Legislature(2007 - 2008)

08/02/2008 02:16 PM FIN

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HOUSE BILL NO. 4001                                                                                                           
     An  Act  making  supplemental   appropriations,  capital                                                                   
     appropriations,     reappropriations,      and     other                                                                   
     appropriations;  making appropriations  to capitalize  a                                                                   
     fund; and providing for an effective date.                                                                                 
Co-Chair Chenault  spoke to the bill. He asked  if there were                                                                   
questions about the bill.                                                                                                       
7:43:52 PM                                                                                                                    
Co-Chair  Meyer reminded  department heads  that some  of the                                                                   
changes made will have a fiscal  impact, and all fiscal notes                                                                   
would be appreciated.                                                                                                           
7:44:14 PM                                                                                                                    
Representative  Hawker commented  that he  would like  to see                                                                   
per  capita information  in  the fiscal  notes.  Supplemental                                                                   
budgets should  not be used  for capital appropriations.  Why                                                                   
would  it ever  be appropriate  to supplement  budgets for  a                                                                   
capital appropriation?                                                                                                          
KAREN  REHFELD, DIRECTOR,  OFFICE OF  MANAGEMENT AND  BUDGET,                                                                   
discussion about  the reimbursement and identify  significant                                                                   
investments to get the gas line construction organized.                                                                         
7:46:51 PM                                                                                                                    
Representative  Hawker inquired  about any constitutional  or                                                                   
statutory prohibition  or authority  preventing the use  of a                                                                   
supplemental    appropriations    bill    for    a    capital                                                                   
appropriation.     Ms.   Rehfeld   was  not   aware  of   any                                                                   
constitutional prohibition.                                                                                                     
7:47:36 PM                                                                                                                    
Representative   Gara  requested   discussion  on   the  AGIA                                                                   
7:49:13 PM                                                                                                                    
FRANK  RICHARDS, DEPUTY  COMMISSIONER  OF  HIGHWAYS &  PUBLIC                                                                   
FACILITIES,   DEPARTMENT   OF   TRANSPORTATION   AND   PUBLIC                                                                   
FACILITIES, clarified the question ready to go to bid.                                                                          
Mr. Richards stated that there are three projects:                                                                              
   ·    Reconstruction of the Dalton Highway from milepost                                                                      
        175 to milepost 209.                                                                                                    
   ·    Reconstruction of the Dalton Highway from milepost 9                                                                    
        to milepost 11.                                                                                                         
   ·    Culvert replacement on the Dalton Highway from                                                                          
        milepost 260 to milepost 321.                                                                                           
These projects  are bid ready,  but because of  complications                                                                   
with the  STIP funds, they  were developed using  the Federal                                                                   
Highway Fund Design Efforts. The  construction funds have not                                                                   
yet been  available to  complete the  three projects.  If the                                                                   
appropriation  from the legislature  was made available,  the                                                                   
projects would  be advertised this fall and  winter, allowing                                                                   
construction to begin  in the spring of 2009.  The benefit of                                                                   
starting the projects  with an appropriation now  is that the                                                                   
money will be available to begin  construction, whereas if it                                                                   
is postponed  until the  next session  the construction  will                                                                   
not  begin until  late spring  2009  or possibly  as late  as                                                                   
August if there are protests in the bidding process.                                                                            
7:51:50 PM                                                                                                                    
Co-Chair Chenault replied that  if federal funds were applied                                                                   
for  and  then  replaced  with  state  funds,  the  available                                                                   
federal funds could be used for  other projects in the state.                                                                   
Would it cost  less to use state funds because  federal funds                                                                   
usually come with  strings attached? There have  been bicycle                                                                   
paths  constructed  on the  Dalton  that wouldn't  have  been                                                                   
built without  those federal  requirements. He asked  whether                                                                   
state  funding  could  be  used  without  the  extra  expense                                                                   
associated with federal requirements.                                                                                           
7:53:17 PM                                                                                                                    
Mr.  Richards   responded  that  the  projects   are  already                                                                   
designed and  that it is  standard to remain  consistent with                                                                   
the  design.  The  goal  with   the  projects  is  to  affect                                                                   
alignment, and replace culverts  on over 60 miles of highway.                                                                   
Bike  paths are  not part  of the plan,  as this  is a  rural                                                                   
Co-Chair Chenault  noted that the  Dalton Highway is  in poor                                                                   
shape.  He  asked  whether the  state  had  investigated  the                                                                   
possibility  of  mining  gravel  on federal  land  along  the                                                                   
Dalton Highway instead  of hauling it in from  other areas of                                                                   
the state.                                                                                                                      
Mr. Richards  answered that the Department  of Transportation                                                                   
