04/28/1998 06:20 PM House FIN

HOUSE BILL NO. 488                                                             
                                                                               
"An Act relating to the Alaska Royalty Oil and Gas                             
Development Advisory Board."                                                   
                                                                               
REPRESENTATIVE JERRY SANDERS stated that fuel prices have a                    
definite retardant effect on the economic development and                      
quality of living in Alaska.                                                   
                                                                               
Alaska refiners strongly influence regional prices through                     
company-owned retail outlets and distributors.  Refiners                       
are attempting to replace independent retail outlets and                       
distributors with company operated outlets to solidify                         
their control over prices.  Neither capacity nor                               
availability of supply is a determining factor in the cost                     
of fuel in Alaska.  Representative Sanders stated that                         
Alaskans would not bear the high prices if they had an                         
alternative.                                                                   
                                                                               
Representative Sanders advised that the Alaska Royalty Oil                     
and Gas Development Advisory Board would be charged to                         
protect the public under the Alaska Statutes from high fuel                    
prices.                                                                        
                                                                               
Representative Sanders continued, HB 488 would change the                      
Board's makeup by increasing the public membership.  The                       
objectives of the bill are:                                                    
                                                                               
? Replace the Commissioner of Revenue with the                                 
Commissioner of the Department of Community and                                
Regional Affairs (DCRA);                                                       
? Raise the number of voting members from five to                              
seven; and                                                                     
? Change the number of members with petroleum                                  
related backgrounds from three to one.                                         
Currently, all public members are required to                                  
have a petroleum-related background, which limits                              
the number of people who can serve on the board.                               
                                                                               
CAROL CARROLL, DIRECTOR, DIVISION OF ADMINISTRATIVE                            
SERVICES, DEPARTMENT OF NATURAL RESOURCES, noted that the                      
Department is neutral on the legislation.  There is a                          
concern with the replacement of the Commissioner of the                        
Department of Revenue by the Commissioner of the Department                    
of Community and Regional Affairs.  The Commissioner of                        
Revenue has a lot of knowledge on how these revenues impact                    
the State.  She noted that the Administration would prefer                     
that the Commissioner of Revenue be on the Board in                            
addition to the Commissioner of DCRA.                                          
                                                                               
Co-Chair Therriault recommended deleting language on Page                      
2, Line 5, "transportation, sale" which would address the                      
legislation's intent.  Representative Sanders stated that                      
change would be "okay".  Co-Chair Therriault MOVED that                        
language change as Amendment #1.                                               
                                                                               
Co-Chair Hanley suggested that the language stay as                            
currently written, in order to avoid a conflict.  He                           
pointed out that if the intent was not to include those                        
people with a vested interest in the fuel business on the                      
board, the language should remain as originally written.                       
Co-Chair Therriault WITHDREW Amendment #1.  There being NO                     
OBJECTION, it was withdrawn.                                                   
                                                                               
Representative G. Davis asked how the Board would protect                      
the people of the State from high oil prices.  Ms. Carroll                     
explained that when the Department is in the process of                        
negotiating with enterprises such as MAPCO, they take into                     
consideration the price, although, do not make any                             
determinations on the retail price of gas.  It is one of                       
the criteria used in selling royalty oil.  There are                           
multiple lists of criteria which the State considers, one                      
of which is price.  Representative Sanders added that oil                      
refiners must consider price or supplied benefits to the                       
citizens.  He concluded that HB 488 would create a new body                    
not directly involved in the industry to consider these                        
concerns.                                                                      
                                                                               
Representative G. Davis spoke in favor of keeping the                          
Commissioner of the Department of Revenue involved in the                      
process.  Representative Sanders reflected, from testimony                     
received from the Commissioner of Revenue, he has little to                    
do with the contract.  Representative Sanders noted that                       
his staff was responsible for all decisions.  He commented                     
that he was not against the Commissioner of Revenue being                      
on the Committee.  Co-Chair Therriault pointed out that the                    
Commissioner would most likely be involved in negotiations                     
on the actual sale.  He remarked that making this change                       
would not exclude the Commissioner of Revenue from being                       
involved in the drafting of proposed contracts.                                
                                                                               
Representative Kohring observed that there are                                 
inappropriate circumstances being placed on the consumer,                      
noting that there is a monopoly on the market with only two                    
refiners in the State.  He cautioned not to restrict the                       
industry in the State, but instead, to encourage a more                        
competitive environment.                                                       
                                                                               
Representative Foster MOVED to report HB 488 out of                            
Committee with individual recommendations and with the                         
accompanying fiscal note.  There being NO OBJECTION, it was                    
so ordered.                                                                    
                                                                               
HB 488 was reported out of Committee with a "do pass"                          
recommendation and with a fiscal note by the Department of                     
Natural Resources.