Legislature(2017 - 2018)ADAMS ROOM 519

02/22/2018 01:30 PM FINANCE

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Audio Topic
01:32:10 PM Start
01:34:12 PM Joint Presentation with the House Resources Committee
03:08:48 PM HB321
04:14:48 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Joint Presentation with House RES: TELECONFERENCED
China, LNG, & the AK Gas Pipeline
by Dr. Wenram Jiang, PhD
+= HB 286 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Scheduled but Not Heard
Subcommittee Reports & Amendments:
- Judiciary
<Above Item Removed from Agenda>
- Office of the Governor
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 321 APPROP: SUPPLEMENTAL OP.; FUND; AMENDING TELECONFERENCED
Moved CSHB 321(FIN) Out of Committee
-- Public Testimony --
+= HB 285 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Scheduled but Not Heard
                       JOINT MEETING                                                                                            
            HOUSE RESOURCES STANDING COMMITTEE                                                                                  
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 22, 2018                                                                                          
                         1:32 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:32:10 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Seaton called the House Finance Committee meeting                                                                      
to order at 1:32 p.m.                                                                                                           
                                                                                                                                
HOUSE FINANCE COMMITTEE MEMBERS PRESENT                                                                                       
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Paul Seaton, Co-Chair                                                                                            
Representative Les Gara, Vice-Chair                                                                                             
Representative Jason Grenn                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Mark Neuman - Alternate                                                                                          
Representative Dan Ortiz                                                                                                        
Representative Lance Pruitt                                                                                                     
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
                                                                                                                                
HOUSE FINANCE COMMITTEE MEMBERS ABSENT                                                                                        
                                                                                                                                
Representative Cathy Tilton                                                                                                     
                                                                                                                                
HOUSE RESOURCES COMMITTEE MEMBERS PRESENT                                                                                     
                                                                                                                                
Representative Andy Josephson                                                                                                   
Representative Garan Tarr                                                                                                       
Representative John Lincoln                                                                                                     
Representative Harriet Drummond                                                                                                 
Representative Justin Parish                                                                                                    
Representative Chris Birch                                                                                                      
Representative DeLena Johnson                                                                                                   
Representative George Rauscher                                                                                                  
Representative David Talerico                                                                                                   
                                                                                                                                
HOUSE RESOURCES COMMITTEE MEMBERS ABSENT                                                                                      
                                                                                                                                
none                                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator   Bert  Stedman,   Legislative   Budget  and   Audit                                                                    
Committee   Chair;  Dr.   Wenran  Jiang,   PHD,  Consultant,                                                                    
Legislative  Budget and  Audit;  April Wilkerson,  Director,                                                                    
Division   of   Administrative   Services,   Department   of                                                                    
Corrections;  David  Teal,   Director,  Legislative  Finance                                                                    
Division;  Joan Brown,  Staff,  Representative Paul  Seaton;                                                                    
Senator Click  Bishop; Representative Bryce  Edgmon; Senator                                                                    
Tom Begich.                                                                                                                     
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Laura  Brooks,  Division   Operations  Manager,  Health  and                                                                    
Rehabilitation Services, Department of Corrections.                                                                             
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 285    APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          HB 285 was SCHEDULED but not HEARD.                                                                                   
                                                                                                                                
HB 286    APPOP: OPERATING BUDGET/LOANS/FUNDS                                                                                   
                                                                                                                                
          HB 286 was SCHEDULED but not HEARD.                                                                                   
                                                                                                                                
HB 321    APPROP: SUPPLEMENTAL OP.; FUND; AMENDING                                                                              
                                                                                                                                
          CSHB 321(FIN)  was REPORTED out of  committee with                                                                    
          four   "do   pass"  recommendations,   three   "no                                                                    
          recommendation" recommendations,  and four "amend"                                                                    
          recommendations.                                                                                                      
                                                                                                                                
JOINT PRESENTATION WITH THE HOUSE RESOURCES COMMITTEE                                                                           
PRESENTATION: "CHINA,  LNG, AND THE ALASKA  GAS PIPELINE" BY                                                                    
DR. WENRAN JIANG, PH.D.                                                                                                         
                                                                                                                                
Co-Chair  Seaton  reviewed  the   agenda  for  the  day.  He                                                                    
indicated that today's meeting was  a joint meeting with the                                                                    
House Resources Committee.                                                                                                      
                                                                                                                                
Representative  Tarr  introduced   the  members  from  House                                                                    
Resources.                                                                                                                      
                                                                                                                                
^JOINT PRESENTATION WITH THE HOUSE RESOURCES COMMITTEE                                                                        
PRESENTATION: "CHINA,  LNG, AND THE ALASKA  GAS PIPELINE" BY                                                                  
DR. WENRAN JIANG, PH.D.                                                                                                       
                                                                                                                                
1:34:12 PM                                                                                                                    
                                                                                                                                
SENATOR   BERT  STEDMAN,   LEGISLATIVE   BUDGET  AND   AUDIT                                                                    
COMMITTEE  CHAIR,  introduced   the  presenter,  Dr.  Wenran                                                                    
Jiang.  As a  consultant,  Mr. Jiang  would  be helping  the                                                                    
legislature  in understanding  the energy  economics of  the                                                                    
Pacific  Basin and  the state's  potential decision  dealing                                                                    
with  the  Liquid  Natural Gas  (LNG)  gasline  with  Alaska                                                                    
Gasline Development Corporation (AGDC).  He asked members to                                                                    
hold their questions  until the end of  the presentation. He                                                                    
indicated  Mr. Jiang  would be  available for  questions for                                                                    
the following two days if the  meeting ran short on time. He                                                                    
spoke of  the building block process  of providing education                                                                    
for the legislature in order to make an informed decision.                                                                      
                                                                                                                                
Co-Chair  Seaton  recognized  Speaker   Edgmon  was  in  the                                                                    
audience.                                                                                                                       
                                                                                                                                
DR. WENRAN  JIANG, PHD,  CONSULTANT, LEGISLATIVE  BUDGET AND                                                                    
AUDIT, thanked  the committee for  the opportunity  to speak                                                                    
and  introduced the  PowerPoint  presentation: "China,  LNG,                                                                    
and the Alaska Gas Pipeline."                                                                                                   
                                                                                                                                
Dr. Jiang began with slide  2: "Self Introduction." He was a                                                                    
first generation Canadian. He was  born in China and left in                                                                    
1980 after  completing his undergraduate degree.  He studied                                                                    
in  Japan and  pursued his  graduate studies  in the  United                                                                    
States.  Eventually  he  completed  his PhD  in  Canada  and                                                                    
started  his   tenured  position  as  a   political  economy                                                                    
professor and  a China expert  at the University  of Alberta                                                                    
from  1993  to  July  2017  at  which  time  he  took  early                                                                    
retirement from his  tenure. He wanted to focus  on the kind                                                                    
of work he was currently doing.  In recent years he had been                                                                    
on  leave  working   for  different  organizations,  federal                                                                    
provincial  governments, to  advise on  the engagement  with                                                                    
China  from  Canada.  Therefore,  he was  focusing  more  on                                                                    
advisory work.                                                                                                                  
                                                                                                                                
Dr.  Jiang  had been  tracking  as  an academic  of  China's                                                                    
overseas   investment  of   Chinese   behavior  of   foreign                                                                    
investment in  Africa, Latin America,  the Middle  East, and                                                                    
North  America.  He started  looking  at  resources back  in                                                                    
early to mid 2000, 2004,  and 2005 moving to further Chinese                                                                    
large investments in North America  in 2009. Back in 2004 or                                                                    
2003, the  then Canadian federal government's  Department of                                                                    
Foreign Affairs  and International Trade, now  called Global                                                                    
Affairs Canada, approached  him as an academic  member to be                                                                    
a  part  of  the  China strategic  working  group  with  the                                                                    
federal  government to  identify priorities.  He proposed  a                                                                    
series  of measures;  one  of  them was  to  hold an  annual                                                                    
China-Canada  energy  and  environment  dialogue  to  engage                                                                    
China. He had  been tasked with doing  the annual conference                                                                    
since  2004.  Up  until  the present  he  had  organized  13                                                                    
conferences.                                                                                                                    
                                                                                                                                
Dr. Jiang reported  that in 2005, the  energy council, which                                                                    
Senator  Stedman  was  a representative  for  the  State  of                                                                    
Alaska, invited  him to be a  special advisor on China  on a                                                                    
voluntary  basis, which  he gladly  accepted. At  that time,                                                                    
China was seen  as a rising competitor of  the United States                                                                    
in  terms  of energy  supply  and  security. Currently,  the                                                                    
picture  had  reversed.  The United  States  was  no  longer                                                                    
talking about  security and  independence because  they were                                                                    
there.  The  Chinese had  reversed  position  from about  35                                                                    
percent  foreign  dependence  on  oil to  about  70  percent                                                                    
foreign  dependence  on oil  and  close  to 40  percent  gas                                                                    
dependence  on foreign  oil. He  had  witnessed the  10-year                                                                    
period  and advised  the energy  council. He  had taken  the                                                                    
executives  representing   about  13  US   energy  producing                                                                    
states,  3 energy  producing  provinces,  and a  legislative                                                                    
group to  China to engage  with Chinese leadership  in 2007.                                                                    
His experience led  to his work with  the provincial federal                                                                    
government  of  Canada.  He  had also  been  second  to  the                                                                    
Department  of Energy  at the  Alberta  provincial level  to                                                                    
further  engage with  the Chinese,  to continue  to organize                                                                    
the annual conference,  to speak, and to  brief the American                                                                    
and Canadian  State and  Provincial legislatures  on China's                                                                    
energy  security  policy,   demand  curves,  and  investment                                                                    
behaviors.                                                                                                                      
                                                                                                                                
Dr.  Jiang  was the  mission  advisor  to Natural  Resources                                                                    
Canada's Minister's China visit.  He also organized the 13th                                                                    
annual  Energy  Environment  Forum   in  November  2017.  He                                                                    
continued to provide  information regarding his professional                                                                    
experience.                                                                                                                     
                                                                                                                                
1:42:00 PM                                                                                                                    
                                                                                                                                
Dr. Jiang  advanced to the  photo on slide 3:  "Meeting with                                                                    
Canadian PM Justin Trudeau, Shanghai  2016." He indicated he                                                                    
facilitated  a major  clean energy  deal between  Canada and                                                                    
Chinese  entities.  Dr.  Jiang  explained  the  pictures  on                                                                    
slides 4 and 5.                                                                                                                 
                                                                                                                                
Dr.  Jiang turned  to slide  6 and  7: "Overview."  He would                                                                    
provide a  Macro level overview.  He had been brought  in by                                                                    
Senator Stedman  to provide  a perspective  on energy  as it                                                                    
related to  China, particularly as  it related to  the AKLNG                                                                    
project. He would be informing  the committee of the Chinese                                                                    
demand and  LNG issues.  Part II  of his  presentation would                                                                    
include where  Alaska would  fit in  terms of  potential LNG                                                                    
development. In  the third  part of  his overview,  he would                                                                    
provide  specific project-related  information and  analysis                                                                    
about the Chinese  parties involved with the  signing of the                                                                    
memorandum of understanding between  5 parties: The State of                                                                    
Alaska, AGDC, the Sinopec Group,  the Bank of China, and the                                                                    
China Investment Corporation. He  had interacted with all of                                                                    
the  entities.  He  would end  his  presentation  with  some                                                                    
concluding remarks.                                                                                                             
                                                                                                                                
Dr. Jiang  skipped to slide  9: "China's Growth."  The slide                                                                    
showed some  indicators that,  by about  10 years  prior and                                                                    
after joining  the World Trade  Organization (WTO)  in early                                                                    
2000, came to scale. Everything  was moving up with positive                                                                    
indicators  other than  the employment  rate going  down. It                                                                    
was also  the time when  China began to heavily  implement a                                                                    
"go  out" strategy  -  going abroad  to  continue a  similar                                                                    
drive. By  2005, 2007,  and 2008  China was  formidable. The                                                                    
economy  had  been  growing  at   about  10  to  12  percent                                                                    
annually.  He  mentioned  the   miracle  story  about  China                                                                    
beginning  to   heavily  sustain  its  drive   by  investing                                                                    
overseas  in   the  developing  world  in   places  such  as                                                                    
Southeast Asia, Africa, Latin America,  and, later, in North                                                                    
America.                                                                                                                        
                                                                                                                                