(DOT) is  looking for hard  aggregate for the  Dalton Highway                                                                   
in  many areas,  but  a  shortage of  gravel  is  one of  the                                                                   
challenges they  are facing. A  portion of the  appropriation                                                                   
is to  define those  material sites, open  them up,  and then                                                                   
have  them ready  for the  construction  activities, both  in                                                                   
current  and   future  projects   associated  with   the  gas                                                                   
7:56:32 PM                                                                                                                    
Representative  Hawker  noted  that  the bike  paths  on  the                                                                   
Dalton Highway were placed on  the old roadbed at very little                                                                   
incremental cost when the road was upgraded.                                                                                    
Co-Chair  Chenault said  he had  driven more  miles on  those                                                                   
bike paths than anyone else in the room.                                                                                        
7:58:22 PM                                                                                                                    
Representative   Gara   wanted   to  avoid   building   roads                                                                   
specifically  for hauling  the  pipeline  materials that  may                                                                   
need  to  be rebuilt  in  order  to haul  materials  for  the                                                                   
pipeline.  Because of  the  speed at  which  roads in  Alaska                                                                   
deteriorate, it might not make  sense to construct roads over                                                                   
the next couple of years for that purpose.                                                                                      
Mr. Richards  explained that  most of  these roads  are being                                                                   
designed  to   come  on  line   at  the  time   the  pipeline                                                                   
construction should  begin. The  projects such as  the Dalton                                                                   
Highway upgrade  need to happen  soon because of  the current                                                                   
deterioration of  that highway. Grade and  alignment features                                                                   
that are appropriate  for hauling pipeline materials  will be                                                                   
incorporated  now.  It would  be  a  great challenge  to  the                                                                   
contracting  community  to  do  hundreds of  miles  of  major                                                                   
upgrades  right before  the  line  goes in.  The  goal is  to                                                                   
expand  these projects  out through the  six years  available                                                                   
until the construction of the gas pipeline.                                                                                     
8:02:19 PM                                                                                                                    
Representative  Gara asked what  specific projects  are being                                                                   
funded in this bill.                                                                                                            
Mr. Richards  repeated the specific Dalton  highway sections.                                                                   
The  construction would  begin  next year  if  the money  was                                                                   
Representative  Gara reiterated  that he  didn't think  those                                                                   
sections would  still be  in good  shape during the  pipeline                                                                   
Mr. Richards  responded that the  challenge of  modern design                                                                   
in the  Arctic is  the creation of  roads that can  withstand                                                                   
heavy traffic and permafrost issues.                                                                                            
8:04:46 PM                                                                                                                    
Representative  Thomas  asked  what  had  been  done  on  the                                                                   
Canadian  section   of  the  Alaska  Highway.   Would  it  be                                                                   
necessary to rebuild and realign that section of the road?                                                                      
Mr. Richards confirmed  that he has been in  discussions with                                                                   
the Canadians regarding this issue.  To upgrade the road, the                                                                   
administration  is  in  contact   with  those  in  the  Yukon                                                                   
Territory. He will visit Canada  next week and will have more                                                                   
information following the visit.                                                                                                
Representative Thomas asked about  the nature of the upgrades                                                                   
that  are  required.  How  many layers  of  asphalt  will  be                                                                   
Mr.  Richards  answered  that  there will  be  injections  of                                                                   
asphalt into the  existing roadbed and the strength  would be                                                                   
greatly increased.                                                                                                              
8:07:29 PM                                                                                                                    
Co-Chair  Chenault  noted  that  there  are  Canadian  mining                                                                   
companies  that  want  to  use   the  highway  to  Haines  to                                                                   
transport  their materials.  He wondered  whether the  mining                                                                   
companies would be willing to contribute to the upgrades.                                                                       
Mr. Richards said  that the companies are looking  to upgrade                                                                   
the  road or  build  a railroad  to  Haines  where there  are                                                                   
better docking facilities.                                                                                                      
Representative   Kelly   requested  clarification   on   this                                                                   
appropriation bill and what the immanent priorities were.                                                                       
Co-Chair Chenault  answered that the appropriation  bill is a                                                                   
wish list.  He wanted to find  out what needs are  out there.                                                                   
The remaining  issues can  be revisited  in the next  regular                                                                   
8:10:33 PM                                                                                                                    
Representative Gara asked Commissioner  Galvin what amount of                                                                   
money   was  appropriate   for   this   special  session   to                                                                   
communicate the intent of the  legislature for support of the                                                                   
TransCanada project.                                                                                                            
PAT GALVIN,  COMMISSIONER, DEPARTMENT  OF REVENUE,  responded                                                                   
