Legislature(2015 - 2016)BUTROVICH 205

03/16/2015 03:30 PM Senate RESOURCES

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03:30:37 PM Start
03:31:07 PM HJR4
03:58:59 PM Confirmation Hearing: Attorney General Craig Richards
05:00:10 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
-- Public Testimony --
+ Confirmation on Governor's Appointees: TELECONFERENCED
Attorney General - Craig Richards
-- Public Testimony on Appointee --
+ Bills Previously Heard/Scheduled TELECONFERENCED
           HJR  4-OFFSHORE OIL & GAS REVENUE SHARING                                                                        
3:31:10 PM                                                                                                                    
CHAIR GIESSEL announced HJR 4 to be up for consideration.                                                                       
3:31:15 PM                                                                                                                    
REPRESENTATIVE  DAN SADDLER,  Alaska  State Legislature,  Juneau,                                                               
Alaska, sponsor  of HJR 4,  explained that this  resolution calls                                                               
upon the federal  government to enact a fair  and sensible system                                                               
of federal  revenue sharing in Alaska.  He said that oil  and gas                                                               
development  in federal  areas  can  be a  boom  for the  country                                                               
providing revenues for the federal  government, jobs and a secure                                                               
source of domestic energy, but  it also creates costly impacts to                                                               
nearby states.                                                                                                                  
The federal government shares the  proceeds from such development                                                               
with some  states to help  them offset the costs  of improvements                                                               
and services  necessary for safe and  responsible development. On                                                               
inshore areas  they share 50  percent of the revenue  with states                                                               
where that  production occurs.  In states  within three  miles of                                                               
shore, it shares 27 percent and  in the four states bordering the                                                               
Gulf  of Mexico  it shares  37.5 percent  (Gulf of  Mexico Energy                                                               
Security Act of 2006). But current  federal law says the State of                                                               
Alaska (SOA) receives  a zero share of the  federal revenues from                                                               
the Chukchi and Beaufort Seas oil or from other OCS areas.                                                                      
The federal areas off the  North Slope hold tremendous amounts of                                                               
oil and gas. Shell's  supplemental environmental impact statement                                                               
(EIS) for  the Chukchi  Sea indicated  3 billion-plus  barrels of                                                               
oil. But just as onshore  development on the North Slope required                                                               
investments in  infrastructure, development of  Alaska's offshore                                                               
oil and gas will also require investments.                                                                                      
3:33:03 PM                                                                                                                    
REPRESENTATIVE SADDLER  said investments will be  required by the                                                               
state for roads, ports,  airports, utilities, housing, pipelines,                                                               
and  services   such  as  oil   spill  and   emergency  response,                                                               
environmental  monitoring and  mitigation and  public health  and                                                               
For example, the  $2.75 billion generated by the  sale of federal                                                               
leases in  the Beaufort and  the Chukchik Seas several  years ago                                                               
would  have  brought the  state  about  $1  million if  the  same                                                               
revenue sharing  applied in Alaska  as applied in Gulf  of Mexico                                                               
states.  In the  future, Alaska  will get  zero percent  from the                                                               
Chukchi Sea development.                                                                                                        
He said this is an important  resolution and comes at a time when                                                               
the OCS sharing issue is  ripe in Washington, D.C., where Senator                                                               
Murkowski has pushed legislation in  the last two years to insure                                                               
a fair  share in states  other than  Gulf of Mexico  states. This                                                               
will  give  her  support  as  she pushes  the  issue  again.  The                                                               
president proposed OCS  expansion on the Atlantic  Coast, but cut                                                               
off the possibility of it in the Beaufort and Chukchi Seas.                                                                     
SENATOR STOLTZE said the resolution  refers to 50 percent revenue                                                               
sharing  for oil  leases whereas  the Statehood  Compact provided                                                               
for 90  percent sharing, which  Congress overruled, and  asked if                                                               
he  was   comfortable  memorializing   the  50  percent   in  the                                                               
REPRESENTATIVE SADDLER responded that  he shared his concern that                                                               
the  federal government  hasn't  respected  the commitments  they                                                               
made to the  state in the Statehood Act,  however, in cooperating                                                               
with Senator  Murkowski, he did  not want to raise  the statehood                                                               
issue, but  rather wanted  to strengthen her  position on  a 37.5                                                               
