount                                                               
of the deficit.                                                                                                                 
1:11:31 PM                                                                                                                    
JAMES  MCMILON,  Business  Representative,  Teamsters  Local  959                                                               
Union, stated that the Teamsters Local  959 is a union of roughly                                                               
7,000 members in a wide  variety of industries, including workers                                                               
at Usibelli  Coal Mine, Inc., on  the North Slope, on  the Trans-                                                               
Alaska Pipeline  System, Port of  Anchorage, AT&T,  United Parcel                                                               
Service   (UPS),  Lynden   Transport,  Weaver   Brothers,  Alaska                                                               
Frontier  Constructors, Nanook,  and Doyon  associates.   He said                                                               
the union  understands the challenges  of the fiscal  crisis that                                                               
Alaska faces.   The union  understands that tough  decisions need                                                               
to be  made and the  union supports the governor  and legislature                                                               
in  reducing the  operating budget,  using some  of the  earnings                                                               
from the  permanent fund  to help balance  the budget,  and maybe                                                               
instituting  some new  taxes.   The union  is concerned  with the                                                               
governor's plan to  change the oil and gas tax  structure.  Since                                                               
passage of  Senate Bill 21  [in 2013, Twenty-Eighth  Alaska State                                                               
Legislature],  the oil  industry  has invested  more into  Alaska                                                               
projects, with projects  like CD5 and Shark Tooth,  that have put                                                               
hundreds of  Alaskans to  work, put more  into the  pipeline, and                                                               
billions of dollars into Alaska's  economy.  Increasing oil taxes                                                               
and reducing  credits that  encourage investment  at a  time when                                                               
the industry is struggling sends  the wrong message.  Alaska must                                                               
maintain  a healthy  oil and  gas  industry to  keep oil  flowing                                                               
through the pipeline and keep alive the prospect of a gasline.                                                                  
1:14:03 PM                                                                                                                    
SCOTT HICKS,  Alaska West  Express, testified  that he  works for                                                               
Alaska West  Express, a company  that provides  transportation to                                                               
the North  Slope for  the oil  and gas  industry.   The company's                                                               
drivers  deliver freight  to customers  on Alaska's  North Slope.                                                               
The company has approximately 140  employees and contractors that                                                               
work in  Fairbanks and on the  North Slope.  The  company's truck                                                               
drivers, mechanics,  and office employees  rely on a  healthy oil                                                               
and gas  industry.   Alaska's fiscal  challenge and  stability of                                                               
the  oil and  gas industry  will  shape the  future of  [Alaska's                                                               
residents].   He  said  he  is opposed  to  a  major revision  to                                                               
Alaska's oil  and gas tax  policy at this  time.  The  bill would                                                               
dramatically  change  the  tax  system  by  raising  the  minimum                                                               
production tax  by 25  percent.  It  is just not  a good  idea to                                                               
raise taxes  on businesses that  are already losing money.   Many                                                               
oil and gas companies are  cutting costs and making choices about                                                               
where to  invest their money  to ensure Alaska  stays competitive                                                               
with the  rest of  the world's  oil and  gas opportunities.   The                                                               
governor's proposal would be the  sixth change in the last eleven                                                               
years.   How  is that  a stable  investment climate?   Oil  still                                                               
provides the majority of Alaska's  revenue and supports one-third                                                               
of the state's economy.  The  last place that should be looked at                                                               
for  new revenue  is to  unfairly tax  industries that  drive the                                                               
state's economy.  He offered  his appreciation for the efforts of                                                               
the governor and the legislature during this challenging time.                                                                  
1:16:00 PM                                                                                                                    
KAREN LANE expressed her opposition to  HB 247.  She said the oil                                                               
industry is  a major revenue  producer for  the state; it  is the                                                               
largest producer of revenue for  the North Slope Borough, City of                                                               
Valdez, and the  Kenai Peninsula Borough.   Higher industry taxes                                                               
in  this low  price  commodity environment  could  lead to  lower                                                               
state revenues  and a weaker  private sector over the  long term.                                                               
The private sector is the  foundation of Alaska's economy and its                                                               
underlying  health   is  the  key   to  sustaining   jobs,  state                                                               
government,  and  the  overall   economy.    The  governor's  tax                                                               
proposal does not encourage the  private sector; instead it takes                                                               
the  state   in  the  opposite  direction,   jeopardizing  future                                                               