1:46:09 PM                                                                                                                    
                                                                                                                                
Dr.  Jiang continued  to  slide 10:  "What's  next after  50                                                                    
years  of remarkable  growth in  China?" He  highlighted the                                                                    
historical 50-year  time span from  1964-2014 on  the graph.                                                                    
It showed  China as  the leader of  the major  economies. He                                                                    
furthered  that  1/5 of  the  world's  population had  never                                                                    
grown the economy as fast or  sustained it as long as China.                                                                    
He  indicated  that  the chart  showed  an  average  50-year                                                                    
compounded growth rate of 7.5 percent.                                                                                          
                                                                                                                                
Dr.  Jiang turned  to slide  11: "China's  GDP Grow  was 6.9                                                                    
percent in 2015:  Slowest in 25 Years." In  recent years the                                                                    
speculation had to do with where  the drive went in China as                                                                    
it was  slowing down. He  posed the question if  China would                                                                    
sustain  itself  forever at  such  an  impressive rate.  The                                                                    
percentage of  growth was going  down. However, it  was only                                                                    
part of the story.                                                                                                              
                                                                                                                                
Dr.  Jiang discussed  the graph  on slide  12: "But  China's                                                                    
Total  GDP Value  Keeps Getting  Bigger." He  explained that                                                                    
while  the percentage  of  growth had  gone  down in  recent                                                                    
years, the  volume of the  gross domestic product  (GDP) had                                                                    
added up substantially. He conveyed  that it was because the                                                                    
base  of the  economy  was so  large.  Currently, China  was                                                                    
growing at a rate of 6.5  percent. It added more GDP volumes                                                                    
to the Chinese  economy than in 2007 when  China was growing                                                                    
at 12  percent. Therefore, implications for  the Chinese use                                                                    
of everything  from energy to resources  reflected an upward                                                                    
track which could be seen on the slide.                                                                                         
                                                                                                                                
Dr.  Jiang scrolled  to slide  13: "Top  three countries  by                                                                    
economic dominance." By 2030 China  was looking at having 80                                                                    
percent  more  economic  capacity than  the  United  States.                                                                    
India followed  the United States.  He suggested  that there                                                                    
would be  a very  rapid transition  of the  world's economic                                                                    
order.  The question  was  where China  was  going with  its                                                                    
economy.                                                                                                                        
                                                                                                                                
Dr.   Jiang   continued   to  a   summary   on   slide   14:                                                                    
"Modernization   paradigm  on   steroids."  He   called  the                                                                    
impressive   numbers    from   the   previous    slide   the                                                                    
modernization  paradigm on  steroids.  China  had chosen  to                                                                    
have  a particular  state driven  paradigm that  was heavily                                                                    
dependent  on  capital  inputs and  labor  inputs  with  low                                                                    
wages, focused on heavy  and manufacturing industries. China                                                                    
was the largest  producer in the world of  most things. It's                                                                    
industry  sector was  larger than  the United  States. China                                                                    
had  a   deepening  integration   with  the   world  economy                                                                    
welcoming  whomever  came.  He   would  revisit  this  point                                                                    
because of  the U.S. and  China trade deficit.  He continued                                                                    
that  U.S. and  European companies  voluntarily moved  their                                                                    
factory  production  base  to   China  for  the  purpose  of                                                                    
exports.  He indicated  that China  was earning  very little                                                                    
return.  As  a result,  China  was  not only  producing  for                                                                    
itself but  for the rest  of the  world resulting in  a huge                                                                    
demand for  energy and resources.  He asserted that  it came                                                                    
with a cost. There was  severe damage to the environment and                                                                    
a  major  contribution  to   global  warming.  Overall,  the                                                                    
Chinese was seen as pursuing GDP growth at any cost.                                                                            
                                                                                                                                
Dr. Jiang  discussed slide 15: "Giant  Appetite." He pointed                                                                    
to  the  resources,  major  commodities,  that  were  highly                                                                    
consumed around the world.                                                                                                      
                                                                                                                                
1:50:43 PM                                                                                                                    
                                                                                                                                
Dr. Jiang turned  to slide 16: "Primary  energy demand, 2035                                                                    
(MTOE)." He  emphasized that China was  becoming the largest                                                                    
overall primary  energy user in  the world, larger  than the                                                                    
U.S.                                                                                                                            
                                                                                                                                
Dr. Jiang scrolled to slide  17: "China surpasses the United                                                                    
States as  the world's top  energy consumer." He  pointed to                                                                    
the read  bars on the  slide which increased over  10 years,                                                                    
eventually surpassing the U.S. and never looking back.                                                                          
                                                                                                                                
Dr. Jiang advanced to slide  18: "China's oil production and                                                                    
consumption, 1993-2016." In looking  at the oil sector, from                                                                    
1993 the Chinese began to  have an import situation in which                                                                    
currently  it  had  a  70   percent  import  dependence.  He                                                                    
reported  that by  2040 China  was projected  to have  an 80                                                                    
percent import  dependency. China  was very  concerned about                                                                    
energy  security.  In  terms   of  imports,  the  U.S.  used                                                                    
significantly  more  oil  than  China.  However,  China  had                                                                    
overtaken  the  U.S. as  the  largest  oil importer  in  the                                                                    
world. It  ended up growing  because the U.S.  was producing                                                                    
more and importing less.                                                                                                        
                                                                                                                                
Dr.  Jiang moved  to slide  19:  "China is  now the  world's                                                                    
largest net  importer of petroleum and  other liquid fuels."                                                                    
Looking into  the future  to 2040,  he believed  China would                                                                    
likely consume twice  as much energy as the  U.S. even given                                                                    
the slow pace.                                                                                                                  
                                                                                                                                
Dr. Jiang discussed  slide 20: "China's Energy  Use Could be                                                                    
able Level  by 2040." China  would be the  largest consumer,                                                                    
twice as much as the US.                                                                                                        
                                                                                                                                
Dr.  Jiang turned  to slide  21:  "Historical and  Projected                                                                    
Population and  Urbanization Trends in China."  He posed the                                                                    
question about what drove the  historical trend. He wondered                                                                    
why energy consumption was growing so much.                                                                                     
                                                                                                                                
Dr.  Jiang  moved to  slide  22:  "Urbanization and  China's                                                                    
emerging  middle  class."  China   had  nearly  1.4  billion                                                                    
people, 4 times the population  of the U.S. He reported that                                                                    
in  the early  80s  barely 20  to 30  percent  of China  was                                                                    
urbanized. Presently just over  half of China was urbanized,                                                                    
which meant  that well over  600 million people were  yet to                                                                    
be  urbanized. He  asserted that  as the  Chinese urbanized,                                                                    
they consumed  more energy. They became  richer, joining the                                                                    
middle class. They wanted  cars, apartments, appliances. the                                                                    
poor population  from 1985 were  currently in the  middle to                                                                    
upper classes. He indicated that  by 2025 most Chinese would                                                                    
be in the middle class.  He reported that around 250 million                                                                    
people  in the  U.S.  were  in the  middle  class and  their                                                                    
consumption  was very  high. He  furthered that  nearly one-                                                                    
third of the world's emerging  middle class was in China and                                                                    
growing.  Other  countries  such   as  India  followed.  The                                                                    
emerging middle class had profound  implications as a driver                                                                    
of energy use.                                                                                                                  
                                                                                                                                
Dr.  Jiang  continued  to  slide   23:  "China  Natural  Gas                                                                    
Production  and Consumption."  In terms  of natural  gas and                                                                    
the AKLNG  project, all major agencies  projected that China                                                                    
would  need to  increase  its import  of LNG  significantly.                                                                    
China was  a major large  producer and its  domestic reserve                                                                    
was huge. However, it could not keep up with demand.                                                                            
                                                                                                                                
Dr. Jiang  explained slide  24: "China  Leads the  growth in                                                                    
projected global  natural gas consumption." He  relayed that                                                                    
the latest  number from  the U.S.  EIA reflected  that China                                                                    
was the  leader in  growth in  projected global  natural gas                                                                    
consumption. The numbers were reflected in the chart.                                                                           
                                                                                                                                
Dr. Jiang  detailed slide 25:  "China natural gas  supply in                                                                    
IEO2017  Reference   case  (2010-40)."  He   explained  that                                                                    
breaking down what  kind of gas the  Chinese were producing,                                                                    
what  kind of  gas they  would be  importing, and  from what                                                                    
locations, would provide a larger picture.                                                                                      
                                                                                                                                
Dr.  Jiang advanced  to slide  26:  "Energy Consumption  per                                                                    
capita versus the  GNP per capita." He used  a laser pointer                                                                    
drawing  attention to  the right  side of  the chart  noting                                                                    
that  the U.S.  and Canada  -  rich countries  - consumed  a                                                                    
significantly larger  amount of  energy. The  United States'                                                                    
counterpart  was much  more efficient  and  rich. They  used                                                                    
less energy but  were high on the consumption  list. He used                                                                    
the laser point to draw attention  to China on the chart. He                                                                    
noted that  India was not on  the slide at all.  The classic                                                                    
trend was  going in  a direction such  that China  sold more                                                                    
cars  in   the  U.S.   China  out-paced  everyone   else.  A                                                                    
traditional trajectory,  with no  paradigm shift,  would not                                                                    
be sustainable. He suggested  thinking about China consuming                                                                    
one-quarter of  the United  States' total  energy on  a per-                                                                    
capita basis. China would need  close to 100 million barrels                                                                    
of  oil  per day.  China's  demand  was  not at  this  level                                                                    
presently but was on a  trajectory. USA and Canada would use                                                                    
more energy.                                                                                                                    
                                                                                                                                
1:56:01 PM                                                                                                                    
                                                                                                                                
Dr. Jiang  turned to slide  27: "China's  Energy Consumption                                                                    
Composition 2007."  He reported  that China's mix  of energy                                                                    
use  was  on  the  slide.  China's  oil  consumption  was  a                                                                    
relatively small portion versus coal.                                                                                           
                                                                                                                                
Dr. Jiang discussed  the pie charts on slide 28,  29, and 30                                                                    
showing the various consumption  mixes. Last year 64 percent                                                                    
of China's  total energy came  from the burning of  coal. He                                                                    
highlighted the  yellow bar on  slide 28 reflecting  that of                                                                    
China's total use  of energy, only 6 percent  came from oil.                                                                    
He  spoke  of china's  energy  mix  in comparison  with  the                                                                    
global  energy consumption  was  drastically different.  The                                                                    
global  consumption  of natural  gas  24  percent versus  30                                                                    
percent coal. He  suggested going between the  pie charts on                                                                    
slides  28, 29,  and 30  to see  the comparison  between the                                                                    
world, the U.S., and China.                                                                                                     
                                                                                                                                
Dr.  Jiang detailed  slide 31:  "China  accounts for  nearly                                                                    
three-quarters   of  the   world   increase  in   coal-fired                                                                    
generation." China might  need more gas because  it had been                                                                    
driving   industrialization    by   primarily   coal-powered                                                                    
generation  plants. China  had made  great efficiency  moves                                                                    
but it  continued to use  a significant coal  burning energy                                                                    
creating  additional pollution.  The  world  was looking  at                                                                    
China as the country using the most coal.                                                                                       
                                                                                                                                
Dr. Jiang  moved to slide  32: "Crude Steel  Production." He                                                                    
relayed  that China  produced the  largest amount  of steel,                                                                    
consuming more coal energy than anything else.                                                                                  
                                                                                                                                
Dr. Jiang explained slide 33:  "Share of total CO2 emissions                                                                    
from  aluminum smelting,  2014."  He spoke  of the  aluminum                                                                    
production in  China that  emitted high  volumes of  CO2 and                                                                    
used  high  quantities  of   energy  during  the  production                                                                    
process. Not only did China  have a large population, it was                                                                    
a large  production country. As  a result of  these factors,                                                                    
CO2 emissions were going through  the roof. He reported that                                                                    
China sought  a 26 percent  global total. The U.S.  sought a                                                                    
percentage  of 21  percent. Emissions  was  a serious  issue                                                                    
that china was trying to address.                                                                                               
                                                                                                                                
