Meyer: Enjoying first year on Resources

Anchorage Republican, Senate Rules Chair says he’s getting fresh perspective on legislation with seat on Senate Resources Committee

Steve Quinn

For Petroleum News

Senate Rules Committee Chair Kevin Meyer was long accustomed to seeing resource development bills come across his desk while serving as a Finance Committee co-chair in the House and Senate, but this year he had a broader view: that as a member of the Senate Resources Committee. Meyer, an Anchorage Republican, spent his first year on the committee under veteran Chair Cathy Giessel. Though he has yet to file for the lieutenant governor’s post in the 2018 election, Meyer has been speculated to be among three Republicans vying for the job along with Sen. Gary Stevens and former House Rep. Lynn Gattis. For now, Meyer spoke only of his first year on the Resources Committee and how much he enjoyed the perspective of the variety of bills the committee heard. The former Senate president shared his thoughts with Petroleum News, still not having officially committed to pursuing a statewide office.

Petroleum News: So what attracted you to be on Resources after all of these years?

Meyer: You know, I think I’ve always been attracted to it. Working part time like I do at ConocoPhillips, it was probably a committee I needed to avoid because Resources handles so many topics and bills. However, what I’m finding is they take on a lot of other issues, too, like land issues and hunting and fishing. It’s much more than just oil and gas. It dawned on me after all these years that most of the bills that come from Resources go to Finance anyway. I’ve been sitting on Finance all these years, so I’ve been hearing these bills anyway. Why not just sit on the committee, especially as I’m not on Finance anymore? It just kind of made sense - the reason why I hadn’t been on it all these years really wasn’t legitimate. I’ve been hearing the bills anyway so I might as well just sit on Resources. I would hear all the bills that interest me. When you get to Finance, you’re more concerned about the cost to the state. You look more at the financial impact. Resources looks at it from a policy standpoint.

Petroleum News: You didn’t seem to get much pushback as in past years for your work with ConocoPhillips.

Meyer: No I didn’t. I think after 18 years, people have either accepted it or just don’t worry about it anymore. It’s one of those things I’ve found out if people disagree with my position, they tend to use it as a reason for me not participating or not voting. If you do agree with me, then you think it’s fine that I participate. The people who I represent in my district, they all know where I work. I disclose that. I’ve been very clear about that. Frankly, I think that’s why a lot of them vote for me. I am a part-time legislator. I think that’s what our founding father’s wanted. They put 121 days in the constitution.

It is our largest and most important industry of our state since we get so much of our revenue from that industry. I think people like the fact that I know something about it. I guess I’m at a point where I disclose it, let people know and if they don’t like the fact that I work part-time for the industry and I have for many years, they can vote for the other guy, I guess. The bottom line is, I have been in office for 18 years and yeah, it comes up when I go door-to-door. Some people, they just don’t like that. Most people accept that I’m not a wealthy guy, I have to work somewhere.

Whether I work at ConocoPhillips, or I work at Sears, or as a fisherman or as a lawyer, as many do, you could say we all have a conflict of some kind because we are all part-time legislators. Unless you’re retired. Even then, you might say they have a conflict because they might be getting a pension check from somewhere.

Petroleum News: So did you enjoy your first year on Resources?

Meyer: I did. There was quite a diverse set of topics from timber to the ferries. I know (Sen. Bert) Stedman had a bill dealing with the ferries (discharge), but there were a lot of land issues in particular. Some of those land trades doesn’t come to Finance because it may not have a financial impact to the state. I probably do get to hear more resource-related bills than I did in Finance, so I’ve enjoyed it. Frankly, (Chair) Cathy Giessel runs a pretty tight committee as you know but let’s everyone have ample time for questions and discussions.

Petroleum News: It seems inevitable there would be an oil tax bill before you guys. What do you think was accomplished with HB 111?

Meyer: Well, the oil tax credits and tax credits in general have been around for some time. The first ones we started in Cook Inlet in 2010 and 2012 was really a bipartisan issue. Both Sen. Wielechowski was pushing it as well as Sen. McGuire. The hope and intent was to get more small guys looking for gas in Cook Inlet because we had a critical shortage in Southcentral. In fact, I still remember the TV ads. It wasn’t that long ago. The mayors of the Kenai borough, the Mat-Su valley and Anchorage were telling people, be prepared for brownouts, we were running out of gas.

