The debate over the financial future of Alaska turned acrimonious in a very public way on April 9.
Sen. Hollis French (D-Anchorage), a member of the Senate Resources Committee, had sent a letter the preceding Tuesday to the committee’s chair, Sen. Cathy Giessel (R-Anchorage), requesting she swear in those scheduled to testify at Wednesday’s meeting regarding oil tax cuts passed under 2013’s Senate Bill 21 (SB21). Noting the gravity of the issue and the fact that “Alaska has struggled since statehood to set a fair oil tax,” French cited Sec. 24.25.060 of the Alaska Statutes granting Giessel that authority:
The president of the senate and speaker of the house of representatives and the chairman of every committee of either body may administer an oath to a witness appearing before the respective bodies. A person who wilfully [sic] swears or affirms falsely concerning any matter material to the subject under investigation or inquiry is guilty of perjury and upon conviction is punishable by imprisonment for not less than one year nor more than five years.
At the beginning of Wednesday’s Resources Committee meeting, Giessel acknowledged receipt of the letter but declined to honor the request, describing it as “unprecedented,” “inappropriate,” and “unprofessional.” Giessel added that it would be “unfair” to those testifying. French requested an opportunity to rebut, but as committee chair, Giessel ruled the issue not subject to debate and cut off French’s microphone. French’s brief comments, stricken from the record at Giessel’s instruction, were heard only by those in the committee chamber.
French pursued the opportunity to rebut, offering his take Wednesday evening on the Senate floor during Special Orders. Speaking on the subject of “unprofessional,” French noted that the statute granting committee chairs the authority to swear in witnesses was established in 1949 by the territorial legislature and has never been amended. “It’s, I think, hard to make a case that you would be somehow acting unprofessionally by conducting yourself within the confines and the boundaries of the Alaska State Statutes,” said French. “But more to the point, what does it say about us when we think that it’s unprofessional to use these statutes in the furtherance of our duties, of our obligations as Alaska state legislators?”
An ADN article about the grounding of the Kulluk oil rig helped French make his point about the effect of testimony under oath. The article he referenced reads in part:
Before the grounding, a Shell spokesman, Curtis Smith, told a reporter in Dutch Harbor that the tax implications “influenced the timing of our departure.” But after the Kulluk ended up stuck on the rocky shore near Kodiak off Sitkalidak Island, both Smith and a Shell executive, Sean Churchfield, denied that the prospect of a hefty tax bill caused the vessels to leave when they did. Churchfield later admitted under oath to the Coast Guard investigation panel that taxes were a factor. (emphasis added)
French expressed frustration that he had not been able to question Bill Hardham, Alaska Project Manager of Spanish oil company Repsol, under oath during the afternoon’s committee hearing. French had asked Hardham which of Repsol’s new post-SB 21 projects would not have been economically viable under Alaska’s Clear and Equitable Share (ACES), the previous oil tax regime. Hardham dodged the question, French felt, but would not have been able to under oath.
French referenced the failure of Exxon Mobil to develop its lease at Point Thompson for 30 years until compelled through the courts. Alaska’s leases to oil companies require that projects on that land be developed if the companies can generate a profit from it. His concluding example of why Alaska legislators should utilize the oath when interacting with oil companies was the famous Alaska v Amerada Hess case. According to a summary of the case from the state Office of Management and Budget, “the state filed a lawsuit accusing oil companies of undervaluing their oil and gas and thus denying the state the full value of its 12.5% royalty share.” After 18 years of legal battles, the state recouped nearly $1 billion in settlements from the oil companies, but not before a judge remonstrated the state for “inexcusable trustfulness.”
There is strong evidence to suggest false claims to the legislature regarding oil are not exclusive to French’s Senate floor examples — or to the oil companies themselves. Former Department of Natural Resources Commissioner Dan Sullivan, now campaigning for the U.S. Senate seat currently occupied by Mark Begich, testified before the Senate Finance Committee on February 28, 2013, that reduced oil taxes in the United Kingdom had led to an increase in oil production. It now appears there is no correlation between the U.K. tax cuts and production, however, as industry forecasters predicted declines in 2014. Senate Democrats noted that Gov. Sean Parnell touted increased production as a selling point for SB 21. On January 28, 2014, the Department of Revenue admitted to the House Finance Committee that the department expects less production in eight years under SB 21 than there would be under ACES.