investments,  jobs,  and production.    The  Alaska economy,  new                                                               
investment,  jobs,  and  production  need  to  be  encouraged  by                                                               
maintaining a  stable, competitive tax  structure.  The  more the                                                               
state taxes companies to produce  the commodity, the less it will                                                               
produce here and the more  it will produce elsewhere.  Increasing                                                               
taxes  discourages  investment.    Why is  the  state  taxing  an                                                               
industry  that is  already  struggling with  bottom-of-the-barrel                                                               
prices?  She urged that HB 247 be discouraged, not encouraged.                                                                  
1:17:40 PM                                                                                                                    
SARAH HETEMI  testified she is  a sophomore at the  University of                                                               
Alaska  Anchorage and  is  working her  way  towards a  political                                                               
science  degree.    She  holds  one  part-time  job  now  and  is                                                               
considering a  second job in order  to make ends meet.   Being in                                                               
Alaska by herself has made it  difficult trying to make rent, pay                                                               
tuition, and  still hold an active  role in the community.   When                                                               
she moved  to Anchorage  about three and  one-half years  ago she                                                               
was not  necessarily in a  much better position, however  she had                                                               
so much hope  for the future as she saw  opportunities within her                                                               
reach as long as  she worked hard.  She was  motivated to do well                                                               
at school, work  as hard as she could, and  still get involved in                                                               
the community.  With no  guarantee, hope, or opportunity, what is                                                               
the  point if  all of  her hard  work and  daily stress  is going                                                               
forth to  potentially nothing and  why?   Alaska is the  place in                                                               
which she  wishes to build  a future, but  if she cannot  make it                                                               
work by  doing her  very best she  fears it is  an idea  she will                                                               
have to  let go of.   In the last  10 years Alaska's oil  and gas                                                               
tax  regime has  significantly changed  five  times.   If HB  247                                                               
passes  it will  be the  sixth time  that investments,  jobs, and                                                               
more  production  are  absolutely  killed.   With  this  kind  of                                                               
instability there is  no wondering why Alaska is  heading the way                                                               
it is.   Since every oil industry job creates  nine other jobs in                                                               
the private  sector it  is baffling  to her  that taxes  would be                                                               
increased  under   any  circumstance   on  the   state's  primary                                                               
industry.   She  asked that  the committee  members keep  in mind                                                               
students like herself and urged members to oppose HB 247.                                                                       
1:20:20 PM                                                                                                                    
KELSI  PULCZNSKI voiced  her strong  opposition to  HB 247.   She                                                               
said  she is  a full-time  student  at the  University of  Alaska                                                               
Anchorage.   She works full-time  to support herself and  pay for                                                               
her education to  maintain her independence, not  from her family                                                               
but from the State of Alaska.   She does so because her education                                                               
is an  investment in her  future and the  future of Alaska.   She                                                               
works hard  so she can  have the opportunities to  be successful.                                                               
She is  involved on her campus  and in her community  because she                                                               
is passionate  about creating  a better  and brighter  future for                                                               
the state.  Because she plans to  live and work in Alaska for the                                                               
remainder of her life it is  incredibly important for her to know                                                               
that the stress and money she  puts into her education today will                                                               
be  a worthwhile  investment, to  know that  the place  she calls                                                               
home has  a prosperous  future ahead  of it.   Oil  and gas  is a                                                               
critical industry for  Alaska and has faced  instability often in                                                               
the last decade.   If HB 247 passes it will be  the sixth time in                                                               
ten years that there has been  significant changes to the oil and                                                               
gas tax regime.   It is no  surprise to her that  the industry is                                                               
laying off workers in  the face of this poor policy.   It is hard                                                               
to plan for the future when  being met by instability.  For every                                                               
one oil  and gas job in  Alaska, nine other jobs  are produced or                                                               
reduced in  the private sector.   Knowing  this she looks  to her                                                               
future and asks what  it holds for her.  Two  or three years from                                                               
now when she  is looking for her post-college job,  what will the                                                               
market  look like?   She  knows  for sure  that she  will not  be                                                               
heading into  the oil and gas  industry, but what about  the nine                                                               
other jobs from every  one oil and gas job?   What will that mean                                                               