I remember a meeting with Chugach Electric discussing having ConocoPhillips turn the export plant into an import plant. There was serious discussion about that. Then we did the tax credits, the small guys came up and now we’ve got a surplus. About that same time oil prices were sky high, we had that extra money, and we realized that production was declining on the North Slope, but we knew there was still more oil up there to be had and found. It’s so expensive on the North Slope, it takes incentives, especially for the smaller guys.

I was OK with the Big 3 as some like to call it, but you know, the more the better. It’s always good to have competition. The hope was we would attract more exploration and development up there. It’s worked as well and worked as far as getting the small guys up there. Who had ever heard of Armstrong, Repsol, Caelus and Hilcorp? We really hadn’t heard of them until the tax credits going into effect. At 2014, when the price of oil started falling and we no longer had a surplus, we realized we couldn’t afford to continue this program any more. Frankly, we probably didn’t need to. We not only had a surplus of gas, we also had major oil discoveries.

So they worked, but like I said, we wanted to phase it out. We started with Cook Inlet last year (HB 247). It was a tough one to get passed. I remember the House had to fly (former Rep. Mike) Hawker down, who wasn’t well, to get that 21st vote just so we could stop tax credits in Cook Inlet. I don’t think the Democrats were opposed to getting rid of tax credits in Cook Inlet. They just wanted much more.

Again, SB 21 - which wasn’t easy to pass - we think it’s working. We also think the voters confirmed that it’s a good bill. They rejected the recall of that bill. It’s been through enough test and challenge. Let’s give it a chance to work. If you talk to the oil companies who are doing most of the work up there, whether it’s ConocoPhillips and their expansion westward into NPR-A, and Hilcorp and Caelus, even Armstrong who isn’t in production yet. There is certainly BP who is trying to squeeze more oil out of Prudhoe Bay, even ExxonMobil at Point Thomson to some extent. They will all tell you they are moving forward and going in the direction they are because we now have a stable oil tax policy in place that our consultants have told us it’s fair on a global basis, it’s fair at low oil prices and it’s fair at the high oil prices.

Unfortunately, oil prices are low and so our tax revenue is low. That’s no reason to change your tax codes just because you want to get more money at lower prices. I’m sure the oil companies would like to get more money at lower oil prices. I think it’s important that we not tamper with that. I know we did tinker with it some in HB 111 with the ring fencing concept, which frankly, I’m a little worried about. I think it could hurt those who are trying to be more aggressive by expanding and connecting these small fields and turning them into a big field or medium size field.

That’s what ConocoPhillips is doing, going around to CD-5, Greater Moose’s Tooth I and Greater Moose’s Tooth II with other small fields there and bringing them all together. Ring fencing could hurt that. I think it depends how the regulations are drawn.

Petroleum News: Why do you think it took so long to get HB 111 passed when most people pretty much knew what needed to be done?

Meyer: Again, I think some of the older guys who voted against SB 21, don’t like SB 21, are still trying to tinker with it through other oil and gas bills. Then you have a lot of new guys who aren’t familiar with SB 21 who think it’s a good idea to get new revenue no matter how we do that. I think that is always going to be a concern. What’s fair to both the state and the industry without going too far one way or the other? I think that’s why we hired some more consultants. They are all on board now.

I think Cathy Giessel was going to have meetings with Geran Tarr over the interim to look at the whole policy and get feedback from all the consultants to make sure that what we have got in place is the best, kind of the sweet spot, that we’re getting the maximum for the state and still encouraging investment. As you know it is very expensive on the North Slope and the fields take a long time, even after discovery until you have first production.

When you have money that is tight you are much better - and I’m shocked that we are getting as much capital investment up there that we are - it’s much better, quicker, more efficient to invest in the oil shale plays in the Lower 48. You don’t have to invest as much and you get quicker production than you do in Alaska. We have to be careful. As you know there is a surplus of gas now because of the oil shale. We are exporting oil now because we’ve got more than we need, though we are still importing from Canada.

