Hawker pushes tax cut, AGIA information

Anchorage Republican dropped his own oil tax rewrite to push governor’s ACES changes; also wants more information on gas line

Steve Quinn

For Petroleum News

House Bill 110 may carry Gov. Sean Parnell’s name, but it bears the shadow and the will of House Rep. Mike Hawker.

The Anchorage Republican was the first to introduce an oil tax rewrite bill before the Legislature returned to Juneau in January.

But he yielded to the governor’s proposal to rewrite the state’s tax system, known as Alaska’s Clear and Equitable Share.

He attended nearly every House Resources hearing before the bill reached the House Finance Committee.

There, Hawker first served as an alternate before being moved to a voting member after Rep. Mark Neuman took a leave of absence.

The bill passed the House and now rests with the Senate, while carrying Hawker’s endorsement and the Senate his admonishment should it fail to act on the bill.

Citing employment, production and exploration data as well as the philosophies of an early 19th century chief justice, Hawker addressed the need to cut oil taxes.

In a follow-up interview from January, Hawker also discussed HB 142, a bill addressing the commercial prospects of a gas line under the Alaska Gasline Inducement Act

Petroleum News: HB110 passed 22-16. What does that tell you?

Hawker: It says that all these issues remain controversial and partisan in this building. It passed 22-16 whereas a few years ago, those numbers were pretty much reversed (26-13 for current system). By that I mean the excessive taxation imposed by ACES passed by roughly the same margin. The dominant philosophy in the building has reversed its course.

Petroleum News: Why do you suppose it was so difficult to come up with a consistent fiscal note?

Hawker: This is not something you can measure. There is not an empirical answer. The department had to establish premises, they disclosed what their premises were and they prepared fiscal notes accordingly.

They learned in the process that the Legislature wanted to see the fiscal note presented with a different sort of disclosure mechanism and the department was responsive and provided a fiscal note in aligned with how the Legislature chose to see things without being directed by the Legislature what the fiscal note was.

Petroleum News: What are your thoughts on kind of a newly coined catch phrase “$2 billion giveaway” used to describe the bill?

Hawker: That was unfortunately the political bumper sticker established by folks against the bill. It was exacerbated by the popular media coverage. As those things go, a gratuitous statement became fact.

Petroleum News: What about Rick Harper’s assertions contradicting the argument that Alaska competes in a global market for investment?

Hawker: I’ve worked with Rick Harper several times in this building. I do not see eye to eye with him on some of his economic philosophy.

I like Rick. He’s great guy to sit down and have a beer with and talk over what you agree on and what you don’t agree on.

Unfortunately when he and I end up in committee, more often than not, I’m disagreeing with his premise. His foundational premise as presented on behalf of the House minority: Competition is irrelevant in these international oil and gas markets and competition is irrelevant from the point of a sovereign in attracting working capital necessary in developing our resources. I don’t know anything that I can disagree more completely with him on. The minority Democrats in the House had an opportunity to hire a consultant. He was given an opportunity to present his position. Obviously, it did not carry the day for them.

Petroleum News: What about the criticism that there is not enough information to make a decision?

Hawker: What more information do you need? Look at the facts. Production is declining. Exploration has all but ceased. Employment, while remaining high, is in the maintenance sector, a direct result of incidents that occurred, that demonstrated the need for additional maintenance. Development drilling is at best at maintenance level. Our productive assets in this state are in fact fleeing south. Our employment base is going away. What more do you need to know?

Petroleum News: Some people still want information from reports commissioned by the (Legislative Budget & Audit) committee last December (before Hawker became chairman) and that are still due. Do you believe these will help folks moving forward?

Hawker: I think they are vastly overrated and I don’t think they provide any assistance at all in addressing the circumstances we face today.

When we can look at the facts and knowing what we need to do, we can take action before this session is over.

Deferring action to some nebulous future date, waiting for some miraculous outcome, and some brilliant insight that these work products are going to offer is absolutely a red herring.

Petroleum News: Why did LB&A commission these?

Hawker: I was laid up in a chemo coma and not expecting to ever be down here again then. I believe the marketing materials associated with the reports were brilliant. They led one to believe they would be an end-all to everything including the better choice between vanilla and chocolate ice cream.

But, I frankly don’t think they are quite what we believed them to be when LB&A approved them.

These are not decision-making tools that the Alaska legislators can go in and put into system inputs, receive outputs and claim they know the right answer.

Petroleum News: The Senate gave HB 110 three committee referrals with two weeks left in session. What are your thoughts on that?

Hawker: What I see happening in the Senate is political grandstanding and posturing and grandstanding. I see the emperor fiddling while Rome burns. I also have been in the Legislature long enough to see bills fly through three committees of referral in the Senate in about 30 minutes if they want them to.