for  her  and  her  peers?   Will  she  have  wasted  four  years                                                               
interning, networking,  and studying only  for the market  to not                                                               
be  able to  support her  and her  future?   The state  budget is                                                               
bloated.   She urged  that this  not be  pushed onto  the private                                                               
sector, which  would cause further  job loss and recession.   The                                                               
state  cannot be  taxed into  prosperity.   The  state should  be                                                               
focused on allowing  the free market to work,  not increasing the                                                               
tax  burden  on businesses  that  are  so  vital to  the  state's                                                               
economy.   When  it comes  time to  move this  bill forward,  she                                                               
hopes committee  members will think  of her and the  thousands of                                                               
others like  her who are facing  an uncertain future.   She urged                                                               
that members oppose HB 247.                                                                                                     
1:23:06 PM                                                                                                                    
RYAN MCKEE testified in opposition to  HB 247.  He said the state                                                               
is already in  a financial crisis and he agrees  action should be                                                               
taken to  balance the  budget, but going  after an  industry that                                                               
pays most of the state's budget already  is not the way to do it.                                                               
These companies are  already being hit hard with the  low cost of                                                               
oil.  Many  Alaskans know a friend or family  member who has been                                                               
laid off  or have  been laid  off themselves  due to  these tough                                                               
times  in  the  industry.    Drilling for  oil  in  Alaska  costs                                                               
significantly more  than other  parts of the  U.S., so  why would                                                               
more  tax  burdens  be  added  to an  industry  that  is  already                                                               
struggling to stay  alive in the state?  Allowing  HB 247 to pass                                                               
is essentially telling the world that  Alaska is not a safe place                                                               
for  these companies  to  do business;  that  despite passage  of                                                               
Senate  Bill 21  and defeat  of  the Senate  Bill 21  referendum,                                                               
there  is going  to always  be  an unreliable  policy that  could                                                               
change at  any moment.   Alaska needs to remain  competitive with                                                               
the rest of the world or  risk losing business, which has already                                                               
begun to happen.   Repsol has restructured  its investments which                                                               
led  to many  people  losing their  jobs  and Apache  Corporation                                                               
recently  decided  to   pull  out  of  Alaska   altogether.    BP                                                               
Exploration  Alaska and  ConocoPhillips Alaska,  Inc., have  also                                                               
announced huge layoffs.  Burdening  the remaining companies still                                                               
trying to  drill for oil  with more taxes  on top of  the massive                                                               
amounts  that they  have  already  paid will  only  lead to  more                                                               
companies closing and moving to  a more business friendly part of                                                               
the  world.   Alaska  is  in  a  time of  financial  uncertainty,                                                               
however ways  should be looked  at to reduce  government spending                                                               
first.   While new  revenue certainly needs  to be  explored, the                                                               
very industry that drives the  Alaska economy and pays 90 percent                                                               
of  the budget  should  not be  looked to.    He urged  committee                                                               
members to oppose HB 247.                                                                                                       
1:25:10 PM                                                                                                                    
BRAD  FAULKNER offered  his support  for  HB 247,  saying he  has                                                               
watched  Alaska's  oil taxes  and  the  evolution of  well  taxes                                                               
throughout  the last  30 years.   He  recounted that  when Senate                                                               
Bill 21 came  out and he saw the Gross  Value Reduction (GVR), he                                                               
immediately called both  his legislators to say  that this cannot                                                               
be done  because there  cannot be  a tax  on the  net and  then a                                                               
rebate of the tax on the  gross.  However, today's hearing is not                                                               
about the Gross  Value Reduction, it is really about  1 percent -                                                               
going  from 4  percent to  5 percent.   When  Senate Bill  21 was                                                               
passed  [and $15  million was  spent in  advertising] to  keep it                                                               
going, the people  of the state were sold a  bill of goods, which                                                               
was taxing the oil  at 35 percent.  But now  when trying to raise                                                               
the  gross tax  on oil  from  4 percent  to 5  percent, [the  oil                                                               
lobbyists and people  who are going to make  hundreds of millions                                                               
of dollars off  of this] are saying  that it is 20  percent.  But                                                               
it will be clipped  from the people of the state  - for the first                                                               
time the  legislature is going  to tax him  in order to  give the                                                               
rebates  on  the gross  when  the  tax is  on  the  net.   It  is                                                               
