New Senate president: Budget big issue

Meyer says budgeting done on $105 oil, cuts will need to come faster; LNG plan puts state further along, allows it to partner

Steve Quinn

For Petroleum News

Sen. Kevin Meyer has held his share of leadership posts within the Alaska Legislature. On the House side, he served as House Finance Committee co-chair. On the Senate side he oversaw the Legislative Budget & Audit Committee then returned to share duties on Senate Finance with Sen. Pete Kelly.

But most recently, Meyer’s peers named him Senate president, a post he’ll hold for at least for the next two years.

During his 14 years in the Legislature he’s constantly fended off criticism of professional conflicts for his work with ConocoPhillips when bills affecting the industry come to his committee or the Senate floor for a vote.

The Anchorage Republican says he’s accustomed to the pushback he and other colleagues have received.

As the new Legislature takes shape with its assignments and as the state welcomes a new administration, Meyer’s majority caucus has already said resource development, especially the advancement of a natural gas export line, is a priority.

Meyer spoke to Petroleum News about what lies ahead in coming sessions and special sessions.

Petroleum News: One of the state priorities the new caucus announced was resource development, or oil and gas. Talk about that a little, please.

Meyer: Those are preliminary priorities of ours. We will finalize those out at a retreat coming up in the middle of December. The governor will have to release his budget by then. Obviously the budget is a big issue for us this year. As you know we budgeted at about $105 this year and we are about $80. When I was the co-chair of Finance - and I guess technically I still am - we had a plan for declining revenues. Of course key to that was the passage of SB 21 so we could get more production.

We don’t hear much about it today, but thank goodness we have SB 21 at these low oil prices. Our plan was to winnow back on the state’s spending. At the same time the private sector would pick up spending, so you wouldn’t see much of an impact, if any to your economy.

Then we would keep using our reserves to keep basic government services like education and health and social services. We felt like we had enough savings or reserves that, along with reducing the budget, we could last 10 years until we saw first revenue from gas and the gas pipeline. That was our plan, but with oil now at $75 and not $105, we will have to expedite the reduction process.

Petroleum News: Still on the topic of oil taxes, this debate lasted nearly eight years when you folks began debating a change under the Murkowski administration. The voters seemed to have the final say whether to uphold SB 21 or reject. With the decision made, can that help the Legislature move forward without having it hanging over their heads?

Meyer: Yeah, I think so - definitely. As far as the Legislature is concerned, we are done with it. The public verified that with the vote no on 1 campaign. There are going to be people out there saying they like ACES better or they like something else better. There will be rumblings and discussions about it, but like I said, SB 21 works so much better under low oil prices. I just don’t anticipate hearing much about it. Even Governor Walker said he’s done with it. I hope it’s a dead issue and that we can focus on gas right now.

Petroleum News: Are there any particular developments on the oil front that have pleased you and supported your position?

Meyer: I think the private sector has done what they said they would do. They said the passage of SB 21, which basically allows them to have more predictability in what the tax is going to be at whatever price, would change things. As you know the problem with ACES, at high prices it took a disproportionate amount of money in taxes, and at low prices it took less. Right now the oil companies would be much better off at ACES, but what they wanted and what SB 21 did was give them was predictability and stability so they could do some long-range planning. We are seeing projects come on line at Kuparuk and West Sak, especially ConocoPhillips coming through with brining up new drill rigs. You don’t bring up new rigs unless you are committed to doing more work.

We heard from Great Bear who was pretty quiet during the oil tax debate, saying they are going forward with their work, more non-traditional type drilling. Then you’ve got Brooks Range moving forward with the Mustang project. Now we are hearing how Caelus is being much more aggressive with their work. I haven’t heard much from BP, but I know they are moving forward within the Prudhoe Bay reservoir and Exxon is still going forward with Point Thomson. I think the oil industry is doing exactly what they said they were going to do. That gives us the Legislature more credibility in what we did. We are counting on that to help us offset the reductions we are going to have to make in state spending, and federal spending, which we don’t have much control over that.

Petroleum News: There is obviously a new administration coming. Do you expect anything to change from the work you’ve started?

Meyer: I think the wild card there is going to be gas and the gas pipeline. I’m not sure we know which way he wants to go with the pipeline. I’ve heard different stories. I know when we were taking action on the current project, the large one, anyway, he actually testified against it.