Dr. Jiang  discussed slides 34  - 39. He reported  that coal                                                                    
use  in the  Chinese economy  in the  energy mix  was mainly                                                                    
responsible for  CO2 emissions. He  mentioned coal was  80 +                                                                    
percent responsible  for emissions. As a  country, China was                                                                    
the  largest CO2  emitter. Although  China  was the  largest                                                                    
emitter of CO2, it argued that  on a per capita basis, other                                                                    
countries such  as India  in the  U.S. ranked  higher. Never                                                                    
the  less,  on  the  population  chart,  with  a  5  percent                                                                    
combined  population  of  U.S.  and  Canada,  North  America                                                                    
emitted  about  23  percent  CO2.  China  emitted  about  16                                                                    
percent based  on population. It was  not country-based, but                                                                    
a calculation  based on  population. China  used to  use the                                                                    
percentages as a  justification to do less.  He claimed, "No                                                                    
more."  Everyone   else's  per   capita  emissions   in  the                                                                    
projections  were going  down, while  China's was  going up.                                                                    
China  finally understood  that  they had  so  much fuel  to                                                                    
emission pollution.  The public demanded it,  and the policy                                                                    
makers wanted to do something about it.                                                                                         
                                                                                                                                
2:00:45 PM                                                                                                                    
                                                                                                                                
Dr.  Jiang advanced  to slide  40: "China's  13th Five  Year                                                                    
Plan (2016-2020)." He explained  that in China's 13th 5-year                                                                    
plan,  which   was  more  of   a  guidance  plan   than  the                                                                    
centralized plan of the Soviet  era, there was a major shift                                                                    
in  the development  paradigm. There  was  less emphasis  on                                                                    
numbers and  more emphasis on  a balance between  growth and                                                                    
the environment.  He proclaimed there was  a huge investment                                                                    
in clean  energy sectors. There  was a nationwide  effort in                                                                    
reducing the  use of coal.  China wanted to replace  the use                                                                    
of coal with  natural gas. China's target  kept changing and                                                                    
projecting more use of natural  gas. The natural gas and LNG                                                                    
demand would rise  as a part of the  natural economic growth                                                                    
and the  decisive centralized  government policy  driver. He                                                                    
reported  that there  had been  a  great need  for China  to                                                                    
change its policies.                                                                                                            
                                                                                                                                
Dr.  Jiang turned  to slide  41: "Where  does China  get its                                                                    
gas?"  Central   Asia  delivered  most  of   the  land-based                                                                    
pipeline delivery  of gas supply.  It was an LNG  import and                                                                    
had remained  relatively the  same for  the past  few years.                                                                    
Australia, Qatar,  Indonesia, and other countries  also lead                                                                    
in supplying LNG to China.                                                                                                      
                                                                                                                                
Dr. Jiang scrolled  to slide 42: "China  LNG import sources,                                                                    
2012." He  reported that  in the previous  year and  for the                                                                    
first  time, the  LNG import  had  overtaken the  land-based                                                                    
pipeline import  from central Asia.  The 38  percent overall                                                                    
dependency rate jumped from 2016.  Year on year their growth                                                                    
was about  15 percent for  gas imports which  was considered                                                                    
slow. In the previous year it was 27 percent.                                                                                   
                                                                                                                                
Co-Chair  Seaton  indicated  that  Senator  Tom  Begich  had                                                                    
joined the audience.                                                                                                            
                                                                                                                                
Dr. Jiang  relayed that  in the  following section  he would                                                                    
look at the  sectoral demand worldwide. He  would be looking                                                                    
at the  players in the  field, the buyers of  gas worldwide,                                                                    
and the  gas suppliers. He  would be investigating  who were                                                                    
the suppliers  and who were  the competitors of  Alaska LNG.                                                                    
He moved  to slide 44: "Gas  demand growth is driven  by the                                                                    
non-OECD."  The slide  showed  the demand  for  oil and  gas                                                                    
primarily by non-OCED countries.                                                                                                
                                                                                                                                
Dr. Jiang detailed slide 45:  LNG trade growth twice as fast                                                                    
as  global  gas  production."  He  elaborated  that  LNG  in                                                                    
particular  was developing  much  faster  than pipeline  gas                                                                    
delivery.  He highlighted  that with  the technology  driver                                                                    
and China  was looking at  natural gas trading.  He believed                                                                    
LNG movement would become a very globally traded commodity.                                                                     
                                                                                                                                
2:05:01 PM                                                                                                                    
                                                                                                                                
Dr.  Jiang moved  to slide  46: "Pace  of global  LNG supply                                                                    
growth has  started to outpace  Pacific LNG  demand growth."                                                                    
He reported that the United  States was not the only country                                                                    
looking  at selling  LNG and  gas to  China. He  mentioned a                                                                    
number of  countries. A significant  amount of  capacity was                                                                    
being added, many countries began  to build before 2014 when                                                                    
the  natural  gas  prices  had skyrocketed  in  Asia.  As  a                                                                    
result,  the current  supply inventory  was building  up. It                                                                    
was almost  at the margin.  In the following few  years, the                                                                    
demand and  supply curve could  meet. Alaska's  timeline was                                                                    
sensitive, as  there could  be a large  change in  demand in                                                                    
the natural  gas energy  market within  6 years.  There were                                                                    
several moving targets.                                                                                                         
                                                                                                                                
Dr.  Jiang   continued  to  slide   47:  "This   presents  a                                                                    
challenging picture for spot prices  in Asia and Europe from                                                                    
2018-21."  He spoke  to the  volatility of  the natural  gas                                                                    
market. Recently the  market had been flat,  however, it was                                                                    
subject to change.                                                                                                              
                                                                                                                                
Dr. Jiang reviewed  slides 48, 49, and 50.  He reported that                                                                    
the  top three  countries,  Japan, South  Korea, and  China,                                                                    
accounted  for 60  percent of  the global  LNG on  an annual                                                                    
basis. By the end of  the previous year China overtook South                                                                    
Korea  in  the  ranking  moving  into  second  position.  He                                                                    
mentioned a  downturn situation in  the past but  noted that                                                                    
the Chinese import was taking up the pace.                                                                                      
                                                                                                                                
Dr.  Jiang  scrolled  to  slide  51:  "Nominal  Liquefaction                                                                    
Capacity by Country  in 2016 and 2022." The  issue was where                                                                    
the supply  would come from  if there was demand.  The chart                                                                    
showed  potential   suppliers  and  competitors.   He  noted                                                                    
Australia  had  been  building  its  capacity,  whereas  the                                                                    
supply in  the Middle  East was  flat. He  thought America's                                                                    
supply would shoot  up. He would come back  to Russia, which                                                                    
had a major interest, particularly  in Alaska. He pointed to                                                                    
3 very large jumps in terms of suppliers.                                                                                       
                                                                                                                                
Dr.  Jiang  reviewed the  regional  breakdown  on slide  52:                                                                    
"Liquefaction Capacity  by Region in 2010,  2016, and 2022."                                                                    
He  highlighted  the capacity  spikes  in  the Asia  Pacific                                                                    
region,  the  former  Soviet Union  region,  and  the  North                                                                    
American region.  He did  not count Canada.  It had  over 20                                                                    
initiatives   that  were   not   moving  significantly.   He                                                                    
clarified that when he spoke  of North America he was really                                                                    
talking about the U.S.                                                                                                          
                                                                                                                                
2:09:17 PM                                                                                                                    
                                                                                                                                
Dr. Jiang  discussed slide 53:  "Chinese LNG  Terminals." He                                                                    
relayed that China wanted to take  all of the supply. It was                                                                    
busy  building  LNG terminals  along  its  coastal line.  He                                                                    
noted  several pipelines  that  had been  built  as well  in                                                                    
order  to  take   in  gas  from  central   Asia.  China  was                                                                    
positioning  itself strategically.  China  was very  worried                                                                    
about the  energy security environment  and did not  want to                                                                    
be  too dependent  on any  one area.  The United  States and                                                                    
Canada were part  of China's diversification. It  was a very                                                                    
important move on  the Chinese side to build all  of the LNG                                                                    
terminals. China  was over-working its  terminal capacities.                                                                    
He had relayed  that in terms of  infrastructure the Chinese                                                                    
could build  additional terminals quickly. There  were major                                                                    
national oil  companies involved  in building  terminals and                                                                    
importing business. He thought  Alaska was involved with the                                                                    
right partners.                                                                                                                 
                                                                                                                                
Dr.  Jiang detailed  slide 54:  "Russia-China  Gas Deal  May                                                                    
2014."  As far  as LNG  potential,  China was  not far  from                                                                    
Russia. He  recalled the Ukraine  crisis from about  4 years                                                                    
prior  in   which  U.S.  lead  European   allies  to  impose                                                                    
sanctions on Russia. As a  result, some of the projects were                                                                    
falling  apart. After  10  years  of difficult  negotiations                                                                    
between  Russia,  Gazprom  Energy, and  the  China  National                                                                    
Petroleum  Corporation  (CNPC)  they   could  not  reach  an                                                                    
agreement until  Putin went to China  explaining that Russia                                                                    
needed the  project. Russia was  under a  significant amount                                                                    
of pressure.  In May  of 2014,  a large  deal was  signed, a                                                                    
$400 billion multi-year plan spanning  30 years. In November                                                                    
2014, a similar deal was  signed delivering the same amount.                                                                    
There was a massive  Russian and Chinese collaboration. Many                                                                    
people were  suspicious, thinking the deals  were just talk.                                                                    
He confirmed  that presently the Chinese  were building very                                                                    
quickly.  He highlighted  the Yamal  Project  in which  CNPC                                                                    
invested $12 billion when Western  sanctions had to withdraw                                                                    
funds. He would return to  discuss the Yamal project because                                                                    
Putin  opened it.  It  was  the first  delivery  of LNG  and                                                                    
equated  to a  $27 billion  project. There  were many  other                                                                    
projects he could discuss.                                                                                                      
                                                                                                                                
Dr. Jiang  moved to slide  55: "Energy Alliance."  China was                                                                    
way ahead of  schedule. The Russian pipeline  to the boarder                                                                    
was already  completed. He indicated the  Russians were real                                                                    
competitors in  terms of  land-based delivery.  According to                                                                    
Gazprom,  by  2025 they  wanted  to  capture 10  percent  of                                                                    
China's  gas market,  which he  thought was  very ambitious.                                                                    
The Russians were very eager  to diversify because they were                                                                    
facing sanctions and most of  their gas was via Ukraine, and                                                                    
Turkey selling to Europe. At  the time they were not selling                                                                    
much to China, although they wanted their market.                                                                               
                                                                                                                                
2:14:16 PM                                                                                                                    
                                                                                                                                
Dr. Jiang continued to slide  56: "Giant tiger, small bear."                                                                    
Russia  had   many  contracts.  In  terms   of  a  bilateral                                                                    
partnership, Russia  was a large energy  supply and reserve.                                                                    
In  terms  of  economy  and trade,  Russia  was  small.  The                                                                    
largest partner for Russia's trading  was China, it was only                                                                    
88 million  in comparison  to the partnership  between China                                                                    
and the  United States.  Russia ranked  only 9th  in China's                                                                    
foreign trade chain.                                                                                                            
                                                                                                                                
Dr. Jiang explained slide  57: "Russia-China Gas Pipelines."                                                                    
The  chart  showed  pipelines currently  being  constructed.                                                                    
They were planned and moving  fast. They were not memorandum                                                                    
of understandings,  they were real projects.  He highlighted                                                                    
the Northeast  part. In November 2014,  another $400 billion                                                                    
30-year contract was targeted  in the Western portion. China                                                                    
was not just depending on  Russia, it was relying on Central                                                                    
Asia  and the  Middle  East  for a  long  time  in terms  of                                                                    
diversification.                                                                                                                
                                                                                                                                
Dr. Jiang advanced  to slide 58: "Silk Road."  He noted that                                                                    
the one-belt,  one-road initiative by the  current president                                                                    
was  a  $1  trillion  initiative.  There  were  hundreds  of                                                                    
billions  of dollars  already lined  up for  investment. The                                                                    
so-called "belt" was actually  from the Chinese coastal line                                                                    
via Southeast  Asia at the Indian  Ocean all the way  to the                                                                    
horn  of Africa,  up  to the  Middle  East to  Mediterranean                                                                    
Europe.  The  land-based  route  was  identified  along  the                                                                    
traditional Silk  Road via Central  Asia to the  Middle East                                                                    
to Europe. He was  talking about infrastructure building all                                                                    
along the way. China  had an infrastructure development bank                                                                    
and a Silk Road fund. They  were all in operation. They were                                                                    
not in the planning stages,  they were in the implementation                                                                    
phase.  In the  past  5  or 10  years  China  had been  busy                                                                    
building all of the pipelines.  He pointed to Turkmenistan -                                                                    
Uzbekistan  via Kazakhstan.  Kazakhstan  provided oil  while                                                                    
Turkmenistan and Uzbekistan provided gas.                                                                                       
                                                                                                                                