percent split.                                                                                                                  
SENATOR STOLTZE said  he did not think saying he  has a moral and                                                               
legal case  for a higher  percentage would diminish  his argument                                                               
and that the  best way to get  less than you want is  to agree to                                                               
ask for it before the negotiation is started.                                                                                   
SENATOR COGHILL agreed  with Senator Stoltze that  the 90 percent                                                               
should not  be conceded in  any form and had  prepared conceptual                                                               
statements to maximize  what the state could  get through revenue                                                               
REPRESENTATIVE  SADDLER said  he respected  the desire  to assert                                                               
the strongest possible case.                                                                                                    
SENATOR STEDMAN commented that his  impression was that Back East                                                               
wants to  zero everyone  out and  to consider  that in  the word-                                                               
smithing, because they  might want to make  everyone like Alaska,                                                               
which is zero.                                                                                                                  
SENATOR COGHILL agreed.                                                                                                         
CHAIR GIESSEL asked him if he was offering an amendment.                                                                        
3:40:20 PM                                                                                                                    
SENATOR COGHILL replied  that he wanted to leave it  on the table                                                               
and give the sponsor time to digest the concept.                                                                                
3:42:01 PM                                                                                                                    
SENATOR WIELECHOWSKI  supported the  resolution and asked  if the                                                               
Statehood Act talks about 50  percent applying to offshore beyond                                                               
six miles.                                                                                                                      
REPRESENTATIVE  SADDLER  answered  that there  is  a  distinction                                                               
between  the  revenue  sharing from  federal  lands  onshore  and                                                               
offshore and  we should expect  a 90/10 split onshore.  That same                                                               
provision does not  apply offshore to the best  of his knowledge.                                                               
He clarified that this resolution  does not call specifically for                                                               
a 37.5  percent share;  it calls  for consistently  and equitably                                                               
sharing to  allow for maneuvering  room. He didn't see  a problem                                                               
with  considering the  conceptual  language now,  but wanted  the                                                               
chance to review it more thoroughly.                                                                                            
SENATOR STOLTZE  said the  key prize is  OCS revenue  sharing and                                                               
that anything  is better than zero.  He didn't think it  would do                                                               
any  harm  to  accurately  reflect   what  the  consistent  state                                                               
position has been.                                                                                                              
SENATOR STEDMAN  said the  session still has  plenty of  time and                                                               
they might think about broadening  the concept to Wyoming coal to                                                               
pick up as much support from resource states as possible.                                                                       
3:45:26 PM                                                                                                                    
CHAIR GIESSEL  asked him  to say  more about  the Land  and Water                                                               
Conservation Fund on page 3, line 3.                                                                                            
REPRESENTATIVE SADDLER  answered that it is  generally considered                                                               
a   mitigation  fund.   He  cautioned   against  broadening   the                                                               
resolution, because  it was designed specifically  to bolster the                                                               
U.S.  Senate delegation  as they  work  specifically on  offshore                                                               
SENATOR COGHILL said that was  an important point, because Alaska                                                               
will be joining  all the Gulf Coast states as  well as California                                                               
on this the OCS issue, especially  since we have leases that have                                                               
both been leased and now are being withheld by this president.                                                                  
He  said his  amendment would  effectively delete  the first  two                                                               
whereas clauses  and replace  them with  his whereas  clause that                                                               
inserts equitable  revenue sharing.  But the final  statement has                                                               
to be in support of the Gulf Coast states.                                                                                      
SENATOR  STOLTZE   said  some  rural  entities   outside  of  our                                                               
Congressional  delegation have  more  of  an aggressive  lobbying                                                               
presence than Alaska does at times on revenue sharing issues.                                                                   
REPRESENTATIVE SADDLER said that was a fair observation.                                                                        
3:51:03 PM                                                                                                                    
SENATOR COGHILL asked if any study  had been done on the Land and                                                               