He’s also learned more about the merits of what we did. Hopefully he’s not going to abandon that idea. We are so much further along on a gas pipeline than we’ve ever been. Certainly, this plan works with the industry rather than against the industry. In my 35 years in Alaska, I’ve never seen anything good come out of trying to force the private sector to do something that may or may not be economical for them to do it.

They are just not going to do it. It will just lead to more lawsuits and delays. I really like the current plan. It’s got us further along than we’ve ever been. It takes a lot of risk away from the state. We are not having to front the entire $65 billion and we couldn’t afford to even if we wanted to.

It does allow us to be partners and be at the table with the industry. We know what they are thinking; we know what they are doing. We know what their economics are. We may need to make some minor tweaks here and there, but hopefully we don’t abandon the current plan.

You know (pending four-term House Speaker Mike) Chenault been pushing that in-state line. That is our backup plan in case the economics didn’t work with the big line or the market crashes. We still wanted to have a bullet line to take care of in-state needs. I hope that advances as well because even if we don’t get the big line and the revenue from the export, at least we will have affordable gas for our own people, Alaskans.

Petroleum News: Let’s go back to your newly appointed post. You seen bills from the post of co-chair in Finance - both House and Senate - as LB&A chair, how do you think your view of any resource legislation will differ?

Meyer: I think it’s too early to say. We’ve seen different perspectives, approaches and bills dating back to Gov. Murkowski, who was pretty serious about getting a gas pipeline. We had special sessions that lasted several weeks in Juneau. He proposed to keep the tax rate on gas over 20 to 30 years. That got people upset. He’s the one who brought up the oil taxes and that got the discussion started.

Then Gov. Palin came in. She had her ideas and a whole different approach with AGIA. She actually introduced ACES. Her initial idea of ACES wasn’t too bad. I blame the Legislature for letting that one get out of control, especially the progressivity part.

Then we tried HB 110, which was a pretty good approach as well, but it wasn’t going to pass a bi-partisan Senate. Finally, SB 21 we were able to get it passed. We’ve seen a lot of different bills, a lot of different approaches. I’m hoping we don’t start over again on the gas pipeline.

Petroleum News: You’ve mentioned the need for not losing sight of the ASAP line and declining revenues, can the state afford stay on both paths?

Meyer: We can’t afford both lines. We know that. The bullet line is our backup plan. We still want and need to have something in-state. The big line goes through - I understand there will be the off takes.

I think for sure what we can’t afford is a Watana-Susitna Dam and I don’t believe we would even need it if we had the bullet line or the big line. I think Gov. Parnell wanted to keep Susitna on the books just in case, but once we make a commitment to the gas line, the other smaller projects will fall off. s

I think we’ll know on the big line later next year whether it’s a go or no-go, and I don’t think it will cost us much more to keep both on the table in the interim. We need to stay with the different gas pipelines until we know for sure which one is going to go or not going to go. That should be fairly soon.

Petroleum News: Can the Legislature do anything during the upcoming session to assist itself to prepare for the end of 2015 when a contract is due? Perhaps updates from consultants or a symposium, which you’ve done before.

Meyer: I don’t think enough is known yet. It’s a bit too early for me to say on that one right now. I don’t think any of us will be opposed to a special session if it advances the gas pipeline. I think what might slow us down a bit is the transition with the new administration.

Petroleum News: OK, let’s talk about the new administration. What kind of relationship do you expect? The incoming chief of staff (Jim Whitaker) was critical of you, Mike Hawker and Mike Chenault of being too close to the industry during the oil tax debate in 2006.

Meyer: I can’t speak for my other colleagues. Jim Whitaker and I served in the Legislature together. I always found him to be a nice guy. We always got along real well. We’ve always disagreed on oil and gas issues, and probably will continue to disagree. Yeah, some of the name calling in the past as far as I’m concerned is forgiven. It’s hard to forget them. Again, it had to do with oil taxes and I don’t just see oil taxes being an issue any more. So I’m not too concerned about it. I think Jim realizes that I represent a group of 35,000 people in my district.