Dr.   Jiang  turned   to  slide   59:  "China-Central   Asia                                                                    
Infrastructure  Development."  He  noted there  were  multi-                                                                    
transit roots  going to China  all the way to  Shanghai. The                                                                    
pipeline was  more than 3,000  kilometers long  and referred                                                                    
to as the East-West Connection  Pipeline of China. The first                                                                    
line was  built about  10 years prior,  then the  second and                                                                    
third   ones  were   built,  and   more   continued  to   be                                                                    
constructed.  He   pointed  to  Pakistan  and   Gwardar  and                                                                    
mentioned the  Burma-Kunming pipeline which was  about 1,200                                                                    
kilometers (similar  to what Alaska  planned to build  - 800                                                                    
miles of pipeline) going from  Burma, at the Indian Ocean to                                                                    
Kunming,  China.  China decided  to  build  the pipeline  in                                                                    
2010, began building  it in 2011, and completed  it in 2012.                                                                    
By 2013 China was building a second line.                                                                                       
                                                                                                                                
Dr.  Jiang   had  reviewed   the  customers   and  potential                                                                    
competitors who  were supplying  China with  gas by  land or                                                                    
sea. He had  provided a global picture  of things currently.                                                                    
Next, he  thought the committee  should consider  how Alaska                                                                    
would fit in, for deliberation of the project.                                                                                  
                                                                                                                                
2:17:12 PM                                                                                                                    
                                                                                                                                
Dr. Jiang scrolled  to slide 60: "The  AGDC-Sinopec MOU." He                                                                    
also  wanted to  discuss the  viability of  the AGDC-Sinopec                                                                    
project in the current  environment. He suggested there were                                                                    
several  questions around  the  viability,  cost, size,  and                                                                    
scope of the project.                                                                                                           
                                                                                                                                
Dr. Jiang  reviewed slide 61:  " China, LNG, and  the Alaska                                                                    
Gas Pipeline." He began with  discussing China's capacity in                                                                    
terms  of doing  such a  project. The  project would  have a                                                                    
budget  of  more  than  $30  billion,  with  a  $10  billion                                                                    
contingency fund,  totaling about  $43 billion. It  would be                                                                    
one  of  the  largest  energy  cooperation  projects  in  US                                                                    
history.  It  was  new  and   unpredictable  to  Alaska  but                                                                    
familiar to China. The Chinese  had already done projects of                                                                    
the same or  larger scope around the world just  in the last                                                                    
10  to   15  years.  China   had  already  dealt   with  the                                                                    
institutions Alaska  was dealing with currently  such as the                                                                    
Bank of  China, China  Investment Corporation,  Sinopec, and                                                                    
CNPC. There  were also state-owned enterprises  and national                                                                    
oil  companies  teaming   up  with  Chinese  state-supported                                                                    
policy and  financial commercial banking  institutions. They                                                                    
were massively investing  around the world for  more than 10                                                                    
years.                                                                                                                          
                                                                                                                                
Dr. Jiang  provided an example.  The Democratic  Republic of                                                                    
the  Congo (DRC)  in  2005  or 2006  started  a massive  $20                                                                    
billion  initiative calling  for infrastructure  in exchange                                                                    
for  copper. He  mentioned  China Railway  and China  Hydro,                                                                    
massive global-sized state-owned  enterprise entities, going                                                                    
to DRC  to build  roads and train  stations in  exchange for                                                                    
developing  a state-owned  copper mine  via a  joint venture                                                                    
and  a  state-signed  contract.   He  continued  to  provide                                                                    
detailed information about the  exchange. He had tracked the                                                                    
investments for multiple years.                                                                                                 
                                                                                                                                
Dr.  Jiang   presented  another  example  in   Angola  where                                                                    
infrastructure was built  in exchange for oil.  Angola was a                                                                    
major producer and  ranked number 1 after  Saudi Arabia. For                                                                    
many  years Angola  was  number 2  on the  list  of top  oil                                                                    
exporters. Payment of  all loans ($20 billion  or more) were                                                                    
made in  oil. He spoke  of the  price difference of  oil and                                                                    
how that affected  the amount of oil that  was exchanged. At                                                                    
$60 per barrel the loan was  paid at 40 percent less than at                                                                    
$100 per  barrel. Therefore, it took  more oil to pay  off a                                                                    
loan  and, at  times,  left  very little  oil  to spare.  He                                                                    
indicated that this was the case in Venezuela.                                                                                  
                                                                                                                                
Dr. Jiang  explained that  much of the  loan from  the China                                                                    
Development Bank  went to Venezuela under  President Chavez.                                                                    
Petroleum   of  Venezuela   (PDVSA),  the   state-owned  oil                                                                    
company, invested  $50 billion and received  payments of oil                                                                    
to  China.  The Chinese  were  very  concerned whether  they                                                                    
would receive  their payment. The  key was that  the Chinese                                                                    
were very  flexible and innovative,  and they  liked dealing                                                                    
with state  actors. He believed  the Chinese would  be happy                                                                    
working  with  AGDC,  Alaska's  government  entity,  because                                                                    
China  had  done  similar  projects  around  the  world.  He                                                                    
mentioned a large  deal with Russia to supply  gas. He noted                                                                    
that Alaska  had its own  competitor in the U.S.  Gulf Coast                                                                    
already shaping LNG. That U.S.  competitor had just signed a                                                                    
supply contract with China  Energy Corporation committing to                                                                    
supplying China with  1.2 million tons of LNG  per year with                                                                    
two subsidies of China Energy  Corporation in the Gulf Coast                                                                    
area.  China  National  Petroleum Corporation,  the  largest                                                                    
group  in  China,  signed  a deal  for  $11  billion  during                                                                    
President Trump's trading. In  a $250 billion package, three                                                                    
projects were  about $140 billion. Alaska's  project was $43                                                                    
billion, CNPC's  project was another  $11 billion,  and West                                                                    
Virginia had  a project  worth $83 billion  developing shale                                                                    
gas. He suggested  the larger comparison was  the Yamel deal                                                                    
in the Arctic.                                                                                                                  
                                                                                                                                
Dr.  Jiang reported  that  the Chinese  had  been eying  the                                                                    
arctic for  a while. In  the prior month, they  had released                                                                    
their first white  paper suggesting that it  build an arctic                                                                    
silk road. The  Chinese had gone to Russia  and other arctic                                                                    
countries  seeking  to  enter  into  free  trade  agreements                                                                    
including with  Canada. He emphasized that  the Chinese were                                                                    
deep  into the  Arctic with  the Russians.  He spoke  of the                                                                    
location  of the  Yamel  peninsula. He  noted  that the  $27                                                                    
billion  project produced  about  16 million  tons per  year                                                                    
capacity  versus  the  20   million  tons  anticipated  from                                                                    
Alaska's  project. They  delivered  LNG in  the past  month,                                                                    
they were on  budget, and were on time. He  reported that of                                                                    
the $27  billion, the  Chinese put in  $12 billion  in 2014.                                                                    
The contract work building 85  percent of the LNG modules to                                                                    
be assembled were bought and  built in China. That was worth                                                                    
$7  billion. They  built 7  transportation trips  related to                                                                    
the project  and 14 of the  15 LNG tankers for  the project.                                                                    
The cost was  more than $8 billion. He  reviewed the Chinese                                                                    
investment totals.  He thought Alaska would  be dealing with                                                                    
many potential collaborative issues  between AGDC and china.                                                                    
He  mentioned  several  different  issues.  He  noticed  the                                                                    
Chinese  press and  other observers  had commented  that the                                                                    
Alaska project  would be good  because there  was government                                                                    
backing  and the  project  would be  larger  than the  Yamel                                                                    
deal.                                                                                                                           
                                                                                                                                
2:27:26 PM                                                                                                                    
                                                                                                                                
Dr. Jiang  discussed slides 62:  "China has deep  pocket for                                                                    
overseas  assets." He  reported that  China's total  foreign                                                                    
reserve peaked at  $4 trillion. He thought  it was currently                                                                    
$3.5 trillion.  China definitely  had money  for investments                                                                    
and liked  investing in the  U.S. However, the  Chinese felt                                                                    
uncertain about  the U.S. Treasury.  They felt  better about                                                                    
investing in genuine assets.                                                                                                    
                                                                                                                                
Dr.  Jiang  turned  to slide  63:  "Composition  of  China's                                                                    
foreign-exchange  reserves." He  reported  that the  Chinese                                                                    
were investing in many different energy assets.                                                                                 
                                                                                                                                
Dr.  Jiang moved  to slide  64:  "China Leads  the World  in                                                                    
Clean Energy Investment." He relayed  that China was leading                                                                    
the world  in alternative and renewable  energy investments.                                                                    
China was leading the world  in installation capacity and in                                                                    
investments.   European   countries   and  the   U.S.   were                                                                    
significantly behind. Some of  the data indicated that China                                                                    
lead in installation capacity.                                                                                                  
                                                                                                                                
Dr.  Jiang  advanced  to slide  65:  "China's  National  Oil                                                                    
Companies." He highlighted that  much of the traditional and                                                                    
new energy  works were done  by national oil  companies. The                                                                    
slide listed  4 of those companies  including China National                                                                    
Petroleum Corporation, Sinopec  China Petroleum and Chemical                                                                    
Corporation, CNOOC  Limited, and  Sinochem Group.  He wanted                                                                    
to  inform members  of something  AGDC had  not relayed.  He                                                                    
continued  that  the top  three  companies  used to  be  the                                                                    
ministry  of  energy in  the  1980s.  It was  a  state-owned                                                                    
enterprise, the  state ministry similar to  Russia. However,                                                                    
they reformed and tried to figure a way to break it up.                                                                         
                                                                                                                                
                                                                                                                                
2:28:18 PM                                                                                                                    
                                                                                                                                
Dr. Jiang discussed  slides 66 - 73. He pointed  to the blue                                                                    
line  on the  slide  depicting the  Yangtze River.  Anything                                                                    
North  of the  Yangtze  River was  given  to CNPC.  Anything                                                                    
South  of the  Yangtze  River was  given  to Sinopec  Group.                                                                    
Anything  not  on  the  land offshore  was  given  to  CNOOC                                                                    
Limited. The  initial stage was  supposed to have  some kind                                                                    
of division of labor because  North of the Yangtze River sat                                                                    
most  of  China's  upstream  oil and  gas  fields.  Most  of                                                                    
China's  refineries   sat  South   of  the   Yangtze  River.                                                                    
Naturally  CNPC  became  focused on  upstream,  and  Sinopec                                                                    
became  focused  on  downstream. China's  refinery  was  the                                                                    
second largest in capacity  worldwide. CNOOC Limited focused                                                                    
on everything  offshore. He  noted the  interesting division                                                                    
of labor.  He indicated things  had changed in  the previous                                                                    
10  years.  As  things  evolved,  the  3  companies  started                                                                    
breaking  barriers.  They  wanted  to  be  integrated  large                                                                    
international oil companies. They  were trading in Shanghai,                                                                    
Hong Kong, and  New York in their  subsidiaries, even though                                                                    
they  were  all  state  controlled   to  a  certain  extent.                                                                    
PetroChina,  a subsidiary  of CNPC,  was  the largest  group                                                                    
with 1.5 million  employees. It dealt with  most gas imports                                                                    
and  built  most  of  the  pipelines.  The  corporation  was                                                                    
building  pipelines at  unprecedented speeds.  Alaska needed                                                                    
to  contemplate whether  CNPC would  build the  pipeline. He                                                                    
indicated that CNPC  was very interested in  building it. He                                                                    
noted that  CNPC had approached Canada.  However, Canada was                                                                    
not interested unless they had a local partner.                                                                                 
                                                                                                                                
Dr. Jiang continued to talk  about the major 3 companies. He                                                                    
noted  that  Sinopec  was   the  second  largest  interested                                                                    
company. He indicated  that CNOOC was the  third largest oil                                                                    
company interested  in Alaska's  project. He  mentioned that                                                                    
CNOOC  was trying  to  purchase Unico  for  $17 billion.  He                                                                    
provided  additional information  about  the possibility  of                                                                    
the   transaction  with   Unico.   He  provided   additional                                                                    
investment  details about  the companies.  He conveyed  that                                                                    
they  were important  players and  dominated China's  energy                                                                    
sector and have done overseas investment.                                                                                       
                                                                                                                                
Dr.  Jiang  continued that  in  looking  at the  LNG  import                                                                    
business, Sinopec was a smaller  player which meant they had                                                                    
room to expand with doing the LNG project with Alaska.                                                                          
                                                                                                                                