We just need to make sure that our policy isn’t such that we chase off investment in Alaska. That’s kind of what ACES did to some extent. We should have had much more investment at high oil prices than we did. It was just easier for the oil companies to make a greater return at less risk elsewhere.

Petroleum News: You talk about a surplus of gas, let’s talk about AKLNG. What are your views on that project right now?

Meyer: Everything I read just says the world is swimming in gas and Canada has a lot of stranded gas that once they figure out how to get it to the coast or the Lower 48, we are going to have even more gas. It would make you believe what are we doing here, even spending $100 million that he (Gov. Bill Walker) wants to spend? Of course, he’s hired Keith Meyers who is getting $550,000 a year plus potential bonuses. So, one can say what are we doing?

On the other hand, if he is able to get a tax exemption from the IRS, which he may or may not have. I read a preliminary announcement that says he may have it but then someone said that’s not the final ruling. So, I’m not sure. If he got that, it would certainly help the economics.

Petroleum News: So, given that it’s uncertain whether the state has that exemption or not, what would you like to hear next?

Meyer: I think they are still going through the FERC process. If they came back and said FERC has approved it and we don’t have to pay taxes on it, and the economics improve significantly, that would then maybe get me a little more interested, a little more excited about the project. If we don’t have FERC approval and if we don’t have the tax exemption, I don’t know how this project goes. We should probably put it back on the shelf until the forecast for gas changes in maybe 10 years or 20 years.

Petroleum News: At the beginning of the summer, Interior Secretary Ryan Zinke visited Alaska and spoke of a commitment from the Trump administration. What were your takeaways from his visit?

Meyer: I think we were all very encouraged. He was talking about some of the land that was off limits in NPR-A, taking another look at that. I can’t recall exactly what his comments were about ANWR, but they were certainly more positive than Secretary Jewell’s. I think he was even positive at looking at offshore leasing again. Everything has to do with timing. I think if Shell was trying to do the offshore drilling now under the Trump administration rather than the Obama administration and Sally Jewell, they could have had enough time and money to go after two or three wells instead of just the one they drilled. I was encouraged by his visit and I hope he is able follow through with it because it can only help. The more land you make available for exploration, the more likely you are to have a discovery.

Petroleum News: Still on Secretary Zinke, he appointed an Alaskan, Joe Balash, to his team. How can that help Alaska?

Meyer: I think it’s great for Alaska for someone like Joe Balash in there on the front lines looking out for us. I don’t know he’s been confirmed yet. Once he starts going through the process, I think he will get confirmed. I haven’t heard anybody say he won’t. I know Sen. Sullivan has been promoting his name and Sen. Sullivan has the respect of his peers back there.

Petroleum News: There have been times when you and Joe have been on the same side of a bill and opposite sides, mostly while he worked for Gov. Palin.

Meyer: It’s hard to say if those were Joe’s thoughts or the person he worked for. Gov. Palin wasn’t all that supportive of the industry whereas I think Joe is working at a whole different environment now starting with the top and President Trump and then of course Secretary Zinke is pro resource development. I think that is where Joe’s personal thoughts are right now. I think under Gov. Palin, he had orders he didn’t necessarily agree with.

Petroleum News: Secretary Zinke also brought Steve Wackowski on board. It looks like he is building his team with some key Alaskans.

Meyer: Steve will be great. I think he has been confirmed. He has a military background so a lot of his background checks are already done. Sen. Sullivan and Sen. Murkowski are very pro resource development.

Petroleum News: Then last month (former Senate President) Drue Pearce was named deputy administrator of the Pipeline and Hazardous Materials Safety Administration, but this is part of the U.S. Department of Transportation. Still, it’s another Alaskan getting a prominent post.

Meyer: I don’t know enough about what she is going to be doing to have a comment, but Drue has always been supportive of the state and the direction the state wants to go. We didn’t have that under the previous administration. First of all, President Obama and Secretary Jewell were not very supportive of resource development. In fact, a lot of times, they were content with just leaving it (the resource) in the ground. We are working in a whole different environment right now. It’s an environment that is conducive to overall economic benefit to the state of Alaska.