that  it would  be most  appropriate for  the legislature  to                                                                   
allocate  the   entire  $500   million  to  fully   fund  the                                                                   
transportation  fund.  It is  imperative  to allocate  enough                                                                   
money  to get  the  project through  the  primary season  and                                                                   
avoid  any bottlenecks  that  would  slow the  project  down.                                                                   
There  would  be a  risk  of  delaying  the project  with  an                                                                   
insufficient amount of money.                                                                                                   
8:14:22 PM                                                                                                                    
Representative Gara  asked what the  500 million and  the 164                                                                   
million dollar amounts represented.                                                                                             
Commissioner Galvin  explained that the $164  million was the                                                                   
suggested amount  for reappropriation  from the $300  million                                                                   
set aside in the  AHFC fund along with the interest  that has                                                                   
been generated  by those  funds, which  is approximately  $36                                                                   
million. The remainder will come out of the general fund.                                                                       
Representative Gara  noted that he has heard  discussion that                                                                   
appropriating  small amounts  would  give  the legislature  a                                                                   
chance  to monitor  how DOT is  handling the  money. But  the                                                                   
legislature  doesn't really  have the  opportunity to  review                                                                   
receipts,  so that  approach  may not  make  sense. He  asked                                                                   
whether there  is any reason to  disburse the funds  in small                                                                   
Commissioner  Galvin   responded  that  the   opportunity  is                                                                   
already built into the Alaska  Gasoline Inducement Act (AGIA)                                                                   
statute. Any  money appropriated into the  reimbursement fund                                                                   
can be taken  out again by  the legislature. He does  not see                                                                   
any  additional  reporting issues  that  would  be raised  by                                                                   
fully funding the reimbursement.                                                                                                
Co-Chair  Chenault noted  that  no one  in  the building  was                                                                   
talking  about   slowing  the   project  down  with   smaller                                                                   
TONY  PALMER, VICE  PRESIDENT,  ALASKA BUSINESS  DEVELOPMENT,                                                                   
TRANSCANADA, introduced himself.                                                                                                
Representative  Gara asked about  reimbursement of  qualified                                                                   
costs  up to  50 percent  of their  expenditures through  the                                                                   
Open Season.                                                                                                                    
Mr. Palmer  confirmed that once  the license was  issued, the                                                                   
state would be obligated, subject  to TransCanada meeting, to                                                                   
all of  the conditions and  50 percent of expenditures.  They                                                                   
had that expectation.                                                                                                           
Representative Gara  asked what the company  would require to                                                                   
get  through  the  Open  Season,   noting  the  legislature's                                                                   
funding cycle.                                                                                                                  
Mr.  Palmer  answered  $54  million   worth  of  expenditures                                                                   
through June 2009 and $84 million total through July 2010.                                                                      
Representative Gara asked how much was necessary.                                                                               
Mr. Palmer responded half of the 84 million dollars.                                                                            
Representative  Gara  asked  how  much was  required  if  the                                                                   
legislature was to fully fund the commitment.                                                                                   
Mr. Palmer said that it would  be one half of the $84 million                                                                   
or $42 million.  Representative Gara asked  for TransCanada's                                                                   
request  of  the  legislature   at  this  point.  Mr.  Palmer                                                                   
responded that  he preferred that the legislature  fully fund                                                                   
the request.                                                                                                                    
8:22:50 PM                                                                                                                    
Commissioner Galvin  answered that  there was little  risk to                                                                   
the legislature  in appropriating the entire  amount into the                                                                   
fund, because  DOT would be  providing detailed  reports. The                                                                   
money  would  not  be  taken   out  of  the  control  of  the                                                                   
legislature if placed in the reimbursement fund.                                                                                
8:24:06 PM                                                                                                                    
Representative Crawford  asked what the earnings  would be on                                                                   
the money sitting in the reimbursement fund.                                                                                    
Commissioner Galvin answered that  the money would be handled                                                                   
like  the money  in the  general Fund,  though accounted  for                                                                   
separately. It would be the Commissioner's  discretion to try                                                                   
to maximize  the return by  investing more aggressively  than                                                                   
the General Fund.                                                                                                               
Co-Chair Chenault asked whether  the General Fund invests for                                                                   
short term return while the AGIA  reimbursement fund would be                                                                   
a long-term investment.                                                                                                         
Commissioner  Galvin responded  that  with the  money in  the                                                                   
General  Fund, it  is  available to  the  legislature at  any                                                                   
point.  If it  were  to  move into  the  AGIA fund  with  the                                                                   
purpose of reimbursing  TransCanada, then the  money could be                                                                   
invested  for  a slightly  longer  term, recognizing  that  a                                                                   