2:34:16 PM                                                                                                                    
                                                                                                                                
Dr. Jiang continued to slides  74-75 that showed LNG imports                                                                    
in 2016.  He indicated that  in the  first half of  2016 the                                                                    
United States  did not ship any  LNG. In the second  half of                                                                    
2016,  the  U.S. shipped  about  3  percent of  China's  LNG                                                                    
import. He thought the growth was interesting.                                                                                  
                                                                                                                                
Dr. Jiang  advanced to slide  76: "LNG Export  Forecast from                                                                    
Qatar,  Australia and  the US."  The chart  showed the  U.S.                                                                    
growing  substantially  reaching  similar supply  levels  of                                                                    
Qatar and Australia by 2025.                                                                                                    
                                                                                                                                
Dr.  Jiang  moved to  slide  77:  "Japan LNG  Demand  Versus                                                                    
Contracted Volume: South Korea  LNG Demand Versus Contracted                                                                    
Volume:   Taiwan  Gas   Use."   The   chart  showed   normal                                                                    
projections for  Japan, South Korea, and  Taiwan. He pointed                                                                    
out that  the supply  from both Japan  and South  Korea were                                                                    
flat. China's supply would be very static.                                                                                      
                                                                                                                                
Dr. Jiang provided a volatility  example on slide 78: "China                                                                    
imports  Projections  Versus  Capacity."  The  slide  showed                                                                    
capacity  and demand  which indicated  they  might not  need                                                                    
much.  However,  the  policy   drivers  stressed  that  they                                                                    
convert as much coal power  generating plants to natural gas                                                                    
as possible.                                                                                                                    
                                                                                                                                
Dr. Jiang reviewed slide 79:  "But recent interruptions show                                                                    
conventional wisdoms  may be misleading." In  the spring the                                                                    
executive  orders were  issued from  multiple ministries  to                                                                    
convert coal to  LNG. However, by the time  the notices went                                                                    
out from the environmental  protection agency it was August.                                                                    
By the  time October  and November  came around,  not enough                                                                    
coal had  been converted to  gas and left the  Northern part                                                                    
of China  in a bind.  People did  not have heat  because the                                                                    
order had been to stop  using coal because of smog. However,                                                                    
there  had not  been enough  time to  convert the  coal. The                                                                    
reality  was  that  China  had   not  finished  the  job  of                                                                    
converting  coal  to  gas  and  was  in  short  supply.  The                                                                    
situation  became  urgent.  The  central  government  issued                                                                    
urgent  directives  to convert  back  to  coal, as  people's                                                                    
livelihoods were at stake. However,  coal was experiencing a                                                                    
slow season and they did not  expect it to pick up. The coal                                                                    
industry  experienced  a  bottleneck. China  had  a  massive                                                                    
shortage of coal  and LNG. He mentioned that  earlier in the                                                                    
current month, China  was receiving about 40  percent of its                                                                    
LNG   from  Central   Asia,  a   land-based  delivery   from                                                                    
Turkmenistan.   One   day  Turkmenistan's   supply   dropped                                                                    
50,000,000 cubic  meters from 120,000,000 cubic  meters down                                                                    
to  70,000,000  cubic  meters.  The  Chinese  import  system                                                                    
almost  collapsed. It  was reported  that the  equipment had                                                                    
failed.  Instead  of  fixing the  problem,  the  supply  was                                                                    
reduced.   There  was   widespread  speculation   that  some                                                                    
diversion of  gas might  have occurred  because of  the very                                                                    
cold  winter. It  was a  perfect storm  of a  policy blunder                                                                    
combined with  a market  mess up that  drove the  spot price                                                                    
from  $7  to $18  British  Thermal  Unit (BTU).  People  had                                                                    
called  him from  China looking  for an  LNG supply.  People                                                                    
were desperate.  China was facing  a major jump in  price of                                                                    
gas imports and  anything related to coal.  He indicated the                                                                    
price was $10  BTU. Alaska was looking at a  price of $8 BTU                                                                    
versus $7  BTU in the  Lower 48.  China faced a  dynamic and                                                                    
volatile situation  not caused by normal  market conditions,                                                                    
but other unknown factors. Many  Chinese were advocating for                                                                    
a more  predictable and transparent  supplier. He  noted the                                                                    
dispute  between  Russian  and  the  Ukraine  about  gas  to                                                                    
Europe. The situation  in China was good news  for Alaska in                                                                    
terms of  doing business  with the  Chinese. He  warned that                                                                    
Alaska could  expect a full  bureaucratic struggle  with the                                                                    
Chinese in the process.                                                                                                         
                                                                                                                                
2:40:18 PM                                                                                                                    
                                                                                                                                
Dr.  Jiang  discussed  slide  80:  "Governing  Structure  of                                                                    
Chinese NOCs." The chart  showed the decision-making process                                                                    
in  China around  energy.  He had  dealt  with the  multiple                                                                    
agencies associated with the process.  He could elaborate in                                                                    
greater detail on  the structure in the  future. The Chinese                                                                    
would scrutinize  the project,  in part  because of  some of                                                                    
its previous investments not going very well.                                                                                   
                                                                                                                                
Dr.   Jiang  referred   to   slide   81:  "National   Energy                                                                    
Administration  (NEA)."  He  reported  the  National  Energy                                                                    
Administration  (NEA)   was  supervising  the   process.  He                                                                    
briefly  scrolled to  slide 82  which showed  NEA's internal                                                                    
structure.                                                                                                                      
                                                                                                                                
Dr. Jiang continued  to slide 83: "Bank of  China." The Bank                                                                    
of China  had been  presented to  members by  Alaska Gasline                                                                    
Development Corporation  (AGDC) and CIC. They  had presented                                                                    
the Bank of China in a  very credible light, which was true.                                                                    
It  was   a  credible  institution.  The   China  Investment                                                                    
Corporation was another entity to  have involved in Alaska's                                                                    
project.   He   displayed   slide  84:   "China   Investment                                                                    
Corporation" as he talked. Sinopec  was also another company                                                                    
worth  having  involved  in Alaska's  project.  Shortly,  he                                                                    
would  review  some  of  the lessons  he  had  gleaned  when                                                                    
working   on  Canadian   investments   with  these   Chinese                                                                    
companies.                                                                                                                      
                                                                                                                                
Dr. Jiang  advanced to slide  85: "Major  Chinese Investment                                                                    
in  Canada  since Late  2009."  The  chart reflected  a  $35                                                                    
billion investment  by China into the  Alberta, China energy                                                                    
sector  from 2009-2013.  Oil prices  and  stock prices  were                                                                    
high,  and   Canada  sold  to  China   enthusiastically.  He                                                                    
highlighted the $15  billion CNOOC deal in  red. At present,                                                                    
some of the investments listed were not doing well.                                                                             
                                                                                                                                
Dr. Jiang  turned to slide  86: "CIC invested  $1.25 billion                                                                    
in Penn  West Corp. in  2010, at  over $18 per  share? Now?"                                                                    
One  example of  an investment  not doing  well was  the CIC                                                                    
investment in  Penn West  Corporation. The  company invested                                                                    
$1.25 billion in 2010 paying  over $18 per share. Currently,                                                                    
the shares  were worth just  over $1. The joint  venture was                                                                    
completely gone.                                                                                                                
                                                                                                                                
Dr. Jiang scrolled  to slide 87: "CIC  invested $500 million                                                                    
in 2009.  Now?" China  Investment Corporation  also invested                                                                    
$500  million in  South  Gobi Resources  Ltd.  In 2009,  the                                                                    
shares were worth more than  $20 per share. Today the shares                                                                    
were worth about 20 cents each.                                                                                                 
                                                                                                                                
Dr. Jiang reviewed  slide 88: "CIC invested  $150 million in                                                                    
2012.  Now?"  He  reported   CIC's  investment  in  Sunshine                                                                    
Oilsands Ltd.,  Sinopec, and  the Bank  of China.  The total                                                                    
investment was  $300 million. The  investors had  to de-list                                                                    
themselves  in 2005  in Canada.  Currently, the  shares were                                                                    
trading  for  22  cents  in Hong  Kong  Dollars,  which  was                                                                    
equivalent to 3 or 4 cents  in U.S. dollars. The company was                                                                    
not going  into production. He mentioned  another example of                                                                    
a  bad   investment  for  Sinopec.  He   had  several  other                                                                    
examples.                                                                                                                       
                                                                                                                                
2:44:09 PM                                                                                                                    
                                                                                                                                
Dr. Jiang  discussed the lessons  learned by China  on slide                                                                    
89: "Chinese investment in Canada's  oil sands." The Chinese                                                                    
had  learned their  lesson.  In the  case  of Canada,  China                                                                    
concluded   that  there   was   much  more   data  and   the                                                                    
corporation's  bets on  Canadian resources  were worth  less                                                                    
than 20  cents on the  dollar. The  good news was  that they                                                                    
were shifting  all the  energy emphasis  from Canada  to the                                                                    
United States.  He thought it  was understandable  why China                                                                    
was willing  to sign  up for  a massive  energy deal  in the                                                                    
previous  year. China  was  now putting  its  eggs into  the                                                                    
United States' basket.  He thought the state  needed to make                                                                    
some decisions about how to move forward.                                                                                       
                                                                                                                                
Dr. Jiang  moved to slide  91: "Conclusions." China  was the                                                                    
largest growing market for LNG  and was driven by market and                                                                    
policy. There was  a strong desire by  the centralized state                                                                    
to  reduce the  use of  coal replacing  it with  LNG in  the                                                                    
short-term.  The energy  market was  volatile. Everyone  saw                                                                    
potential which created competition  of suppliers to China's                                                                    
LNG  market.  The  global capacities  were  also  increasing                                                                    
partly   due  to   the  United   States.  China's   overseas                                                                    
investment was  also shifting to the  United States. Chinese                                                                    
large  national oil  company  (NOC)  and investment  players                                                                    
were key  drivers because they  had been  making investments                                                                    
all  over  the  world.  Therefore, in  the  context  he  had                                                                    
provided, Alaska  was well positioned  with the  MOU between                                                                    
AGDC  and Sinopec  in  terms of  global  supply and  demand,                                                                    
China's  shifting emphasis,  overall  momentum, and  China's                                                                    
desire to buy  more things from the US to  balance trade. He                                                                    
mentioned   the   pending   trade   war   with   the   Trump                                                                    
administration,  which the  Chinese wanted  to avoid.  China                                                                    
might want Alaska  to focus on its efforts in  the arctic as                                                                    
opposed to  the LNG project.  The Chinese were  cautious and                                                                    
tough negotiators. He advised that  there would be more work                                                                    
and   expertise  necessary   to   finalize   the  MOU.   His                                                                    
recommendation  was to  engage  extensively  with China.  He                                                                    
thanked committee members for their time.                                                                                       
                                                                                                                                
Co-Chair  Seaton   acknowledged  that  Senator   Bishop  had                                                                    
stopped by the meeting.                                                                                                         
                                                                                                                                
2:48:18 PM                                                                                                                    
                                                                                                                                
Representative Birch  asked about the potential  for China's                                                                    
energy independence.  He also asked about  the potential for                                                                    
shale gas production in China.                                                                                                  
                                                                                                                                
Dr. Jiang responded  everyone was aware of  the U.S. context                                                                    
of national security, energy  security, and the independence                                                                    
debate. He  commented that 4  or 5 years made  a difference.                                                                    
He thought  China had worsened  in the past 10  years. China                                                                    
used  to  be  in  a   similar  situation  as  the  U.S.  was                                                                    
presently.  China was  40 percent  dependent on  gas imports                                                                    
and  70 percent  dependent  on oil  imports. Presently,  the                                                                    
Chinese consumed  about 11,000,000  barrels of oil  per day,                                                                    
produced only about 4,000,000 barrels  per day, and imported                                                                    
about 7,000,000 barrels per day.  He had watched the barrels                                                                    
of  imported oil  increase,  raising  China's dependency  on                                                                    
imports. The Chinese policy makers  were worried about their                                                                    
import  numbers.  Many  countries   had  a  100-day  reserve                                                                    
requirement.  A  couple  of   years  ago  China's  strategic                                                                    
petroleum reserve  fulfilled a  week or two  of consumption.                                                                    
Now it's reserves would satisfy two months of consumption.                                                                      
                                                                                                                                