Water Conservation Fund and Gulf of Mexico Energy Security Act.                                                                 
REPRESENTATIVE  SADDLER  responded  that   he  would  review  the                                                               
functioning of the Land and  Water Conservation Fund and what the                                                               
balance  is in  time for  the next  meeting. It  is an  important                                                               
factor  for passage  of federal  legislation, because  they might                                                               
pick up  more support if  they can  show that development  of oil                                                               
and gas resources was going to  what some perceive as the greater                                                               
good of environmental conservation or remediation.                                                                              
3:53:02 PM                                                                                                                    
CARL  PORTMAN,  Deputy  Director,  Resource  Development  Council                                                               
(RDC), Anchorage, Alaska, supported HJR  4. He said like the Gulf                                                               
States,  Alaska  also  contributes to  national  energy  security                                                               
through  onshore  oil  and  gas  development  and  has  generated                                                               
billions  of dollars  to the  federal  treasury through  offshore                                                               
leasing. These leases  could contain tens of  billions of barrels                                                               
of  oil which  in turn  could  generate hundreds  of billions  of                                                               
dollars in revenue.                                                                                                             
RDC  has  consistently  supported   federal  revenue  sharing  to                                                               
benefit  the State  of Alaska  and local  communities agree  that                                                               
states  sustaining  offshore  energy development  and  production                                                               
deserve a  share of  the revenue  generated because  they support                                                               
offshore operations and experience  impacts to local services and                                                               
infrastructure.  Federal  government  grants  are  inadequate  in                                                               
addressing   the  need   for  additional   investment  in   state                                                               
infrastructure  or  the  increased  demands on  state  and  local                                                               
government   resources  resulting   from  offshore   development,                                                               
especially  in  Alaska  which  has  more  coastline,  more  rural                                                               
communities, and  less infrastructure  than any other  state. RDC                                                               
supports HJR 4 especially the concept behind it.                                                                                
3:55:20 PM                                                                                                                    
KARA MORIARTY, President and CEO,  Alaska Oil and Gas Association                                                               
(AOGA),  Anchorage,   Alaska,  had  technical   difficulties  and                                                               
couldn't continue her testimony.                                                                                                
3:56:02 PM                                                                                                                    
PETE STOKES, Alaska Support  Industry Alliance (ASIA), Anchorage,                                                               
Alaska, supported  HJR 4. He  works as a petroleum  engineer with                                                               
Petrotechnical  Resources of  Alaska, is  a board  member of  the                                                               
ASIA, and also  serves on the Oil and  Gas Competitiveness Review                                                               
Board. He said Alaska became the  49th state and could sustain an                                                               
economy only  through resource development.  It is  important for                                                               
Alaska to  share in the OCS  royalty revenue as the  state is the                                                               
entity that  provides infrastructure  and social  fabric (schools                                                               
and  other  state  government  spending)  that  support  the  OCS                                                               
MR. STOKES  said similar to  the OCS  Gulf of Mexico,  Arctic OCS                                                               
development  is important  for the  nation's energy  security and                                                               
the host state should receive  benefit in support of this effort.                                                               
This is currently  the practice in the Gulf of  Mexico and should                                                               
be adopted  for the Arctic OCS  as the state gives  the necessary                                                               
support for developing  oil and gas in the  harsh Arctic offshore                                                               
environment. An  additional precedent is the  sharing with Alaska                                                               
of 90  percent of  federal onshore  royalties. Since  the federal                                                               
government  has put  many onshore  areas, such  as the  NPR-A off                                                               
limits to  development and continues  to prevent  exploration and                                                               
development in ANWR,  it is even more important for  the state to                                                               
receive benefit from federal OCS development.                                                                                   
CHAIR GIESSEL thanked Mr. Stokes  and finding no further comments                                                               
said  she would  keep public  testimony open  and hold  HJR 4  in                                                               

Document Name Date/Time Subjects
HJR 4 Sponsor Statement.pdf SRES 3/16/2015 3:30:00 PM
HJR 4A.pdf SRES 3/16/2015 3:30:00 PM
HJR 4 Fiscal Note -1-1-030215-RES-N.pdf SRES 3/16/2015 3:30:00 PM
Resume-Attorney General - Richards.pdf SRES 3/16/2015 3:30:00 PM