03/10/1993 01:12 PM House FIN

  HOUSE BILL NO. 116                                                           
                                                                               
       "An Act directing the commissioner of natural resources                 
       to accept,  under certain  circumstances, the  contract                 
       price agreed to between a lessee  of federal land and a                 
       gas or  electric utility  as the  value of  the federal                 
       government's royalty share from  natural gas production                 
       when royalty is  payable to the state  under applicable                 
       federal law; and providing for an effective date."                      
                                                                               
  House Bill  116 was  in a  subcommittee consisting  of Chair                 
  Representative Parnell with members Representatives MacLean,                 
  Hanley and Brown.                                                            
                                                                               
  Representative  Parnell  provided  members with  a  proposed                 
  Committee Substitute of HB 116, Work Draft 8-LS0442\O, dated                 
                                                                               
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  3/10/93  (Attachment 5).  He  noted that two amendments were                 
  adopted.                                                                     
                                                                               
  Representative Hanley MOVED to adopt Work Draft  8-LS0442\O,                 
  dated 3/10/93.  There being NO OBJECTION, it was so ordered.                 
                                                                               
  Representative  Brown  discussed provisions  adopted  by the                 
  Subcommittee on HB  116.  She  referred to page  2, line  6.                 
  She explained that the provision will define which utilities                 
  will be involved.   Only utilities that are in  the business                 
  of providing service  to the general public.   The provision                 
  includes that the "utility with which the lessee has entered                 
  into the contract is not an  affiliated interest, as that is                 
  defined  in   AS  42,05.990,  with  the  lessee  or  with  a                 
  subsequent  purchaser  of  more  than   10  percent  of  the                 
  utility's gas or  electricity..."  She emphasized  that CSHB
 (FIN) will require that the arms length provision is met                 
  before the State  is locked into  a contract price that  may                 
  not represent the value of the resource.                                     
                                                                               
  Representative Hanley discussed  Section 3.   The  amendment                 
  clarifies that the State is able to collect excess royalties                 
  based on an increased federal assessment.                                    
                                                                               
  Representative Hanley MOVED to report CSHB  116 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying  fiscal  note.     Representative   Grussendorf                 
  OBJECTED.  He expressed concern  that negotiations regarding                 
  the state/federal  90/10  distribution  of  future  resource                 
  royalties will be adversely affected.                                        
                                                                               
  Representative  Brown  shared  Representative  Grussendorf's                 
  concerns.    She  stated  that it  "generally  sets  a  poor                 
  precedent for the Legislature to become involved in contract                 
  interpretations  that  affect  the  royalty  value."     She                 
  asserted that  a selective  benefit is being  provided to  a                 
  few.  She  noted the difficulty in  retroactively collecting                 
  from individuals  that may not  have been involved  when the                 
  original  benefits were received.   She   cautioned that the                 
  North Slope interests may be affected.   She stressed that a                 
  $21 million dollar  benefit is being  giving to a subset  of                 
  the State's  citizens.   She wondered  how many  hundreds of                 
  millions of dollars  may be  "inadvertently passed down  the                 
  pipe" by the adoption of CSHB 116 (FIN).                                     
                                                                               
  Co-Chair MacLean asked for further clarification of  Section                 
  3.    Representative Hanley  explained  that if  the federal                 
  government, on its  own, negotiates a higher  contract price                 
  that the State can accept the  State's portion of the higher                 
  amount.                                                                      
                                                                               
  Representative Hanley observed that CSHB  116 (FIN) does not                 
                                                                               
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  change the fiscal note.                                                      
                                                                               
  Representative Therriault pointed out  that the intertie was                 
  not  active  during the  time  disputed.   Residents  of the                 
  Fairbanks Northstar Borough would be asked to pay 25 percent                 
  although they did not receive electricity.                                   
                                                                               
  Representative Brown  stated that  her husband  is a  public                 
  utilities Commissioner and she is an EnStar Gas consumer.                    
  Co-Chair Larson noted that he is an EnStar Gas consumer.                     
  Representative Navarre noted that he  is an EnStar and Homer                 
  Electric Association consumer.  Representative Martin stated                 
  that he is a consumer of EnStar Gas and Chugach Electric.                    
  Representative Parnell stated that he is a consumer of                       
  Chugach Electric.                                                            
                                                                               
  Co-Chair Larson reiterated  the motion MOVED to  report CSHB
 (FIN)  out of Committee  with individual recommendations                 
  and  with  the accompanying  fiscal  note.   There  being NO                 
  OBJECTION, it was so ordered.                                                
                                                                               
  CSHB 116  (FIN) was  reported out  of Committee  with a  "do                 
  pass" recommendation  and with  a zero  fiscal  note by  the                 
  Department of Natural Resources.