Dr.  Jiang  continued that  another  debate  was over  China                                                                    
building  a massive  accumulation of  reserve. Some  Chinese                                                                    
thought  it was  not worth  the cost  to have  that cushion.                                                                    
Another  faction   was  adamant   about  not   depending  on                                                                    
Americans who were controlling all  of the sea lanes in case                                                                    
of a  conflict. He  opined that  the Chinese,  overall, were                                                                    
too sensitive. China was banking  on the largest partnership                                                                    
in terms  of economic  interaction. They thought  the stakes                                                                    
were too  high for the U.S.  to go further into  a trade war                                                                    
or a  hot war. He  spoke of  China building up  its military                                                                    
and  a  new generation  of  aircraft  carriers. The  Chinese                                                                    
wanted to eventually have its  own capacity to guard but did                                                                    
not seem to  have a solution. They did not  have enough oil.                                                                    
There  had been  substantial  discoveries  of oil.  However,                                                                    
they were challenged by geography  and connection. The water                                                                    
requirement to  extract shale  was a  barrier as  well. Many                                                                    
people  were more  concerned with  the  country's supply  of                                                                    
water rather than oil and gas.                                                                                                  
                                                                                                                                
2:54:12 PM                                                                                                                    
                                                                                                                                
Representative   Grenn   asked   about   the   culture   and                                                                    
philosophies of  the Chinese companies  regarding investment                                                                    
and their potential reactions to a slow approach.                                                                               
                                                                                                                                
Dr. Jiang  responded that China  was not a  very experienced                                                                    
international player. He recalled  that the U.S. was leading                                                                    
the world  in the  oil industry  in the  second half  of the                                                                    
19th century.  China had not  had any oil  discoveries until                                                                    
the  1960s. He  provided examples  of China's  behavior that                                                                    
lead to success stories.  China showed different patterns in                                                                    
business dealings. In the case  of Alaska's project, Sinopec                                                                    
would be the  off-taker of the partner,  but not necessarily                                                                    
the  owner.  The ownership  would  remain  in Alaska.  Local                                                                    
expertise  would  be  used. In  terms  of  contracting,  the                                                                    
Chinese were looking  to contract build some  of the project                                                                    
modules. China could  move very quickly once  they saw there                                                                    
was potential. He mentioned an example.                                                                                         
                                                                                                                                
Co-Chair  Seaton   indicated  that   there  were   two  more                                                                    
questions from  members. He  conveyed his  appreciation that                                                                    
Dr. Jiang would be in  town until the following day. Members                                                                    
could arrange  a meeting with him  through Senator Stedman's                                                                    
office.                                                                                                                         
                                                                                                                                
2:58:14 PM                                                                                                                    
                                                                                                                                
Representative Pruitt  mentioned the Chinese  demand focused                                                                    
on market and  policy. He asked if there was  a need to move                                                                    
away  from  coal  as  quickly  as  possible.  He  wanted  to                                                                    
understand the philosophy around  the country's concern with                                                                    
air quality.                                                                                                                    
                                                                                                                                
Dr. Jiang  replied that  China had a  large economy  and was                                                                    
polluting its  environment heavily.  He was  concerned about                                                                    
China.  He  wanted  it to  be  healthy  and  environmentally                                                                    
friendly.  He  wanted the  Chinese  to  have a  middle-class                                                                    
life, breath  better air, and  not to suffer the  CO2 global                                                                    
warming impacts. About  5 to 7 years  previously China would                                                                    
have  been  very  defensive  about  being  asked  to  change                                                                    
something related  to policy. The  Chinese did not  like the                                                                    
West questioning its  contribution to emissions. Eventually,                                                                    
the impact of air pollution  and CO2 emission took root. The                                                                    
Chinese became very concerned with  air quality only after a                                                                    
few  years of  the Chinese  government being  passive. China                                                                    
shifted  from  being passive  to  being  proactive. The  key                                                                    
driver was a domestic  consensus being formed. He emphasized                                                                    
that  as China  began integrating  into the  global economy,                                                                    
all  of   the  Western  major   multi-national  corporations                                                                    
started  moving  their production  bases  to  China for  the                                                                    
purpose  of exports.  He noted  Apple  products and  Walmart                                                                    
items. He  had calculated that  65 percent to 70  percent of                                                                    
export value  of China's production was  produced by foreign                                                                    
multi-national  corporations in  China  for  the purpose  of                                                                    
exports.  In the  process he  calculated all  of the  energy                                                                    
consumption,  CO2 emissions,  and  combustion  in China.  He                                                                    
opined  that  China's  environmental problem  was  also  the                                                                    
United States'  problem. His  message was  to treat  the LNG                                                                    
project   as   a  commercial   project   but   also  as   an                                                                    
environmental  project -  helping to  fight global  warming.                                                                    
There was an international consensus.                                                                                           
                                                                                                                                
Co-Chair Seaton reported  that the committee had  to move on                                                                    
to other items  on the agenda. He thanked  the presenter and                                                                    
members  of   the  House   Resources  Committee   for  their                                                                    
participation.                                                                                                                  
                                                                                                                                
3:05:47 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:08:30 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Seaton called the meeting back to order.                                                                               
                                                                                                                                
HOUSE BILL NO. 321                                                                                                            
                                                                                                                                
     "An  Act making  supplemental appropriations  and other                                                                    
     appropriations; making  an appropriation  to capitalize                                                                    
     a fund;  amending appropriations; and providing  for an                                                                    
     effective date."                                                                                                           
                                                                                                                                
3:08:48 PM                                                                                                                    
                                                                                                                                
Co-Chair  Seaton wanted  to start  with public  testimony on                                                                    
the supplemental bill.                                                                                                          
                                                                                                                                
Co-Chair Seaton OPENED and CLOSED Public Testimony.                                                                             
                                                                                                                                
3:09:59 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:10:16 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  Seaton indicated  that  no one  had  signed up  to                                                                    
provide  testimony on  HB 321.  He asked  for comments  from                                                                    
committee members.                                                                                                              
                                                                                                                                
Representative   Thompson  was   opposed   to  rushing   the                                                                    
supplemental bill out of committee.  He wanted a couple more                                                                    
days to properly  vet the bill. He thought  it was necessary                                                                    
to have further discussion about  certain items in the bill.                                                                    
Co-Chair  Seaton   asked  if  Representative   Thompson  had                                                                    
certain items  he wanted to  discuss. He conveyed  that only                                                                    
one  issue was  brought up.  He  explained that  any of  the                                                                    
items all 4 co-chairs could not  agree on as necessary to go                                                                    
in the  fast-track budget were  not included. The  amount of                                                                    
$170  million had  come down  to $49  million. He  suggested                                                                    
discussing  the item  Representative Wilson  had brought  up                                                                    
concerning  corrections.  Representative  Thompson  had  the                                                                    
same  question  as  Representative   Wilson.  He  asked  for                                                                    
clarification on the related item.                                                                                              
                                                                                                                                
Co-Chair Seaton  recalled that  Representative Wilson  had a                                                                    
question that was addressed to  the department for feedback.                                                                    
The  department had  replied with  a  letter. Hopefully  the                                                                    
department  had  been  responsive. He  asked  Representative                                                                    
Wilson if she wanted to discuss the issue.                                                                                      
                                                                                                                                
Representative  Wilson  met  with  DOC  and  understood  the                                                                    
portion regarding  population management. She wanted  to put                                                                    
on the record that the $10  million did not have anything to                                                                    
do with SB 91. However, it  had to do with the controversial                                                                    
fiscal note associated  with SB 91. She  clarified that when                                                                    
Palmer was closed,  there was not a  reduction in personnel.                                                                    
Rather,  personnel  were  placed  into  other  institutions.                                                                    
Historically,  halfway  house  money  had been  used  as  an                                                                    
offset,  although the  money was  reduced  by a  significant                                                                    
amount of $8  million. Currently there was  no extra cushion                                                                    
funds to rely  on. She did not understand  about the medical                                                                    
costs  associated  with  prisoners.  She  wanted  to  better                                                                    
understand  about the  growth in  the  number. She  reported                                                                    
there  had been  an increase  of $10  million in  healthcare                                                                    
costs. She  noted there  was a  supplemental request  of $10                                                                    
million in  the current legislation. There  was also another                                                                    
$10 million  request for  FY 19. She  was unsure  what drove                                                                    
the  increase. She  specifically  wanted to  know where  the                                                                    
growth  was derived.  She remarked  that $10  million was  a                                                                    
significant amount of  money. She was aware  that 2-3 people                                                                    
had been sent out of state  because of high medical costs. A                                                                    
few  more  prisoners might  be  sent  out-of-state. She  was                                                                    
looking for a breakdown of the population management.                                                                           
                                                                                                                                
Co-Chair  Seaton  did  not  want to  get  confused,  as  the                                                                    
committee was  currently dealing  with the  supplemental for                                                                    
FY 18.  Representative Wilson wanted  to ensure that  it was                                                                    
not a one-time deal.  Co-Chair Seaton invited the Department                                                                    
of Corrections to respond.                                                                                                      
                                                                                                                                
APRIL  WILKERSON,   DIRECTOR,  DIVISION   OF  ADMINISTRATIVE                                                                    
SERVICES,  DEPARTMENT OF  CORRECTIONS, asked  Representative                                                                    
Wilson to repeat  her question. She noted  that Laura Brooks                                                                    
from  the  department was  also  available  to provide  more                                                                    
detail on the populations that the department was seeing.                                                                       
                                                                                                                                
Co-Chair  Seaton mentioned  a  memo from  the Department  of                                                                    
Corrections   dated,   February    21,   2018   specifically                                                                    
addressing  the question.  It was  a three-page  response to                                                                    
the question.                                                                                                                   
                                                                                                                                
Representative  Wilson asked  about the  actuals, and  about                                                                    
what the department anticipated spending.                                                                                       
                                                                                                                                
Ms.  Wilkerson  replied  that  the   total  budget  for  the                                                                    
physical healthcare component  in FY 18 was  $30 million. In                                                                    
FY  17 the  department spent  just over  $43.5 million.  She                                                                    
noted that the  department received a supplemental  in FY 17                                                                    
and it  made up  an additional  $3 million  through existing                                                                    
authorization within the Health  and Rehabilitation RDU. She                                                                    
expected  a  shortfall  of  $11.7  million.  The  department                                                                    
anticipated   making   up   the   difference   between   the                                                                    
supplemental ask  of $10.3 million, the  difference of which                                                                    
would  be  made  up  within   the  existing  authority.  The                                                                    
shortfalls  were  currently  within personal  services,  the                                                                    
contractual  line, and  the commodity  line. The  department                                                                    
was asking  for the  same amount  to be added  to the  FY 17                                                                    
budget because  a shortfall  of a  minimum of  $10.3 million                                                                    
was expected.  She thought Laura  Brooks could speak  to the                                                                    
actuals.                                                                                                                        
                                                                                                                                
3:18:36 PM                                                                                                                    
                                                                                                                                
LAURA  BROOKS,  DIVISION   OPERATIONS  MANAGER,  HEALTH  AND                                                                    
REHABILITATION  SERVICES,  DEPARTMENT  OF  CORRECTIONS  (via                                                                    
teleconference),  thought the  question  was  about why  the                                                                    
department's costs  had increased. She conveyed  that one of                                                                    
the  things that  had  greatly  influenced the  department's                                                                    
budget was the  treatment of Hepatitis C  in the facilities.                                                                    
For  the  first   time  there  was  a   cure.  However,  the                                                                    
medication was incredibly expensive.  She reported that when                                                                    
the department first started treating  inmates, the cost for                                                                    
a  12-week regimen  was about  $120,000. The  amount dropped                                                                    
down  to about  $74,000 in  the prior  year, and  it dropped                                                                    
again in the  current year to between $25,000  to $30,000. A                                                                    
person might think  that because the cost  of the medication                                                                    
had  dropped,  the  standard  of  care  would  broaden.  She                                                                    
explained that individuals were  treated based on the degree                                                                    
of illness  and on  the degree of  fibrosis versus  a 4-tier                                                                    
system. It  used to be  the department would treat  the most                                                                    
severe at  level 4. However,  the standard had  changed, and                                                                    
the department was  now treating levels 3  and 4. Therefore,                                                                    
while the cost  of the medication had  decreased, the number                                                                    
of patients  that were being  treated had increased.  In the                                                                    
current year,  the department was  expecting to  treat about                                                                    
20 patients  with the  medication at  an unbudgeted  cost of                                                                    
$540,000. In the following  year, the department anticipated                                                                    
that up  to 200 inmate  patients would be  treated, equating                                                                    
to an unbudgeted  cost of $5.4 million.  She reiterated that                                                                    
while the cost of medications  treating Hepatitis C had gone                                                                    
down, the need had risen.                                                                                                       
                                                                                                                                