schedule   must   be   followed.   Understanding   that   the                                                                   
legislature could reappropriate  funds would probably prevent                                                                   
this type of investment.                                                                                                        
8:28:14 PM                                                                                                                    
Representative  Thomas asked  what  would happen  if the  500                                                                   
million  dollars   were  appropriated  and   the  investments                                                                   
incurred losses.                                                                                                                
Galvin  responded  that the  funds  would  not be  placed  in                                                                   
investment vehicles  that were subject  to losses due  to the                                                                   
nature of the requirements.                                                                                                     
8:29:47 PM                                                                                                                    
TOM  IRWIN, COMMISSIONER,  DEPARTMENT  OF NATURAL  RESOURCES,                                                                   
introduced  staff,  Marty  Rutherford,  Deputy  Commissioner,                                                                   
Department of  Natural Resources  and offered a  highlight of                                                                   
what they are doing. He reviewed  what the accomplishments of                                                                   
the  legislature  over the  past  year  by funding  the  AGIA                                                                   
program. They have learned a tremendous  amount. The issuance                                                                   
of  a  license  is  a  major  step  forward.  There  will  be                                                                   
questions that inevitably come  up in the four categories. He                                                                   
wants the state  to be prepared when the questions  do arise.                                                                   
He is looking at 6.2 million over  the next five years.  They                                                                   
plan to use a  contractor to help with the  process, and they                                                                   
will  be working  with a  multitude of  companies. The  funds                                                                   
will be  used to determine  the correct  paths to  follow. He                                                                   
described  other needs for  the money.  They will be  looking                                                                   
for more efficient methods as they go.                                                                                          
8:35:12 PM                                                                                                                    
CLARK   BISHOP,  COMMISSIONER,   DEPARTMENT   OF  LABOR   AND                                                                   
WORKFORCE   DEVELOPMENT,  stated   that  the  department   of                                                                   
education   and  the   department  of   labor  have   a  good                                                                   
relationship that has been fostered for two years.                                                                              
8:37:47 PM                                                                                                                    
LARRY LEDOUX COMMISSIONER, DEPARTMENT  OF EDUCATION AND EARLY                                                                   
DEVELOPMENT,  appreciated  the   opportunity  to  help  young                                                                   
people engage  in the  construction of  a pipeline.  He would                                                                   
like to  see an Alaska workforce  ready when the  pipeline is                                                                   
ready for construction.                                                                                                         
8:38:36 PM                                                                                                                    
Commissioner   Bishop  stated   that  each  funding   request                                                                   
coincides with the strategy outlined  in their training plan.                                                                   
Business, Industry,  and Education  have all worked  together                                                                   
to  develop  the  training plan.  Each  funding  request  was                                                                   
identified in  the strategies  by timeline. Each  request has                                                                   
been vetted by the best in the state.                                                                                           
Representative Gara  wanted as much job training  as possible                                                                   
for  Alaskans  to limit  the  amount  of imported  labor.  He                                                                   
thought this  was the best way  to limit dislocation.  If the                                                                   
training happens  too early,  the students  may not  work for                                                                   
the pipeline,  but instead take  their training to  other job                                                                   
opportunities.  If there is  inadequate training,  then labor                                                                   
will need to be imported.                                                                                                       
Commissioner Bishop made clear  that one guiding principle of                                                                   
the presented document was the  industry recommendations that                                                                   
the  focus is  on  current workforce  shortages.  He did  not                                                                   
think that  overtraining would  be a problem.  Representative                                                                   
Gara asked if there  was a way to ensure that  people trained                                                                   
would  be available  to work  on  the pipeline.  Commissioner                                                                   
Bishop discussed  the variable  occupations mentioned  in the                                                                   
training document,  stating that  many are transferable  from                                                                   
one industry to the next.                                                                                                       
8:44:06 PM                                                                                                                    
Vice-Chair  Stoltze asked  for  comments  from Department  of                                                                   
Education and Early Development  regarding the advertising of                                                                   
technical training versus other  methods of higher education.                                                                   
Commissioner  Ledoux  observed   that  there  will  be  plans                                                                   
introduced soon.  Technical education  helps build  vision in                                                                   
young  people.   The  real  challenge  will   be  to  provide                                                                   
experiences  to young  people  throughout Alaska.  Vocational                                                                   
programs   throughout    the   state   have    been   reduced                                                                   
substantially.  The competitive  nature of  this program  can                                                                   
create innovative partnerships.                                                                                                 
HB 4001 was HELD in Committee for further consideration.                                                                        
8:49:38 PM                                                                                                                    

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