structurally incorrect and his hat is  off to the oil company guy                                                               
who slid that through and the  legislators voted for it, and then                                                               
the majority  of the people in  the state voted for  it after the                                                               
industry's $15 million  ad campaign.  The reality  is that nobody                                                               
looked at $50 oil  and now there is about $30  oil.  However, the                                                               
budget is based on $55 oil.  If  an interest rate of 6 percent is                                                               
put on it, it  can be seen that 30 years in  the future the Gross                                                               
Value Reduction  does not work.   He requested  committee members                                                               
to not listen  to those people who are urging  that the taxes not                                                               
be raised  by 20  percent, because  the tax  raise is  1 percent.                                                               
What legislators guaranteed Alaska  residents when Senate Bill 21                                                               
was given to them was 35 percent on the net value.                                                                              
1:28:41 PM                                                                                                                    
CARL PORTMAN  stated he is  very concerned about  Alaska's fiscal                                                               
situation.   The  state's  economic  lifeblood, the  Trans-Alaska                                                               
Pipeline System  (TAPS), is now running  at three-quarters empty.                                                               
The  current   oil  tax  policy   has  encouraged   new  industry                                                               
investment,  which   has  stabilized  a  long,   steep  slide  in                                                               
production.  He said he does  not support increasing taxes on the                                                               
oil industry  as HB  247 would  do.   Alaska cannot  increase oil                                                               
product  by  raising  taxes, especially  considering  that  North                                                               
Slope  oil now  sells for  less than  it costs  to produce.   The                                                               
industry is losing billions of  dollars annually in this downturn                                                               
and is being  forced to cut jobs and expenses.   Any tax increase                                                               
will  have a  direct impact  on future  investment in  Alaska and                                                               
therefore future production.  Even  at today's low oil prices, 67                                                               
percent of Alaska's  revenues come from the  oil industry through                                                               
various  industry  taxes and  royalties.    Clearly the  industry                                                               
continues  to pay  the  vast  majority of  Alaska's  bills.   The                                                               
legislature needs  to continue  to cut state  spending to  a more                                                               
affordable  level.   Despite  cuts in  recent  years the  state's                                                               
operating   budget   is   still   on   an   unsustainable   path.                                                               
Unrestricted general  fund spending has increased  230 percent in                                                               
10 years  while revenues  have fallen sharply.   In  addition the                                                               
legislature  and the  administration  need to  come  to terms  on                                                               
using permanent fund  earnings to help fill the fiscal  gap.  The                                                               
permanent  fund  earnings  need  to  be  part  of  the  long-term                                                               
solution; it  is the  biggest and  best tool in  the box  to help                                                               
solve the state's  fiscal crisis.  Even the  bond rating agencies                                                               
have  recognized the  need for  Alaska to  begin using  permanent                                                               
fund  earnings  in  a  sustainable  manner.    He  recalled  that                                                               
Governor  Jay Hammond's  vision for  the permanent  fund included                                                               
the eventual use  of the permanent fund earnings to  help pay for                                                               
essential  government  services.    Given  low  oil  prices,  low                                                               
throughput in TAPS, and the  need for new industry investment, he                                                               
said he  does not support HB  247.  Higher taxes  on the industry                                                               
will make matters worse for both the public and private sector.                                                                 
1:32:05 PM                                                                                                                    
The committee took an at-ease from 1:32 p.m. to 1:47 p.m.                                                                       
1:47:43 PM                                                                                                                    
JOHN STURGEON  expressed his opposition  to HB  247.  He  said he                                                               
opposes the  bill because it sends  the wrong message to  the oil                                                               
industry  and anybody  else in  Alaska who  is trying  to invest.                                                               
The number  one priority of  the legislature should be  trying to                                                               
create  jobs,  not  stifling them  through  additional  taxes  on                                                               
industry.  He said he works  in the timber industry and he cannot                                                               
imagine how  the timber industry  would survive  if it had  a tax                                                               
structure  like that  of the  oil  industry.   With markets,  oil                                                               
prices, and  fuel costs going  up and  down, not having  a stable                                                               
tax base  would make  it extremely difficult  for him  to conduct                                                               
his business in the timber industry.                                                                                            
1:49:13 PM                                                                                                                    
ARLENE RONDA offered  her support for HB 247.   She said revenues                                                               
