Senate Passes FY15 Capital Budget

Author: Bert Stedman

Today, the Senate passed its version of the FY15 capital budget bill.  The $2.1 billion budget includes $1.1 billion in federal funding and $1 billion in state funding.  In spite of the limited funds available compared to past years, Senate District Q received a little over $76.7 million in appropriations.  Below is a list of all the projects in my district that are in the FY15 capital budget.  This does not include other region wide capital funding such as Southeast government agencies and the marine highway system. The bill (Senate Bill 119) now goes to the House of Representatives where it will be referred to the House Finance Committee for further review and additional public hearings.

Community              Project Title                                                                             Funding Amount

                                                                                                                              Total     $76,697,591

April 12th, 2014  |  Posted in News & Comment  |  No Comments »

Senate Passes Senator Stedman’s Bill Regarding Criminal Trespass

Author: Bert Stedman

Today, the Senate passed Senate Bill 201, an act regarding criminal trespass by a vote of 17 yeas and 2 nays.  I introduced this bill earlier this session to amend the criminal trespass statutes as it relates to the posting of “no trespass” signs. Current state law gives a person who enters or remains on unimproved or apparently unused land the privilege to do so unless notice against trespass is given. There are two ways notice against trespass can be given: 1) if the landowner or an authorized representative personally communicates to the person that trespass is prohibited; 2) or if “no trespass” signs are posted.  The law also includes specific requirements for posting “no trespass” signs such as:

It must be at least 144 square inches in size;

It must contain the name and address of the landlord or an authorized representative;

It must be posted at every roadway or access point to the property;

In the case of an island, it must be posted on the perimeter of each cardinal point of the island;

Furthermore, the sign must state what specific activities are prohibited such as “no hunting,” “no fishing,” or “no digging.”

Senate Bill 201 would remove from statute the excessive requirements for posting numerous no trespassing signs at every access point.  If we don’t do this, intentional trespassers will continue to use this section of statute as a legal defense to enter and remain on private land.  All they have to do is find an access point that isn’t posted.  Many Alaskans own private property in remote locations with severe weather.  No trespassing signs can be blown down, removed by vandals, or covered by snow.  The lack of visible signs at every access point to your property should not be a legitimate excuse for trespassers.  It should be the responsibility of the individual to find out beforehand if the property they want to use is public or private.

This won’t result in a flood of criminal trespass charges against the average citizen who is out for a hike and wanders across someone’s private land.  In the 1987 case of Johnson vs. State, the court established a prerequisite for conviction for the offense of criminal trespass.  The state is obligated to prove beyond a reasonable doubt that the defendant knowingly remained on the premises after personally being ordered to leave.  Finally, this won’t change the legal right of a person to use private property in an emergency.  AS 11.46.340 provides an affirmative defense against prosecution if someone enters and uses private property in the case of immediate and dire need.

Senate Bill 201 now goes to the House of Representatives for their consideration in the final days of the legislative session.

April 11th, 2014  |  Posted in News & Comment  |  No Comments »

Senator Stedman Votes No on Gasline Bill

Author: Bert Stedman

Yesterday I voted against Senate Bill 138, the Governor’s proposed Liquefied Natural Gas Pipeline Project.  My vote against SB 138 was not a vote against a natural gas pipeline.  Like most Alaskans, I support the construction of a pipeline to get our natural gas to market.  My vote was a statement against the fiscal structure in the bill and the misalignment for the state.  I’m encouraged that we’re closer to the reality of a gas pipeline than we’ve ever been because of the alignment of interests between ExxonMobil, BP and ConocoPhillips.  But my objection comes from the fact that the state’s interests as a sovereign are not in alignment with the inclusion of TransCanada owning the state’s share of the pipeline and gas treatment plant.

Beyond any doubt, this gasline will be the largest financial commitment in the history of the state.  There are many troubling risks to the state from this megaproject including: low gas prices due to a potential oversupply from competing international projects under development; the state’s lack of expertise and ability to market its share of the gas received in lieu of royalties and taxes; and handing over the state’s ownership share of the pipeline and gas treatment plant to TransCanada.  The last point is what gives me the most indigestion.

Make no mistake; the producing companies (ExxonMobil, BP, and ConocoPhillips) and not the state are in control of moving this pipeline project forward.  TransCanada is a pipeline company but who actually builds this pipeline will be decided by ExxonMobil with concurrence from BP and ConocoPhillips.  TransCanada is simply acting as our lender to cover the upfront project costs at a guaranteed rate of return through construction.  The deal looks like this: TransCanada will hold an ownership interest in the gas treatment plant and the pipeline equal to the state’s estimated 25% share of the gas; the state would have a one-time option to buy back up to a 40% of its ownership interest from TransCanada so long as TransCanada’s share doesn’t fall below 14% leaving the state with only an 11% ownership interest. Furthermore, regardless of whether the state exercises its option to buy an ownership interest from TransCanada, we are obligated to pay TransCanada’s development costs plus an interest rate of 7.1% if the project is not sanctioned.

The state entered into an agreement like this with TransCanada once before when the legislature passed the Alaska Gasline Inducement Act (AGIA) in 2007.  That law guaranteed the state would reimburse TransCanada up to $500 million for costs incurred related to the development of a large diameter gas pipeline through Canada.  Today, most legislators would agree that tying ourselves to TransCanada through AGIA was a mistake.  I’m concerned that we didn’t learn our lesson and we’re making the same mistake again but instead of a $500 million mistake, this could turn out to be a multi-billion dollar mistake.