It can be done if they have the will. I truly doubt that they have the will to do what ought to be done for the interest in the state of Alaska with this matter right now.

Petroleum News: No one disagrees that the pipeline needs oil. What is the role of the 61 people in this building (executive and legislative branches)? At what point does the government’s role stop and the industry’s role take over?

Hawker: The first role for the people in this building is to listen to industry that has the investment and managerial and operational responsibility for TAPS. Listen to what they are telling us to the challenges they face, then make the policy decisions here that our industry needs to attract the capital in the international market place, to make the investments, to develop the remaining resources in a manner that is sustainable over many years here. The decision was made a long time ago that TAPS was a private sector enterprise, and we need to respect that. We need to recognize while quoting, the Chief Justice John Marshall, we the Legislature have the power to tax and the power to tax does necessarily invoke the power to destroy and it is very easy to destroy or severely damage our economic infrastructure in this state with excessive taxation.

Petroleum News: What about the industry’s responsibility with Wall Street watching them closely and not happy with market moving leaks?

Hawker: It is an important corporate asset to themselves and their shareholders. It’s an important asset of public infrastructure in the state of Alaska. The owner operators have an obligation to main that asset to the best of their ability so it’s capable of functioning with maximum efficiency and safely.

There is no question there has been a time here where the investment in preventative maintenance has been less than it probably should have been. For that matter it also goes to the gathering lines in the fields that have received a lesser priority than it should have.

It’s been an incredible competitive time for the industry where they have had to look to ways that they themselves can operate most efficiently. Unfortunately as with most of us, maintenance is one of the first casualties in an increasingly tightening budget. In many ways the issue of the maintenance of the TAPS line is a byproduct of our excessive taxation where we’ve priced Alaska out of reach of the oil and gas industry compared to the international marketplace.

Petroleum News: Let’s switch pipelines to HB 142 and the gas pipeline project under AGIA. You seem to find yourself regularly offering clarification as to what the bill is.

Hawker: I had to offer clarification because the blind adherents to AGIA were doing everything they could to distort and mischaracterize what HB 142 is designed to do. I found myself in a position of needing to offer a clarification of what it is and what it is not.

Petroleum News: Don’t you see that as your job as the first co-sponsor?

Hawker: That is my job as the first co-sponsor, especially in this case that it’s being heard in the House Finance Committee, it’s an issue I’m very knowledgeable of and an issue I passionately believe in moving forward. Now I’m a voting member of the Finance Committee. So it fell to me to keep the record clear, keep the record correct and keep the record accurate as the polemic testimony was brought forward by the bill’s detractors.

Petroleum News: With that in mind, what is this bill about?

Hawker: This bill is about accountability. This bill is about the people of Alaska’s concerns that when the original AGIA legislation was passed there were no benchmarks or requirements for performance. None. TransCanada and Exxon Mobil are essentially able to sit, claim confidentiality and do nothing for years. The bill sets up a scenario that says if the AGIA project does not result in an identifiable benchmark by a date certain, then the executive branch would report that fact to the Legislature and submit its opinion as to whether the project remains viable or not.

Hawker: That was part of the testimony. They are arguing no, that everything they are doing is confidential. We had testimony from the administration that the administration has very little access on the progress of the commercial terms on the AGIA project. To that end, the record of testimony so far identifies clear failings in the crafting of the original AGIA legislation, allowing the successful applicant, in this case TransCanada, now TransCanada/ExxonMobil, to operate in complete secrecy from the administration without any benchmarks or requirements for performance. It’s a huge problem.

Petroleum News: Getting back to HB 110 You have a history of brokering deals — the education task for student funding, the film tax credit from the House side in 2008 and even PCE funding — do you see yourself doing something like this in the upcoming interim?

Hawker: We are done studying this. It’s time for decisive action. I certainly have been communicating with the decision-makers in the Senate. I certainly would like to see them come together before the end of session with whatever elements of the governor’s tax proposal that can be passed that does the greatest good in the shortest amount of time in our oil patch. I think it can still be done if the will is there. I’m afraid the will is not there.

I’ll continue to work with all the people involved as we get into the interim this summer anticipating there will be a special session sometime middle to late summer. My complication is that everybody knows I‘m fighting an extremely serious cancer. I can only hope at this point I am doing well. I wasn’t supposed to physically be at this session if I had listened to the doctors. I am. I really truly believe I’m getting better.

But I won’t know until right after session when I’m going down south to check myself into the Mayo Clinic for a month. I’ve got to take care of my health first. Then I’m going to be back here to sort out this tax issue and find something that we can get passed in a special session.