On the Senate floor Wednesday, in response to French and also under Special Orders, Giessel spoke on the topic of “Unprecedented and Unprofessional.” She used the term “unprecedented” an additional three times to describe sworn testimony in committee. However, Giessel noted an oath had previously been administered in committee, most recently in 1997, and acknowledged other instances in a subsequent press release. “We are to conduct ourselves with some decorum,” said Giessel, shortly after herself violating the decorum of the Senate by addressing French by name. She was promptly corrected by Majority Leader John Coghill (R-North Pole) and Senate President Charlie Huggins (R-Wasilla). Giessel continued, “I think that if we distrust the citizens who are coming, then we need to execute a different process.”
Giessel’s perspective — that those who come before committees to testify are simply innocent citizens providing information — seems to be universally shared by state legislatures. Statutory language regarding committee chair authority differs from state to state. Some have broad language comparable to Alaska’s, but others refer specifically to investigative hearings allowing sworn testimony of witnesses under subpoena. While it could be argued that all committee meetings constitute “investigative hearings,” the theme, as Giessel suggests, is that sworn testimony before state committee is atypical.
One recent high-profile example is Bill Baroni’s testimony on November 25, 2013, before the New Jersey Assembly’s Transportation Committee. Baroni, former Deputy Executive Director of the Port Authority of New York and New Jersey, was called to testify about the George Washington Bridge lane closures, which he claimed were part of a traffic study. Baroni, who resigned less than a month later, was not administered an oath. Documents and text messages later retrieved under subpoena indicated that Baroni’s story was fabricated.
Unfortunately, like New Jersey, Alaska has been the victim of false testimony unrelated to oil. Heavily debated this session on the House side have been the defined contribution Public Employee Retirement System (PERS) and Teachers’ Retirement System (TERS or TRS). As reported in the Alaska Dispatch, a large unfunded liability was discovered in the pensions, prompting the legislature to switch newly hired public employees to a 401(k)-style defined contribution retirement package in 2006. But the liability was exaggerated by the actuarial consulting firm Mercer Inc.
Pat Forgey writes, “When Mercer discovered the errors, the state later said, it hid them and knowingly provided bad data the following year as well. State officials said the loss to the state amounted to $2.5 billion of the unfunded liability.”
Mercer later settled with the state of Alaska for $500 million, but nearly twenty percent of that went toward legal fees and expenses.
In another recent example reported by Richard Mauer:
Dr. David Heimbach, the retired burn center director at Harborview Medical Center in Seattle, testified at least three times in Juneau between 2010 and 2012 against bills to restrict chemicals suspected or proven to be hazardous, especially to children. Washington’s medical board said Heimbach invented tragic stories of children burn victims in his testimony in Alaska and other states, and portrayed himself as a neutral physician when in fact he was on the payroll of the manufacturers of chemical flame retardants.
Bills restricting chemical flame retardants failed to make it out of committee in the previous three legislatures, at least partly based on Heimbach’s testimony. Unlike Amerada Hess and Mercer, the cost to the state due to Heimbach is indeterminate and unrecoverable.
According to the National Conference of State Legislatures, Alaska was one of 18 states, plus the District of Columbia, that had statutes making a false statement or false testimony by a lobbyist to the legislature unlawful as of March 2013. Alaska’s statute reads, “A lobbyist may not… intentionally deceive or attempt to deceive any public official with regard to any material fact pertinent to pending or proposed legislative or administrative action.”
Twenty other states only outlaw false reporting by lobbyists.
It is unclear how easy it would have been to enforce Alaska’s lobbyist statute for some of the aforementioned cases. What is clear is that Senator French made a compelling argument that a need exists for the Alaska legislature to take some action. It has been lied to on multiple occasions with serious economic consequences for the state. Perhaps the possibility of jail time for perjury would be a motivator.
Cathy Giessel views those who testify in committee merely as citizens with information. At times, that may be. However, while the analysts at Mercer and Heimbach may be citizens of somewhere, it is not Alaska. They did not have a vested interested in the Alaska community and its well-being. They were alleged expert witnesses, not just citizens. Alaska citizens have a completely separate opportunity to speak to legislative committees during public testimony.
Though some may be Alaska residents, oil company executives are primarily charged with generating profit. By contrast, the Alaska Constitution mandates that the legislature “provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people.” French successfully made his point that the legislature needs to utilize all the tools at its disposal to meet that constitutional mandate.
Richard Mauer relayed an exchange following the adjournment of the Senate on April 9th:
“Doesn’t Congress swear in witnesses?” a reporter asked.
“Yes, but we’re not Congress, aren’t we?” Giessel said.
“This is redneck Alaska,” Huggins said.
It is hard to know if Huggins was being genuinely proud or cynical. It is up to Alaskan voters whether they want to maintain Huggins’ description or seek a higher stature.