absolutely must  be raised because  if the  cuts are too  deep it                                                               
does a  disservice to the people  of the state.   She offered her                                                               
appreciation   to  Representative   Seaton  for   his  thoughtful                                                               
research and efforts in this regard.   She said HB 247 is another                                                               
way to  plug some of  the gaps that have  been had over  the last                                                               
several years.                                                                                                                  
1:50:15 PM                                                                                                                    
The committee took an at-ease from 1:50 p.m. to 2:05 p.m.                                                                       
2:05:28 PM                                                                                                                    
JOE MATHIS, Vice President of  External Affairs, NANA Development                                                               
Corporation,  NANA  Regional  Corporation (NANA),  said  he  will                                                               
provide  NANA Development  Corporation's  perspective  on HB  247                                                               
overall as  it relates  to NANA's oilfield  businesses.   He said                                                               
NANA has  many companies directly  involved in the  oil industry,                                                               
such as  NANA Management Services,  NANA Oilfield  Services, NANA                                                               
Worley  Parsons, WHPacific,  and GIS  Oilfield Contractors.   The                                                               
NANA companies  have been meeting  the needs  of the oil  and gas                                                               
sector  for four  decades and  have employed  5,000 Alaskans  and                                                               
more  than  1,600  NANA  shareholders.     Through  its  business                                                               
operations  NANA  generates income  that  enables  it to  deliver                                                               
valuable  benefits to  its shareholders  and  to the  state as  a                                                               
whole.   Shareholders of NANA  have made  significant investments                                                               
in  the oil  industry  over the  past  40 years.    For over  two                                                               
decades NANA  held a  small ownership  in the  Endicott Oilfield.                                                               
Recently  NANA  invested  in  new  facilities  and  equipment  at                                                               
Deadhorse for NANA  Oil Field Services, and  constructed a state-                                                               
of-the-art fabrication  facility in the  Matanuska-Susitna Valley                                                               
specifically  designed  for  oilfield  modules.    Through  those                                                               
business  activities NANA's  shareholders and  all Alaskans  have                                                               
been afforded  the opportunity to  hold thousands of  good paying                                                               
jobs  as  well  as  the  opportunity  to  receive  extensive  job                                                               
training.    He  expressed  his corporation's  concern  with  the                                                               
direction that HB 247 would take  in times when caution is needed                                                               
in  instituting   substantial  tax  changes.     The  corporation                                                               
supports a  stable and predictable  tax structure; NANA  has been                                                               
significantly  impacted by  this turn  of events.   Oil  industry                                                               
investments fuel contracts for NANA  companies and the jobs those                                                               
contracts create.  But Alaska's  current investment climate is at                                                               
a  standstill  due to  the  low  oil  prices  and NANA  has  lost                                                               
hundreds of  good paying jobs.   It is essential that  there be a                                                               
stable  economic climate  to serve  Alaska's  citizens today  and                                                               
well  into the  future.    The downturn  will  not last  forever.                                                               
However, HB  247 sets the  stage for diminished  development when                                                               
the  oil  economy  does  recover.    He  urged  that  as  members                                                               
deliberate HB 247 they consider  that Alaska's future for decades                                                               
to come  depends on the  decisions the  committee will make.   In                                                               
its  current  form  the  bill  has too  much  impact  on  today's                                                               
transitional situation.   The  bill does  not strike  the balance                                                               
between Alaska's  short-term wants and  its long-term needs.   He                                                               
urged that  members consider  the impacts HB  247 will  have upon                                                               
the industry without  further changes to the bill.   The proposed                                                               
changes in  the tax structure  will have  unintended consequences                                                               
of delaying  expansion projects and  production of new oil.   The                                                               
catastrophic  downturn in  oil prices  has  shaken the  industry,                                                               
including  NANA and  the state  government.   Alaskans must  pull                                                               
together  to  ensure  a  stable   economic  climate  that  serves                                                               
citizens  today and  into the  future.   Thoughtful  work by  the                                                               
committee  can produce  a  viable  and fair  tax  policy for  the                                                               
state, Alaskans, and the industry.                                                                                              
2:10:46 PM                                                                                                                    
JEREMY PRICE, State Director, Americans  for Prosperity - Alaska,                                                               
testified in  opposition to HB  247.   He said the  saying, "When                                                               
you tax  something more,  you get  less of it,  and when  you tax                                                               