The people in my district, at least a majority of them, agree with my position on oil taxes and oil and gas issues. The fact that I work part time for an oil company (ConocoPhillips) I think is irrelevant. For them to not have a say on a very important issue like oil taxes, I think Jim would agree it’s not very fair to 35,000 people in my district. When you throw Peter Micciche (Kenai senator) in there too, that’s 70,000. So now you’ve got a group people the size of Jim’s city - Fairbanks - that would not have a say on oil and gas issues. I think Jim realizes that.

I can’t really tell you that I’ve worked closely with any chief of staff. I didn’t work with Jim Clark too much and I didn’t work with (Mike) Nizich too much. I don’t think it would be a problem at all. I think we are all trying to do what’s best for the state of Alaska and we have different approaches on how to do that.

Petroleum News: Still on the topic of a new administration, the announced appointment for Department of Natural Resources commissioner is Mark Myers. He was among many who left DNR en masse during the Murkowski administration. What are your thoughts on his appointment?

Meyer: I actually knew Mark when he worked at ARCO and I worked at ARCO. He’s got a Ph.D. in geology and is a smart guy. I know he was pretty upfront about the repeal of SB 21 as was Walker as was Whitaker as were pretty much all the people who seem to be making up the administration, so I’m truly glad that SB 21 is behind us. Again, I think a lot has been learned since we started this process under Murkowski.

That’s the wild card: What is going to be the approach on the gas pipeline? Are we going to start new or are we going to start where we are at and move forward rather than recreate the wheel? If we start over, I’m afraid it’s going to delay the project. I think we are all anxious to get a gas pipeline sooner rather than later. The state definitely needs the revenue. I think everyone is aware of the factors and concerns, and we are all going to work together and do what’s best. Yeah, the gas pipeline, in my mind, is one big question mark.

Petroleum News: So what do you think you can do as Senate president to advance the project?

Meyer: Governor Walker and I have already talked a couple of times. I think it’s good that he is willing and wants to work with the Legislature. I don’t know if he’s talked to the speaker yet. I do know the speaker and I have an appointment with him in the middle of December and Governor Walker is scheduled to talk to the entire majority caucus also in the middle of December.

I think as Senate president I will be able to advocate for all of the work that we have done on the gas pipeline, and that will be my role now. The funding will come from the new co-chairs in Finance. It will be a challenge because there isn’t much money available.

So that’s how I see my role now: work with the governor; let him know what our feelings are in the majority caucus as it pertains to the gas pipeline, try to keep the communication open between the executive branch and the appropriators in the legislative branch. We need each other. He needs us as the appropriators and we need him as the executive branch.

Also, we will be working closely with the House. I think you alluded to the fact that Chenault and I were co-chairs of Finance in the House. We served together. We had a good relationship. It’s certainly my intent that we work well with the executive branch.

Petroleum News: Speaking of your relationship with the speaker and working with the executive branch, you and the speaker took a lot of heat separate from Jim Whitaker for connections to the industry. Now that you’re Senate president, and the face of the Senate, do you see that happening further or are you accustomed to it by now?

Meyer: I’m accustomed to it. I just kind of let it go in one ear and out the other ear. I used to be concerned about it and again, we are citizen legislators, we are all going to have jobs and conflicts at one point or another. We have a lot of fishermen in the Legislature who will have fisheries conflicts.

But people know that when they vote for you and the people who have given you their trust and want them to represent them down in Juneau, if they are OK with that, then I’m OK with it as well. They keep asking me to go back and represent them and I’m honored to do so.

I know I’ll do what’s best not only for my district but also the state of Alaska. Where I work and who I work for on a part-time basis is kind of irrelevant to the whole process. If I don’t represent the people who asked me and trust me to represent them, they simply aren’t going to vote for me.

I’ve been fortunate to be voted into office for 22 years now, so no, I’m not worried about it anymore. There are obviously, especially when it comes to oil and gas issues because it’s very emotional, are going to be people who are mad at me for voting the way I did. There are just some people who hate the oil companies, and there are going to be people who are mad at me for voting the way I did, and there’s nothing I can do about that.

I will say though when we had taken up oil taxes during the bipartisan coalition, and I voted for the oil tax the bipartisan group brought forward, I never heard any concerns, so I think it’s kind of partisan thing. It’s really just the business we are in and I don’t let it bother me anymore.