Stoltze: Committee allowed for all voices

House Finance co-chair talks about hearings for LNG project; says opposition to SB 21 focused on revenues, not state’s economy

Steve Quinn

For Petroleum News

House Rep. Bill Stoltze closed out his last session as the Finance Committee co-chair and as a member of the House. But, unless he loses in the upcoming primary or general election, he’ll return as a member of the Senate.

The Chugiak Republican has been in office for 14 years, serving all of them in some capacity on the House Finance Committee. For the last six years, he held a co-chair position, a slot he shared with three different House members.

Every heavy-hitting resource bill finds its way to his committee and this past session was no different.

Gov. Sean Parnell’s LNG gas line bill, his refinery tax credit bill and board appointments for the Alaska Gasline Development Corp. all drew substantial debate, the first two in Stoltze’s committee.

It’s familiar territory for Stoltze who has been around for the proposed gas line contract under Frank Murkowski and the Stranded Gas Development Act, then Sara Palin’s Alaska Gasline Inducement Act.

Stoltze sat down with Petroleum News and discussed his views on the most recent session against the backdrop of previous sessions and efforts to advance a gas line project.

Petroleum News: Let’s start with the LNG bill - SB 138. Having been around for debates over the last 12 years, what, if anything, stands out as different among the debates over the various plans?

Stoltze: The political environment was a lot different with the Stranded Gas deal under Murkowski. I’m not sure there was any consensus. The opportunity seemed pretty good there. I would say it became contentious. It bled over into later events. The AGIA line, all but one member of the Legislature voted to establish the AGIA law, but with the contact, a lot of us certainly through maturity, myself included, voted against the AGIA contract back in late July, early August of 2008. We had concerns about our hands being tied and the half billion dollar expenditure. All of the things we are regretting today.

I think things are better aligned with this. There certainly is no guarantee of a gas line, but we are better aligned between the industry and the executive branch and the legislative branch. I think we have a better opportunity than we have had in the past. Still there is no guarantee and that gives me a little trepidation this being the third or fourth try on a different avenue. There is not an unlimited amount of state resources that we can continue to put forth toward attempts to get a gas line. First and foremost it has to be economic. We can’t just will or spend our way to getting a gas line, which I think at least one iteration, the process tried doing that.

Petroleum News: You noted trepidation. There seemed to be some of that, or at least caution, even from people who supported the bill, mostly because of past iterations of a gas line bill or contract. Is that how you approached the bill?

Stoltze: Yeah. Absolutely. Many people’s concerns are molded by experiences from past events. Maybe trepidation isn’t the right word; maybe caution is a better word. We are investing another amount of state resources. The payout is not just providing gas to Alaska communities who need it and the economic benefits. It’s also, not a panacea or a replacement for oil revenue, even if we increase production, but gas is part of the big picture. Gas and oil go together. If you are looking for oil, you can find gas, and vice versa. It makes projects more economic. When we walked into it, I wasn’t an absolute vote. There was definitely hesitation. I would still say things seem better aligned on this. We can hope and wish all we want; we aren’t going to be any more successful. It will continue to be market driven.

Petroleum News: You were the final committee of referral. What was your approach to this? Was it your philosophy to have so many hearings early on and before the bill arrived, especially when your committee only has about a week and a half?

Stoltze: I have to give (Co-chair) Alan Austerman a lot of credit for that. He was really on top of that. We had hearings concurrent with the Resources Committee. It really worked out well because the consultants were in town at the same time. It was a real necessity to start working on the bill before it got to our committee. We really didn’t make many changes to the bill. There was a local hire provision. I had an amendment allowing much broader training programs.

Petroleum News: You gave the other side its chance to bring consultants to the table for testimony. What did that accomplish when you’re in the majority?

Stoltze: That’s why before we even got the bill in House Finance, we spent a substantial amount of time listening to (Federal Coordinator) Larry Persily from his policy perspective on exporting LNG, from Black & Veatch, Mr. (Roger) Marks and honoring the minority’s request to hear Mr. (Rick) Harper. We provided opportunities for all voices, the cheerleaders and the skeptics, to be at the table. That’s our responsibility, to look at all points of view. Just like when we had oppositions previously with HB 4 (in-state gas line legislation), we accepted a request from the city of Valdez to have Mr. (Bill) Walker present on behalf of their community. They had a past role and hope for a future role with a gas line. We tried to not have a predetermined decision on that legislation.

Petroleum News: What would you like to see the Legislature do between now and the end of 2015 when the administration has to come back with a contract for your review?

Stoltze: We need to effectively use our resources that the Alaska Gasline Development Corp. has. Not just prepare the engineering, but if we haven’t used those resources to make sure we know the markets, I don’t see how that gets built. We clearly can build one for in-state use, to bring affordable energy to places like the Interior. What are the things we lack? If we just think of this as opportunities for the treasury, it’s pretty short-sighted. There are so many other opportunities for Alaska residents and the economy.

