Friday, January 11, 2013

Fresh faces, energy in Juneau as session opens

Tim Bradner
Alaska Journal of Commerce

A new Legislature convenes in Juneau Jan. 15 bringing fresh faces and energy to tackle old problems, nagging issues like oil taxes and, with oil production declining, restraining the growth of spending.

Republicans are firmly in control of both the House and Senate, with 13 Republicans and 7 Democrats in the 20-member Senate, and 25 Republicans and 15 Democrats in the 40-member House.

Rep. Mike Chenault, R-Nikiski, was chosen to once again be Speaker of the House, while Sen. Charlie Huggins, R-Mat-Su, will lead the Senate as president.

Revenues seem sufficient to cover expenses for the upcoming 2014 fiscal year, which begins July 1. The latest estimate is that the state will receive $11.36 billion in total revenues in the 2013 fiscal year. Gov. Sean Parnell has proposed a spending plan of $10.86 billion, which includes a proposed capital budget of $1.8 billion. If the Legislature adds $500 million in capital appropriations, which is quite possible, the expenditures will match expected income.

A possible $2.35 billion capital budget is healthy, but will be down from the $2.88 billion capital budget approved for the current 2013 fiscal year.

Lawmakers will meanwhile be watching oil production levels and oil prices and will make final budget decisions based on an updated revenue forecast that will be made in the spring.

Oil production is declining at rates of about 6 percent per year, a matter of concern to legislators.

Energy problems in the state will be at the forefront in 2013.

House Speaker Chenault and Rep. Mike Hawker, R-Anchorage, have reintroduced their bill to expedite an in-state gas pipeline from the North Slope; Parnell has included $95 million in his proposed budget for continued work on licensing a $4.6 billion hydro dam on the upper Susitna River; and Fairbanks legislators will be at work to get a natural gas trucking project under way from the North Slope to relieve high space heating and power costs.

The 2013 version of the Chenault-Hawker bill to facilitate the in-state gas pipeline is HB 4, among the prefiled bills. The measure is similar to last year’s HB 9 which established new confidentiality powers and made changes on regulatory issues, and also would allow the state Alaska Gasline Development Corp. to have access to $200 million set aside in a fund to finance engineering and development.

Parnell is expected to unveil a new proposal to adjust the state’s oil and gas production tax, which the governor says is too high and inhibits investment in new oil development.

A similar proposal by Parnell in 2011, continuing through the 2012 session, resulted in deadlock. The House passed the governor’s bill, HB 110, but the Senate refused to approve it both years and was unable to get a majority of its coalition leadership to approve an alternate proposal it developed.

Republicans have a clear majority in 2013, up to 13 from the previous 10, and Democrats’ numbers have dropped from 10 to 7, so there may be a better political environment for the oil tax issue this year.

“May” is the operative word. Passage won’t be a slum dunk for this controversial, complex issue. The three Fairbanks senators, all Republicans, were pressured in their campaigns to demand that tax reductions for industry be linked to increased investment and improved production, a good idea in theory but complicated to actually write in the tax code.

Legislators also hope to see progress on the large natural gas pipeline and LNG export project being planned by the three major North Slope producers and TransCanada, a pipeline company. The governor is hoping to see the companies commit to pre-Front End Engineering and Design, which would involve the first substantial financial commitment to the project.

Lawmakers will also be watching to see if that happens. The producers have made it clear that progress on adjusting the oil tax is needed for the gas pipeline because a healthy oil producing industry is needed over the long term to pay for the infrastructure that will also support gas production.

On other issues, it is clear that with both the incoming Senate President Huggins and Speaker Chenault representing Southcentral Alaska, issues affecting that region will have a priority this year that was absent in 2012.

In a talk to the Resources Development Council Jan. 3 Huggins mentioned legislation to expedite the long-planned Knik Arm crossing project, a road down Cook Inlet’s west side to boost resource development in that area, and upgrades to electrical distribution grids, a priority for Southcentral electric utilities.

On the Knik crossing, Rep. Mark Neuman has introduced HB 23, relating to bonds and reserve funds needed for the Knik Arm Bridge and Toll Authority that was formed to build the crossing.

Huggins and Chenault, who was also at the RDC meeting, both mentioned support for the Watana hydro project and the in-state gas line.

It’s noteworthy also that the two Finance co-chairs in charge of the capital budget are both from Southcentral, Rep. Bill Stoltze, R-Chugiak, on the House Finance Committee and Sen. Kevin Meyer, R-Anchorage, on the Senate Finance Committee.

The House and Senate co-chairs for the operating budget are Rep. Alan Austerman, R-Kodiak, and Sen. Pete Kelly, R-Fairbanks.

Given the positions they are in, Huggins and Stoltze are also expected to give a priority to sports fisheries and particularly efforts to enhance and protect the diminished king salmon fisheries in Cook Inlet. The first batches of pre-filed bills by House and Senate members are available, 46 bills in the House and 10 bills in the Senate. The measures aren’t formally introduced until the Legislature gavels in on Jan. 15, however.

Many of the proposals have been in the Legislature before and many are relatively routine changes to statutes. Many are of interest to businesses, among them HB 6 in the House and SB 8 in the Senate relating to audits of pharmacy records; a House proposal making changes in the Uniform Commercial Code, in HB 9; bills relating to commercial motor vehicles, in HB 15 and commercial vehicle registration in HB 19; a bill allowing issuance of one business license for multiple lines of business in HB 32; a Senate bill requiring reporting and analysis of tax credits in SB 5; a bill dealing with computation of tax on the state corporate income tax in SB 7; and a bill requiring more information on oil and gas expenditures related to petroleum investment tax credits, in SB 10.

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