Ms.   Brooks  highlighted   that   the   overall  costs   of                                                                    
pharmaceuticals had risen dramatically.  Over the previous 5                                                                    
years  she  had seen  an  increase  in medication  costs  of                                                                    
almost  60  percent.  Although the  department  had  done  a                                                                    
tremendous  amount to  streamline and  reduce the  number of                                                                    
prescriptions written (about 12  percent), there was still a                                                                    
10 percent  increase in the overall  cost of pharmaceuticals                                                                    
impacting   the   department's  budget   substantially.   As                                                                    
Representative Wilson  indicated, the department  never knew                                                                    
who  would walk  through the  door. The  department had  had                                                                    
cancer patients  that had  run up costs  in the  hundreds of                                                                    
thousands of  dollars who were  pre-trial inmates  with very                                                                    
serious charges.  There was  no option to  send them  out of                                                                    
state,  to  send  them to  a  community  residential  center                                                                    
(CRC), or  to enroll them in  pretrial electronic monitoring                                                                    
(EM). The costs  had to be paid by  the department. Although                                                                    
Medicaid had been  a benefit to the  department covering the                                                                    
stays  of inmates  who  were hospitalized  for  24 hours  or                                                                    
more, the  largest increase was  the fee for  service costs.                                                                    
The  department was  spending about  $800,000  per month  on                                                                    
fees for  services to vendors  outside of the  facility. She                                                                    
cited examples such as going  to an orthopedic specialist, a                                                                    
day  surgery,  a  colonoscopy,  or an  eye  exam.  She  also                                                                    
thought  a change  in prison  population had  influenced the                                                                    
rise in healthcare  costs. Inmates were coming  to the state                                                                    
sicker, with untreated medical  conditions that were further                                                                    
complicated  by substance  abuse like  opiate abuse.  Opiate                                                                    
abuse  was  having a  noticeable  impact  on emergency  room                                                                    
visits. The department had over  840 visits costing anywhere                                                                    
from $700 to $5,000 per visit, sometimes more.                                                                                  
                                                                                                                                
3:23:33 PM                                                                                                                    
                                                                                                                                
Representative  Wilson asked  for  expenses  to-date in  the                                                                    
areas of personal services,  services, and commodities. They                                                                    
were  the  areas  in which  the  department  was  requesting                                                                    
increases. She  was looking  at page 3.  Ms. Brooks  did not                                                                    
have the  FY 18 year-to-date  figures on hand. She  had last                                                                    
year's numbers.                                                                                                                 
                                                                                                                                
Representative Wilson was trying to  figure out how much the                                                                    
department had  already spent. Co-Chair Seaton  relayed that                                                                    
the supplemental  budget was projecting  through the  end of                                                                    
the year.  It did not  reflect the actuals  already incurred                                                                    
to-date. He  suggested having  someone from  the Legislative                                                                    
Finance Division  come to the  testifiers table.  He relayed                                                                    
that the committee was not working with FY 18 actuals.                                                                          
                                                                                                                                
Representative Wilson suggested  that the department already                                                                    
knew its  numbers because it  had determined  a supplemental                                                                    
number  to   request.  The   department  already   knew  its                                                                    
population  management numbers.  She wanted  the information                                                                    
as  it pertained  to health  services. She  wondered if  the                                                                    
division had already overspent.                                                                                                 
                                                                                                                                
3:26:28 PM                                                                                                                    
                                                                                                                                
Ms. Wilkerson  reported that although  she did not  have the                                                                    
actual  breakout   of  numbers,   she  confirmed   that  the                                                                    
department had spent just over  $20 million of a $30 million                                                                    
budget. The  division did not have  negative appropriations.                                                                    
There  was a  difference between  the current  $11.7 million                                                                    
shortfall  and the  difference  in  the supplemental  having                                                                    
spent just  over $20  million of a  $30 million  budget. The                                                                    
department did  not have negative  appropriations presently.                                                                    
Of the  department's personal services,  it had  spent about                                                                    
$15 million. Under the contractual  line, the department had                                                                    
spent  just under  $10.7 million.  Under the  commodity line                                                                    
the  department was  just  under the  $2  million mark.  She                                                                    
could  provide the  actual  report. She  noted  that of  the                                                                    
department's  medical costs,  some of  its providers  were 6                                                                    
months  to 9  months out.  She  could not  confirm that  the                                                                    
expenditures  were  through  100  percent  of  the  billings                                                                    
received to-date.  They were  through the  invoices received                                                                    
within her  office. The department was  aware of anticipated                                                                    
items that made up the anticipated shortfall.                                                                                   
                                                                                                                                
Representative Wilson  was just  trying to  understand where                                                                    
the money was going.                                                                                                            
                                                                                                                                
Co-Chair Seaton added  that the supplemental was  to get the                                                                    
state  through the  end of  the year.  The figures  were not                                                                    
known.  He  commented  that  the  figures  were  projections                                                                    
except  for the  amounts already  expended. He  continued to                                                                    
remark about the varying numbers.                                                                                               
                                                                                                                                
Representative  Pruitt  thought   the  supplemental  request                                                                    
spoke more  about the Department of  Corrections' management                                                                    
over  the  prior  year.  The department  had  asked  for  an                                                                    
additional  $10  million  for institutional  operations.  He                                                                    
pointed  to  the  department's  comments  about  the  budget                                                                    
reductions  being taken  in anticipation  of a  reduction of                                                                    
the daily  prison population of  1257 starting on  July 1st.                                                                    
The daily  reduction was around  500 which reflected  a 757-                                                                    
person difference. He also  highlighted that the anticipated                                                                    
savings  would   not  be  attainable  until   the  projected                                                                    
reductions of  SB 91  could be  achieved. He  indicated that                                                                    
the  original number  was projected  by the  department with                                                                    
the understanding  that certain aspects  of SB 91  would not                                                                    
be  in  place.  However,  the  department  was  off  by  757                                                                    
individuals.   He  thought   the  discrepancy   brought  the                                                                    
management  of  DOC  into  question.  He  wondered  how  the                                                                    
legislature  could trust  the accuracy  of the  department's                                                                    
information.                                                                                                                    
                                                                                                                                
Ms.  Wilkerson understood  Representative Pruitt's  concern,                                                                    
as  the department  shared his  concerns. Within  the fiscal                                                                    
note, the department tried to  accurately represent that the                                                                    
funding reduction  was an  annual immediate  reduction while                                                                    
the projected population would be  achieved over a period of                                                                    
time. The  department knew it  was behind the curve.  At the                                                                    
bottom of the fiscal note,  the department identified that a                                                                    
supplemental  would  be needed  if  the  reductions did  not                                                                    
occur.  The department  did not  see the  immediate drop  in                                                                    
population as anticipated.                                                                                                      
                                                                                                                                
3:31:46 PM                                                                                                                    
                                                                                                                                
Representative   Pruitt  asked   why  the   initial  numbers                                                                    
provided  to  the  legislature  were  "best  case  scenario"                                                                    
numbers and  used to  plan the budget.  He thought  that the                                                                    
department's   fiscal  note   should  have   reflected  more                                                                    
realistic numbers. He  noted that the changes made  in SB 54                                                                    
[Legislation  passed in  2017 regarding  crimes, sentencing,                                                                    
and probation] did not go into  effect in time to change the                                                                    
department's  numbers.  The  numbers were  affected  by  not                                                                    
being  able  to  attain  something. He  suggested  that  the                                                                    
department should  have communicated that it  could not meet                                                                    
its goals.  Having the full  information would  have allowed                                                                    
the legislature to make a  better-informed decision on SB 91                                                                    
[An omnibus  crime bill passed  by the legislature  in 2016]                                                                    
and for budget planning purposes for the following year.                                                                        
                                                                                                                                
Ms.  Wilkerson replied  that the  department  had been  very                                                                    
hopeful  about   achieving  its  intended   reductions.  Two                                                                    
factors  played a  role  in  the department's  circumstance.                                                                    
First,  the  inmate  population   had  not  reduced  as  the                                                                    
department  had anticipated  due  to  its difficulties  with                                                                    
community placements.  Second, there was a  reduction to the                                                                    
FY  18 budget  in the  amount  of $8.1  million of  existing                                                                    
authority  to  backfill  the  institutions.  The  additional                                                                    
reduction had  burdened the department  and left  it without                                                                    
sufficient operational funding.                                                                                                 
                                                                                                                                
Representative Pruitt  mentioned hearing  about less  use of                                                                    
halfway houses and electronic Monitoring.  The state had not                                                                    
seen the  usage of halfway  houses in the capacity  that was                                                                    
expected   to  generate   savings.   He   asked  about   the                                                                    
commissioner's  and leadership's  policy  decisions and  why                                                                    
things  had  not  shifted. Ms.  Wilkerson  deferred  to  the                                                                    
commissioner of the department.                                                                                                 
                                                                                                                                
Representative  Wilson  had additional  questions  regarding                                                                    
the bill. She referred to page  6, line 20 of the work draft                                                                    
which   mentioned  $322,000   for   paying  judgements   and                                                                    
settlements. She asked for more details.                                                                                        
                                                                                                                                
3:35:53 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:36:51 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Seaton relayed there was  only one case which was a                                                                    
Department of Environmental Conservation employment case.                                                                       
                                                                                                                                
Representative  Wilson  pointed  to Section  7(b)  where  it                                                                    
talked  about fund  capitalization. Funds  in the  amount of                                                                    
$30 million  were being appropriated  from the ACHI  fund to                                                                    
the  Community Assistance  fund. She  thought that,  through                                                                    
legislation, the  community assistance  fund was  being paid                                                                    
with  Power  Cost  Equalization funds  based  on  a  formula                                                                    
contained in the bill. She  wondered why the state would use                                                                    
health money. She referenced a  previous occurrence in which                                                                    
$55 million  of the  funds were  used and  partially repaid.                                                                    
She thought it would be better  to leave the funds in place.                                                                    
She asked  if the  money would  be paid out  or left  in its                                                                    
current fund.                                                                                                                   
                                                                                                                                
Co-Chair  Seaton explained  that $30  million was  deposited                                                                    
annually into the community assistance  program from the PCE                                                                    
fund, if available, to allow  for the same payout each year.                                                                    
The problem was due to a  gap year in which the governor put                                                                    
$30  million  from PCE  funds  into  the  FY 18  budget  but                                                                    
nothing  for the  FY  19 budget.  The  legislature would  be                                                                    
placed in the  same situation of not having  known funds for                                                                    
the following  year. Therefore, in the  proposed work draft,                                                                    
one-time  ACHIA   money  was  taken  and   placed  into  the                                                                    
supplemental for  FY 18. Intent  language was  included that                                                                    
specified that $30 million could  be taken from the PCE fund                                                                    
to  fund  FY 19.  The  bill  would fulfill  the  legislative                                                                    
intent  to have  $30 million  deposited into  the fund  each                                                                    
year  in   order  to  stabilize  the   Community  Assistance                                                                    
Program.  Rather than  trying  to cross  fiscal years,  they                                                                    
wanted to take  the FY 19 budget and utilize  the PCE excess                                                                    
earnings of  $30 million in  statute for the fiscal  year in                                                                    
which they  were preparing the  budget. They would  take the                                                                    
one-time money  from ACHIA and  put it into the  $30 million                                                                    
that  was not  appropriated  for  FY 18  in  the  form of  a                                                                    
supplemental    appropriation.   The    municipalities   and                                                                    
communities  would  know  the amount  of  money  they  would                                                                    
receive annually.                                                                                                               
                                                                                                                                
Representative  Wilson asked  how  much money  the PCE  Fund                                                                    
made in the  current year. She also wondered  about how much                                                                    
was paid out of the PCE fund.                                                                                                   
                                                                                                                                