something less,  you get more of  it," is appropriate here.   The                                                               
private sector  faces uncertainty  during these  tumultuous times                                                               
of  record low  oil prices.   The  private sector  cannot control                                                               
these  fluctuations in  the market  and neither  can the  state's                                                               
elected officials.   The  private sector can  plan for  the short                                                               
and long  term knowing these  volatile times can and  will occur.                                                               
However, the private  sector cannot plan for  constant changes in                                                               
public  policy.   Fortunately  this is  an area  that  is in  the                                                               
control of  the state's elected  officials.   Legislators control                                                               
the state's  future with [HB]  247.   The private sector  needs a                                                               
predictable   and  stable   regulatory   environment  where   the                                                               
government will not keep changing the  rules in the middle of the                                                               
game, especially  when the home  team is  losing.  This  issue is                                                               
being  considered  because  state government  wants  more  money.                                                               
Should an  overhaul to the  oil and gas industry's  tax structure                                                               
be  passed simply  because the  state wants  more revenue  from a                                                               
particular industry?   Like it or not, Alaska's  future lies with                                                               
the failure or  success of the oil and gas  industry.  This issue                                                               
will  make  or break  Alaska's  future.   Expert  witnesses  have                                                               
called this bill  one big tax increase on the  industry.  This is                                                               
not the  time to  raise taxes  on an  industry that  is currently                                                               
cash flow  negative.  This is  the sixth major change  to oil and                                                               
gas tax  policy in  the last  eleven years.   When will  it stop?                                                               
[The committee's] leadership  is needed now more than  ever.  The                                                               
pipeline is flowing  at a half million barrels a  day compared to                                                               
2 million  in the early 1990s.   On federal lands  the regulatory                                                               
environment makes it extremely  difficult to economically produce                                                               
oil and  gas, especially in  this state.  Alaska's  most prolific                                                               
deposits  of  hydrocarbons  are  off limits.    Alaska  has  more                                                               
federal regulatory  blocks than any  other state.  He  urged that                                                               
the  economic  environment not  be  made  worse with  state-level                                                               
roadblocks.   He said  his family  has been  in Alaska  since the                                                               
1950s when his  grandfather homesteaded in the Interior.   He has                                                               
two  children  and another  on  the  way  and he  wants  Alaska's                                                               
elected  officials to  think of  his family  when voting  on this                                                               
bill.   What will his family's  future be if the  committee helps                                                               
to drive the  industry out of the state  through constant changes                                                               
in tax policies?  He urged the committee to oppose HB 247.                                                                      
2:13:44 PM                                                                                                                    
The committee took an at-ease from 2:13 p.m. to 2:30 p.m.                                                                       
2:30:55 PM                                                                                                                    
CO-CHAIR NAGEAK recessed the meeting to a call of the chair.                                                                    
2:50:03 PM                                                                                                                    
CO-CHAIR NAGEAK called the meeting back to order.                                                                               
FAITH MARTINEAU, Caelus  Energy Alaska, LLC, said  she has worked                                                               
in  Alaska's oil  industry  for a  year now  and  opposes HB  247                                                               
because it is a real threat  to Alaska's oil industry and affects                                                               
her,  her family,  the people  she works  with, and  many of  her                                                               
neighbors.  She urged the  committee to consider the strides that                                                               
have  been made  already  under  Senate Bill  21,  a system  that                                                               
better  benefits Alaska's  primary industry  as well  as Alaska's                                                               
economy in  the long run by  making the state more  attractive to                                                               
investment.  The company she works  for came to Alaska because of                                                               
the benefits  offered by Senate  Bill 21, benefits that  would be                                                               
retroactively revoked in  some cases under HB 247.   Allowing the                                                               
system  that  is currently  in  place  to  work is  essential  to                                                               
showing that  Alaska can have a  stable fiscal regime.   She said                                                               
she  agrees  with  the legislature's  consultant,  enalytica,  in                                                               
concluding that  stability is the  most important element  in any                                                               
legal system.   Alaska's Arctic is one of the  most expensive and                                                               
challenging places  in the world to  operate in, but it  also has                                                               
world-class resources that can still  attract investment with the                                                               
correct incentives.  She asked  the committee to consider what is                                                               
