Bradners'

Alaska Legislative Digest

November 2, 2007     

Oil and Gas Bulletin

Comments? E-mail: timbradner@pobox.alaska.net

Reflections on when Alaskans were united, when oil was $9/barrel

Roll back to tape to the mid-to-late 1990s. Oil prices were in the tank. The state faced billiondollar revenue deficits. Industry was slashing jobs. What happened? Alaskans pulled together to work cooperatively with their major revenue-producing industry, former Gov. Tony Knowles told a standing-room-only crowd at the Resource Development Council’s Nov. 1 meeting in Anchorage. In thoughtful reflections on tough times a decade ago, Knowles talked of how business leaders, legislators and the state administration launched serious efforts to develop a long-range state fiscal policy. The Legislature cut spending over a series of years. The administration crafted incentives for marginal oil field development, launched regular areawide lease sales and persuaded the federal government to open the National Petroleum Reserve-Alaska. What happened then? The state-industry partnership paid off. Even as oil prices tanked to $8 per barrel in 1998 oil companies launched new field development, including the Badami, Northstar and Alpine fields. The decline in oil production temporarily halted. Serious discussions on a gas pipeline got underway.

In thoughtful observations on the state’s current sorry relationship with its major taxpayer, the petroleum industry, Knowles said oil prices, state revenues and state spending are at record highs; but “we’re at each others’ throats” politically. There’s no buzz, no excitement, about a gas pipeline. Some points made by the former govenor: (1) Attitude changes are needed. “Certainly a change in today’s atmosphere of personal attacks, accusation, blame and fault.” (2.) “We need a responsible plan for restraining spending and building savings and a focused plan to grow the oil economy,” including a plan for a gas pipeline driven by the market and not a project selected by the state government. (3) Only in the context of a long-range plan, “can the state develop a rational and fair oil tax policy,” Knowles said, reflecting on the Legislature’s special session now under way in Juneau.

It his first speech since being defeated by Republican Sarah Palin in the governor’s race. The former two-term governor looked rested and said he wasn’t running for any office. The full text of the speech is on the Resource Development Council website.

French puts a hold on subpoena for industry

Sen. Hollis French has backed away from a threat Wednesday to subpoena information from oil producers, and the possibility appears delayed indefinitely. In comments after yesterday’s Senate Judiciary Committee hearing French said he still might ask Senate President Lyda Green to approve a subpoena if industry representatives were not “responsive” to questions. In other developments, consultants Steve Porter and Dan Dickinson said they had no criticism of a model of oilfield profitability presented to the Judiciary Committee earlier in the week by the administration’s consultants, Gaffney, Cline & Assoc., that showed high profits from oil production. Dickinson said the model showed why a net profits tax regime is preferable to a gross production tax. Porter said the model may demonstrate that the Petroleum Profits Tax is working as intended. A new draft of the governor’s oil bill will be considered at today’s Judiciary Committee session and will be advanced to the Finance Committee no later than Saturday, French said. The bill goes next to the Finance Committee. That panel had no meetings scheduled through the weekend.

Lawmakers continue to question auditor exemptions

Senate Judiciary Committee members continue to question the Palin administration’s plans to
shift oil and gas auditors from the state civil service to “exempt” job classifications (essentially, to be political appointees) and the extent of the administration’s efforts to fill existing vacancies for those posts. Sen. Bill Wielechowski (D-Anch.) asked why the Department of Revenue opened an application period on Oct. 12 but closed it Oct. 17, the day before the special session began. Four applicants for junior auditor posts were awaiting consideration during that period and the hiring of a senior auditor was pending.

Jon Iversen, director of the Tax Division, said the state has been recruiting “vigorously” but indicated he was not aware that a hiring was pending. He said the application period was closed because of the potential reclassification of the positions. Following the hearing, oil and gas audit section director Gary Rogers said the application period was closed and no candidates were interviewed at the direction of Commissioner Pat Galvin. Although the governor’s bill allows auditors in classified positions to choose whether to remain there or move to the exempt category, Jerry Burnett, department administration director, said it would be unfair to offer an applicant a job without being able to tell them their job category. Applicants who would have had their salaries set by existing state wage scales will be able to negotiate pay rates if the governor’s bill becomes law with the administration’s language intact.

Committee meeting schedules:

Friday

• 9 a.m. House Resources Committee: presentations by Revenue Commissioner Pat Galvin and legislative consultants.
• 9 a.m. Legislative Budget & Audit Committee: preliminary & final audit reports.
• 1 p.m. Senate Judiciary Committee: review and possible final action on committee substitute for SB 2001.

Saturday

• 9 a.m. House Resources Committee: stakeholder roundtable discussion of ACES.
• 9 a.m. Senate Judiciary Committee: final action on SB 2001.

Sunday

• 1 p.m. House Resources Committee: deliberations on HB 2001.

Legislative Digest is a paid-for private subscription service. Our special session Bulletin is distributed free as a public service, and is supported by special grants from a group of subscribers. Editors: Mike and Tim Bradner. Contributing writer: Bob Tkacz.  Interested in getting the regular Legislative Digest and Alaska Economic Report? Contact: mbradner@GCI.net or fax at: (907) 522-1761.