Petroleum News: So what would you like to see AGDC do then during the interim?

Stoltze: I would hope they work with the administration, do the technical work, do the economical analysis and have a proposal for the Legislature based on market viability not wishing and dreaming to have a pipeline. They have good people over there to get that done.

Petroleum News: Still on AGDC, do you believe the Richard Rabinow appointment and the out-of-state issue was a distraction during the session, whether unnecessary or valid?

Stoltze: I know it was a distraction for me. Had not the law been changed, I wouldn’t have supported his appointment. He’s definitely a qualified person. We bring in out of state folks for other positions. This happens from time to time. I know Harold Heinze got a lot of pushback when Wally Hickel appointed him as DNR commissioner. As a commissioner of DNR he was somebody with experienced-based knowledge on how the industry operated. He took the industry to task on a regular basis and he was supposed to be aligned with the industry. The jury is still out on Rabinow. As for my druthers, I would have rather had an in-state person. After voting against the law change - I didn’t like changing it in the middle of the process - with some hesitation, I approved his appointment. It was a merit-based issue. All things being equal, I liked to defer to someone who has that kind of knowledge. The people on that board who I respect, John Burns, spoke real highly of his expertise. I couldn’t have voted for it as an illegal appointment, but once the law was changed, I deferred to the folks serving on the board and they spoke kindly of him.

Petroleum News: Looking at the ads, the issue for those supporting SB 21 seems to have shifted from filling the pipeline to jobs. Which is it?

Stoltze: They are all concerns to those of us who are policymakers in Juneau. Those who are trying to convey a message, they are going seek the approach that resonates with the public. I imagine they are doing polling and contact to hear what their larger concerns are just as we do with our constituents. They are a little better at it because they have just one thing to focus on so they can do just that.

Folks can point out flaws in this - there are flaws in any tax regime - the only thing I can think of worse than allowing something with imperfections to operate is to throw out the whole thing and go back to a totally failed system.

On the gas line, a lot of the discussion becomes moot on our whole position on of oil and gas production in Alaska - well, maybe not moot, but it certainly would toss a cold, wet blanket thrown on a lot of opportunities if Ballot Issue 1 passes in August. It will send a message that we are not that interested in the future. We want to stay in harvest mode and not look at some of the exciting potentials with oil and gas in our future, not just revenue this year and next year but the long term. Revenue and opportunities. Just saying revenue is short sighted.

Petroleum News: So what would happen if SB 21 gets repealed?

Stoltze: You know what? I don’t want to take that fatalist point of view. We just have responsibility to keep working and explaining to the public about why it’s an important economic decision that we make. Right now, I don’t want to contemplate the collective and cumulative failures that would cause going back to the old system. It may be beneficial to the state treasury in the short term, on varying degrees and depending on the price. It would be a disaster to the economy and to the confidence instilled by the private sector investment. There were some companies like Repsol and Armstrong who might have had different understanding of the political system. I think they thought HB 110 had already passed because it had been introduced. I think some businesses very enthusiastically and over optimistically responded earlier coming in before SB 21. That made them all the more poised to continue operations.

Petroleum News: So when you think of Hilcorp’s announcement to purchase some of BP’s assets, can that be attributed to SB 21?

Stoltze: I would say Hilcorp is really aggressive. I just view it as a positive whether it has anything to do with SB 21 or not. I sure hear a lot of folks saying we need smaller investors who are hungrier and will be aggressive. I appreciate the contribution of all of the companies. I don’t think the diversity hurts. I think it helps.

Petroleum News: You folks also addressed some tax issues for the state’s refinery industry. This was done in the waning days. Do you see yourself having to go back and look at it again?

Stoltze: I think the situation came before us and it’s a situation that had a lot of dominoes. There are all kinds of implications to it, such as keeping our air base in Eielson. There are so many ways that this affects Alaska operations. Interacting with the railroad is important to our economy as well. When Agrium went out of business in the early 2000s, we had a situation where farmers were getting fertilizer for $200 a ton. A year later they were paying closer to $1,000 a ton. It’s always controversial when you’re looking at a tax credit. Folks opposing keeping alive our in-state refineries believed we should continue to spend the $200 million for folks to come in and make reality TV shows and go straight to video movies. I don’t know that you can replace those entities once they are gone. It’s not just what the tax breaks did for the Interior, it has cascading effects on the whole state economy if we were to lose our in-state capacity. What would fuel prices be if we didn’t have an in-state operation?

Petroleum News: Do you see any heavy hitting resource issues coming back next year?

Stoltze: I hope we haven’t taken any steps backward on mining or oil and gas. We want to make sure we do our best and are good stewards. I would sure hate to have the door shut on opportunities if the Ballot Issue No. 1 passes. There is an incredible opportunity for jobs. Not everything we do is a home run.