Competitiveness review board wants study

Board established by SB 21 couldn’t start work until after referendum vote, so delayed in presenting first report to Legislature

Kristen Nelson

Petroleum News

The work of the Alaska Oil and Gas Competitiveness Review Board established in 2013 as part of Senate Bill 21 was delayed by the 2014 referendum vote on SB 21 and the board didn’t hold its first meeting until Oct. 15, 2014, board Chairman Tom Hendrix, vice president of oil and gas for Carlile, told the House Resources Committee March 13.

The board has submitted a report, but Hendrix said that because of the late start due to the referendum, the report doesn’t meet statutory requirements.

To meet statutory requirements, the board needs a report done by outside experts, similar to experts the administration has hired for different studies, to be able to get good feedback from oil companies, Hendrix said. He said if companies got questions from the state, he didn’t think they would be compelled to provide anything that might be viewed as criticism.

Jerry Burnett, deputy commissioner of the Department of Revenue, told the committee that when the fiscal note was prepared for SB 21 the funding was just for board operations. He said the board concluded they needed an outside study - a conclusion with which the department agrees - but the request wasn’t ready in time for inclusion in this year’s budget. Burnett said they met with the governor’s office earlier in the day and got support to request funding for the work.

Revenue has prepared a request for proposals pegging the needed report at $300,000. The RFP describes the work as “a comprehensive survey of oil and gas companies aimed at assessing Alaska’s economic competitiveness as it relates to both current and future industry investment.”

The RFP says that one of the key elements of the board’s duties is obtaining “an accurate perception” of the state’s competitiveness by the oil and gas industry in four areas: permitting and regulatory structure; labor pool and workforce development; status and deficiencies in oil and gas related infrastructure; and the state’s fiscal oil and gas regime.

“Because assessment of jurisdictions is based on proprietary information,” the RFP said, the board “determined it was critical to obtain the support of a neutral third party surveyor.”

The RFP describes the work as obtaining “a confidential survey of oil and gas companies” and says “information obtained by the survey will be subsequently aggregated and made available to the public.”

Hendrix said if there is no funding for the study in this budget cycle, it would push the board out about nine months to get the work done, although it doesn’t bring the board to a complete stop.

With a lack of funding, he said, the board would need legislation to push out the dates for the next reports.

In an overview presented to the committee the next deliverable due date is shown as Jan. 15, 2017, with findings and recommendations on “the state’s tax structure and rates on oil and gas produced south of 68 degrees North latitude”; a tax structure taking into account unique economic circumstances for each oil and gas producing area south of 68 degrees North latitude; a reduction in gross value at the point of production south of 68 degrees similar to existing reductions; and other incentives for oil and gas production south of 68 degrees North latitude.

The board’s final statutorily required deliverable is due Jan. 31, 2021, and includes findings and recommendations on: changes to fiscal regime conducive to “increased and ongoing long-term investment in and development of the state’s oil and gas resources”; alternative means the state could use to attract and maintain oil and gas investment; and review of effectiveness and future value “of any provisions of the state’s oil and gas tax laws that are expiring in the next five years.”