Legislature(1993 - 1994)
03/10/1993 01:12 PM FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
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 7 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 116 (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 8 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 116 (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.