I’m uncomfortable supporting this proposed commercial arrangement that doesn’t align the state’s interests with ExxonMobil, BP and ConocoPhillips.  These companies will see to it that this project is profitable for them or they won’t proceed.  Similarly, TransCanada is guaranteed to make a handsome profit.  Unfortunately it looks to me like the state of Alaska as a sovereign and the owner of the oil and gas resource is assuming the most exposure and risk.  Making a bad situation worse, reduced revenue from oil taxes will result in year after year deficit spending to balance our budget, depleting our savings accounts around the same time pipeline construction will begin.

One of our own legislative consultants hired by the Legislative Budget and Audit Committee warned, “In its totality, however, the proposal will result in a radical departure from the State’s historical position and role as a Sovereign, as a Royalty Owner, as a Taxation Authority and as a Regulator which raises a number of issues and presents substantial risks.”

A sole source, non-competitive bid resulting in a multi-generational contract with TransCanada is not in the state’s best interest.  In my opinion, the Legislature should put SB 138 on the shelf and work on it over the interim.  We have the time and the obligation to do it right.

March 19th, 2014  |  Posted in News & Comment  |  No Comments »

Senator Stedman Introduces Three New Bills

Author: Bert Stedman

Since my last newsletter, I have introduced three new bills in the legislature.

On February 5^th, I introduced Senate Bill 159 regarding the AirCare membership program. Since January 2009, Airlift Northwest, the Seattle based provider of lifesaving air medical transport services, has offered the popular AirCare membership program to residents of Southeast Alaska. Approximately 2,000 Southeast households are enrolled in the program. Air medical transportation is expensive and insurance may not cover all the costs.  The purpose of the AirCare program is to cover all out-of-pocket expenses such as deductibles and coinsurance amounts that may not be covered by the primary payer.  As an AirCare member, only your insurance company receives a bill.  Airlift Northwest is secondary to all payers and works directly with your insurance company for claims processing.  The AirCare program directly helps fund Airlift Northwest so they can transport critically ill or injured patients to hospitals with levels of care not locally available.

Since its inception, the AirCare program was offered to Alaskans under a regulatory exemption it received from the Alaska Division of Insurance.   However, after an organizational restructuring, the Division of Insurance deemed the program no longer exempt from insurance regulation as stated in AS 21.87.010 under which Airlift Northwest was providing the program. As a result, the Division of Insurance ordered Airlift Northwest to cease enrolling new members.  Airlift Northwest is allowed to honor their existing memberships but is not allowed to renew expired memberships.  If Airlift Northwest wants to continue offering the AirCare program, then the program must either be fully insured by a health insurer authorized by Alaska or Airlift Northwest must obtain a certificate of authority pursuant to AS 21.09 to transact health insurance in Alaska.  Since Airlift Northwest operates under the umbrella of University of Washington’s medical system, becoming a licensed insurer in Alaska is not an option for them.

Senate Bill 159 will exempt air ambulance services from the state’s insurance code, thereby allowing Airlift Northwest to continue offering the AirCare program to Alaskans.  The bill passed the Senate unanimously on February 28^th and is now in the House Labor and Commerce Committee where it received its first hearing on March 17^th.

The second bill I introduced is Senate Bill 192 which proposes to amend deficiencies in Alaska’s petroleum production tax.  The current tax structure, created by the passage of Senate Bill 21 last year, sets a base tax rate of 35% based on a net profit system which is calculated after deducting the cost of royalties, transportation, operating and capital expenses.  The producers also receive a tax credit between $1 and $8 paid for each barrel of oil produced.   The per barrel tax credit is not contingent on any performance measures.  The producers are not required to do anything to receive this credit except pump oil from their existing wells. There is no requirement for expansion, exploration, increased production or capital investment in Alaska.  The state is obligated to pay this credit to the producers on a sliding scale which increases as the price of oil decreases.  For example, if the price of oil is between $140 – $150, the producers receive a tax credit of $1 per barrel.  But if the price of oil falls to under $80, the producers receive a tax credit of $8 per barrel.

In FY15, the impact to the state treasury as a result of this per barrel tax credit is estimated to be almost one billion dollars.  Senate Bill 192 would reduce that per barrel credit by half so it would start at 50 cents per barrel at high oil prices and cap out at $4 per barrel at low oil prices.  This would return almost a half a billion dollars to the state treasury in FY15.  Under the current tax regime, the compensation for the value of Alaska’s hydrocarbons is too low compared to similar world class hydrocarbon basins around the world.

Senate Bill 192 would also raise the minimum production tax from 4% of the gross value at the point of production to 15%.  As the price of oil goes down and the credits go up, we need a higher minimum tax to protect the state’s share of its resource wealth from our legacy fields on the North Slope.

Senate Bill 192 would establish a more reasonable, balanced and sustainable petroleum production tax for Alaskans.  The bill was referred to the Senate Resources Committee where I have requested it be scheduled for a hearing.

Finally, the third bill I recently introduced is Senate Bill 201 regarding criminal trespass.  As a landowner, you have the right to regulate activities on your property.  However, in Alaska, current state law gives a person the privilege to enter and remain on unimproved or apparently unused land that isn’t posted with “no trespassing” signs.  Furthermore, a sign must be placed at each roadway or access point onto the property.  Many Alaskans own private property in remote locations with inclement weather.  No trespassing signs can be blown down, removed by vandals, or covered by snow.  The lack of visible signage should not absolve trespassers of guilt.

Senate Bill 201 would repeal Alaska Statute 11.46.350(b) and (c), thereby removing the requirement that private property be posted in order for criminal trespass laws to be enforced.  It should be the responsibility of the individual to know who owns the property that they want to access.  Today’s technology allows many options for individuals to identify public and private property boundaries such as topo maps that can be downloaded on a smart phone or GPS.  In addition, the public can access maps showing property boundaries from the state Department of Natural Resources, the U.S. Geological Survey, as well as municipal plats available at city hall.

March 19th, 2014  |  Posted in News & Comment  |  No Comments »