truly best for Alaska in the long term and to oppose HB 247.                                                                    
2:52:32 PM                                                                                                                    
RAYMOND  WARD stated  that now  is not  the time  for HB  247 and                                                               
increasing  taxes  on  the  oil  industry  in  light  of  current                                                               
dwindling oil and gas prices.   Recently many major oil companies                                                               
in Alaska  have ceased their  operations and the  remaining major                                                               
players  are scaling  down tremendously  on  their operation  and                                                               
production.   Increasing taxes on  the oil industry at  this time                                                               
would be  more of an  incentive for oil companies  doing business                                                               
in Alaska to cease their operations,  close shop, and move out of                                                               
state, which  is not  a good idea  particularly with  the pending                                                               
state deficit.   It would be an impingement on  the generation of                                                               
revenues of the state's operating budget.                                                                                       
2:54:36 PM                                                                                                                    
JON  COOK, Chief  Financial  Officer,  Airport Equipment  Rental,                                                               
Inc., testified  that his company  is opposed  to HB 247.   These                                                               
credits  over  the  past  three  years  have  given  his  company                                                               
tremendous  opportunities   in  the   exploratory  side   of  the                                                               
business.    His company  owns  one  of the  largest  exploration                                                               
packages  for a  lease on  the North  Slope and  that package  of                                                               
equipment  has worked  steadily for  the  past two  years and  is                                                               
working this winter.   In this low price  environment his company                                                               
thought  it would  be a  challenge to  put this  package and  the                                                               
company's employees  to work, but  the credits offered  under the                                                               
current  statutes are  one of  the reasons  that this  package is                                                               
being  deployed and  out working  on the  North Slope  right now,                                                               
literally putting hundreds of Alaskans to  work.  There is a time                                                               
to  tinker with  things, but  right now  when there  is a  lot of                                                               
uncertainty  amongst private  employers and  companies it  is bad                                                               
timing to  make changes to a  system that is working  and putting                                                               
Alaskans to work.  He urged  the committee to do due diligence in                                                               
looking at  things, but  said his company  would not  have people                                                               
working on the  North Slope right now were it  not for the system                                                               
that is currently in place.                                                                                                     
2:56:43 PM                                                                                                                    
CRYSTAL  NYGARD,  Matanuska-Susitna   Business  Alliance  (MSBA),                                                               
explained that  her organization was  founded seven years  ago to                                                               
provide  a voice  to small  businesses  in the  Matanuska-Susitna                                                               
Valley.   She said her  organization urges all  committee members                                                               
to vote  no on HB 247.   The bill is  a job killer.   She related                                                               
that recently Neal  Fried provided a presentation  at the college                                                               
in which he  referenced that 10 percent of  the current residents                                                               
in the  Matanuska-Susitna Valley  work on the  North Slope  and 1                                                               
percent work on the Kenai Peninsula.   People are able to live in                                                               
the Matanuska-Susitna  Valley and  work around the  state because                                                               
of the  rotational schedules  that the oil  and gas  industry has                                                               
provided.    The government  needs  to  stop competing  with  the                                                               
private  sector and  let  the  private sector  create  jobs in  a                                                               
friendly environment.  She noted she  has three sons, one of whom                                                               
is studying  in Montana and  who does  not see an  opportunity to                                                               
come back  to the state he  was raised in because  of the message                                                               
being sent to  investors and students.  Another son  in school is                                                               
asking where  are the jobs?   Government needs to get  out of the                                                               
way and needs  to incentivize the private sector  to create jobs.                                                               
She thanked those legislators willing to vote against HB 247.                                                                   
2:58:34 PM                                                                                                                    
CO-CHAIR NAGEAK  closed public testimony  for the time  being and                                                               
said  further testimony  will be  taken at  the committee's  next                                                               
hearing on HB 247 which will be held this evening.                                                                              
[HB 247 was held over.]                                                                                                         

Document Name Date/Time Subjects
HSE RES HB 247 - Neutral - Tammie Stoops.docx HRES 3/14/2016 1:00:00 PM
HB 247
HSE RES HB 247 - LOS Communications.pdf HRES 3/14/2016 1:00:00 PM
HB 247
HSE RES HB 247 - Oppose Communications.pdf HRES 3/14/2016 1:00:00 PM
HB 247
HSE RES HB 247 answers from DNR Rep Tarr Ltr.doc HRES 3/14/2016 1:00:00 PM
HB 247