3:40:09 PM                                                                                                                    
                                                                                                                                
DAVID   TEAL,   DIRECTOR,  LEGISLATIVE   FINANCE   DIVISION,                                                                    
answered that  it was not the  current year, but it  was the                                                                    
previous  year.  In  FY  17 the  earnings  were  about  $112                                                                    
million  which  more than  paid  for  the  cost of  the  PCE                                                                    
program - roughly $35 million.  It left a substantial amount                                                                    
for community assistance  in the amount of  $30 million. The                                                                    
money was  intended to  be deposited  in FY  19 in  order to                                                                    
know at  the beginning  of the  fiscal year  that the  FY 19                                                                    
deposit  was  covered  by FY  17  earnings.  As  communities                                                                    
prepared  their  FY  20  budgets they  would  know  well  in                                                                    
advance that  the money  would be  there. He  explained that                                                                    
the other use of the PCE  earnings of $112 million after $30                                                                    
million was used for community  assistance $25 million could                                                                    
be used towards energy programs.  The governor had split the                                                                    
$25  million  between supplemental  in  FY  19 [and  another                                                                    
year]. The  Office of Management  and Budget  indicated that                                                                    
there would be a change making  the $25 million occur all in                                                                    
FY 19 just as all of the PCE  earnings from FY 17 went to fY                                                                    
19 community  assistance. It  was a  matter of  which fiscal                                                                    
year   the  money   was  assigned.   The  idea   behind  the                                                                    
legislation  was to  get  the  community assistance  program                                                                    
back on track using earnings  from the second prior year. In                                                                    
FY  19  the  deposit  would  be based  on  FY  17  earnings.                                                                    
Similarly, energy  program deposits made  in FY 19  would be                                                                    
based on FY 17 earnings. However,  it left a hole for FY 18,                                                                    
which needed to  be filled in the  supplemental process. The                                                                    
governor had proposed  using the PCE earnings in  FY 18. The                                                                    
Legislative Finance  Division thought  the proposal  did not                                                                    
follow  the intent  of  the  law passed  2  years prior.  He                                                                    
thought it was  a matter of timing and  finding fund sources                                                                    
to fill the shortage in Community Assistance funding.                                                                           
                                                                                                                                
Representative  Wilson asked  for the  balance in  the ACHIA                                                                    
fund once the $30 million was removed.                                                                                          
                                                                                                                                
3:43:33 PM                                                                                                                    
                                                                                                                                
Mr.  Teal thought  it was  important  to focus  on how  much                                                                    
excess was in the fund. He  detailed that the state had made                                                                    
3 deposits of  about $60 million each, one of  which was for                                                                    
FY 17. He  reported $55 million  flowing out in FY  17. Only                                                                    
$30  million was  needed and  $25 million  was refunded.  He                                                                    
continued  that  $60 million  was  deposited  in FY  18.  He                                                                    
reiterated that  there were 3  deposits; one for FY  16, one                                                                    
for  FY 17,  and one  for  FY 18  through FY  22. The  state                                                                    
obtained a waiver  from the federal government  for a 5-year                                                                    
program.  The  expectation  was for  the  state  to  receive                                                                    
federal  payments for  the reinsurance  plan. The  amount of                                                                    
$55 million for FY 18 - FY  22 took up $55 million leaving 3                                                                    
deposits to the fund and  only 2 withdraws. The total amount                                                                    
of  excess funding  was about  $93 million.  The Legislative                                                                    
Finance Division  recommended that  the state might  want to                                                                    
spend about $80 million rather  than the full amount because                                                                    
it was uncertain  how much the federal  government would pay                                                                    
from one  year to the  next. He  thought it would  be better                                                                    
for  there to  be more  money available  3-4 years  from now                                                                    
rather than finding out  additional deposits were necessary.                                                                    
The bottom line was that there  was about $93 million in the                                                                    
fund to  be used for one-time  expenditures. Co-Chair Seaton                                                                    
added a comment about one-time money.                                                                                           
                                                                                                                                
3:46:10 PM                                                                                                                    
                                                                                                                                
Representative    Neuman     understood    the    fast-track                                                                    
supplemental was being discussed relating  to line 34 on the                                                                    
spreadsheet. He had  a question beyond that.  He referred to                                                                    
page  13,  line   49  having  to  do   with  the  open-ended                                                                    
appropriation for statutory  designated program receipts for                                                                    
the  AKLNG  fund.  The Legislative  Finance  Division  notes                                                                    
stated that it was open-ended  language that would allow the                                                                    
investments  to  be deposited  into  the  AKLNG project  and                                                                    
spent without further appropriations.                                                                                           
                                                                                                                                
Co-Chair    Seaton    interrupted   Representative    Neuman                                                                    
indicating that  the item  was not  presently on  the table.                                                                    
Representative Neuman  understood and had  clarified himself                                                                    
at the beginning of his  question. The way he understood the                                                                    
language, it  conveyed that  the administration  could enter                                                                    
into  an  agreement  with  Sinopec  or  China  Gas  and  the                                                                    
legislature  would not  have any  say in  how the  money was                                                                    
spent or appropriated. He asked if he was correct.                                                                              
                                                                                                                                
Co-Chair Seaton did not want  to discuss the budget that was                                                                    
not  on  the table  currently.  The  only thing  before  the                                                                    
committee  was the  fast-track  supplemental. He  reiterated                                                                    
that  he  wanted  to  keep   the  focus  on  the  fast-track                                                                    
supplemental.                                                                                                                   
                                                                                                                                
Representative  Wilson referred  to page  7, Section  9. She                                                                    
asked  why   the  word  "reduced"   was  being   changed  to                                                                    
"adjusted."                                                                                                                     
                                                                                                                                
Representative  Guttenberg  asked if  Representative  Wilson                                                                    
was   referring   to   the    bill   or   the   spreadsheet.                                                                    
Representative Wilson  responded that she was  talking about                                                                    
the bill. She reiterated her question.                                                                                          
                                                                                                                                
3:49:12 PM                                                                                                                    
                                                                                                                                
JOAN  BROWN, STAFF,  REPRESENTATIVE  PAUL SEATON,  responded                                                                    
that the change was due to  some of the monetary terms which                                                                    
currently  included furlough  days. In  other words,  it was                                                                    
not  just a  cash adjustment.  The number  of furlough  days                                                                    
could  be adjusted,  resulting  in the  number  going up  or                                                                    
down.                                                                                                                           
                                                                                                                                
Representative  Wilson  asked  about  the  ratifications  of                                                                    
certain  expenditures  on  page  9, Section  10.  Ms.  Brown                                                                    
responded  that generally  there were  ratifications in  the                                                                    
supplemental every  year. Usually  they were in  the capital                                                                    
budget  bill  at the  end  of  session. They  were  clean-up                                                                    
transactions  to  the  accounting   system.  The  funds  had                                                                    
already been  spent, and there  was no additional  cost. The                                                                    
ratifications did  not add to the  cost of the bill.  It was                                                                    
an accounting clean-up transaction.                                                                                             
                                                                                                                                
Representative  Wilson   asked  why   2010  and   2011  were                                                                    
included. She asked if something  had been missed. Ms. Brown                                                                    
could  not  say definitively  why  there  were so  many  old                                                                    
transactions. If  revenue was expected  to be  received that                                                                    
would  have cleaned  things up,  the adjustments  could drag                                                                    
on.                                                                                                                             
                                                                                                                                
Representative  Wilson   suggested  it  could   possibly  be                                                                    
federal funds  that were expected.  In other  words, general                                                                    
fund money was spent in the  hope of another type of funding                                                                    
being received but had not  been obtained to-date. Ms. Brown                                                                    
agreed.                                                                                                                         
                                                                                                                                
Representative Pruitt  wanted to  return to the  fund source                                                                    
change regarding  community revenue sharing. He  referred to                                                                    
page 6, line 13 of the  bill and page 19 of the spreadsheet.                                                                    
He thought  money that was  earned in  FY 17 was  applied to                                                                    
FY 19. He  asked about the  earnings in  FY 16 and  how they                                                                    
could  have been  applied in  the current  year [FY  18]. He                                                                    
wondered why a draw from the PCE fund was necessary.                                                                            
                                                                                                                                
Mr.  Teal responded  that the  earnings were  only about  $8                                                                    
million or  $9 million. The  amount was insufficient  to pay                                                                    
for  the   PCE  program.  There  were   no  excess  earnings                                                                    
available  to   make  the  FY   18  deposit   for  community                                                                    
assistance.  He continued  to explain  that  with no  excess                                                                    
money, the governor  did not ask for a deposit  from PCE. He                                                                    
also did  not make a  general fund deposit to  the community                                                                    
assistance  fund. The  legislature  did not  make a  deposit                                                                    
either.  If  a deposit  was  not  made  before June  of  the                                                                    
current year the distribution to  communities in FY 19 would                                                                    
be $20 million rather than $30 million.                                                                                         
                                                                                                                                
3:53:59 PM                                                                                                                    
                                                                                                                                
Representative Pruitt remarked that  there was a policy call                                                                    
made by  not funding  community assistance. He  wondered why                                                                    
the governor did  not introduce it [an  amendment]. He asked                                                                    
about the initial thought process.                                                                                              
                                                                                                                                
Mr.  Teal  could  not  comment  on  the  governor's  thought                                                                    
process or policy  decision. He could only  confirm that the                                                                    
appropriation was  not included  in the  budget. It  was the                                                                    
basis for discussions between the  chairman's office and the                                                                    
governor's office.  The governor  indicated his  support for                                                                    
the   community   assistance   program  and   wanted   money                                                                    
deposited. However,  he did not  submit an  amendment making                                                                    
the  deposit.  If  the  legislature   decided  to  make  the                                                                    
deposit,  it  would  show  an   additional  $30  million  of                                                                    
spending. He was not sure  the legislature was willing to do                                                                    
that in the prior year,  which resulted in the appropriation                                                                    
being placed in the supplemental bill.                                                                                          
                                                                                                                                
Co-Chair Seaton  added that there had  been an appropriation                                                                    
to  spend some  money. He  explained that  $30 million  went                                                                    
into the fund and came out  as an amount calculated based on                                                                    
how much  money was in  the fund.  In the prior  year, there                                                                    
was  an  appropriation  offered   to  add  an  appropriation                                                                    
amount, rather  than adding  to the  fund, which  would have                                                                    
brought the  amount back  up to  the level  it had  been the                                                                    
previous year.                                                                                                                  
                                                                                                                                
Representative Pruitt  asked if  the amount was  smaller. He                                                                    
thought the  amount was $8 million.  Co-Chair Seaton replied                                                                    
that it was  about $8.3 million. He added that  if the money                                                                    
had been in  the fund, only about one-third  would have been                                                                    
spent because  it was the  third distribution. It  was added                                                                    
to the  amount appropriated  with a third  taken out  of the                                                                    
fund and $8  million added. The legislature did  not have to                                                                    
find $30 million  to place in the fund and  then remove one-                                                                    
third of  it. The legislature  only took what was  needed to                                                                    
make the past payment.                                                                                                          
                                                                                                                                
Representative  Pruitt  did  not  like  appropriating  funds                                                                    
through   the   supplemental    because   he   thought   the                                                                    
supplemental  process   was  typically  overlooked   by  the                                                                    
public. Co-Chair  Seaton commented  that he had  brought the                                                                    
matter  up so  that  the public  could  understand that  the                                                                    
legislature had  not capitalized  the fund with  $30 million                                                                    
in   the   prior   year.  Instead,   the   legislature   had                                                                    
supplemented  the payment.  Currently,  the legislature  was                                                                    
doing the capitalization.                                                                                                       
                                                                                                                                
3:58:45 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
4:00:37 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Seaton  announced that it  was Mr.  Teal's birthday                                                                    
and presented him with a present.                                                                                               
                                                                                                                                
4:02:37 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
4:04:22 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair  Gara  MOVED  to  report  CSHB  321(FIN)  out  of                                                                    
Committee with individual recommendations.                                                                                      
                                                                                                                                
Representative Wilson OBJECTED.                                                                                                 
                                                                                                                                
Representative Kawasaki  indicated that it had  been a while                                                                    
since he  had seen a fast-track  supplemental and understood                                                                    
the  discomfort of  some members  to  pass such  legislation                                                                    
prior to  discussing the budget.  Historically, it  had been                                                                    
how  things  were  done  for  several  years.  He  expressed                                                                    
appreciation for the work that  had been done by both bodies                                                                    
in finding  the agreement points  on the items in  the bill.                                                                    
He understood there  would be a bolder  discussion about the                                                                    
supplementals in  general. He  noted that  the FY  19 budget                                                                    
discussions were  ongoing. He would support  moving the bill                                                                    
from committee.                                                                                                                 
                                                                                                                                
Representative   Pruitt  understood   wanting  to   pass  an                                                                    
appropriation  bill on  things that  the legislature  agreed                                                                    
on.  However, he  was concerned  with  the use  of the  term                                                                    
"Fast-track"  as it  implied  that there  would  not be  the                                                                    
opportunity  to properly  vet it  and offer  amendments. The                                                                    
movement of the bill at such  a quick pace did not allow for                                                                    
the public  to properly weigh  in on the policy  calls being                                                                    
made.  He did  not understand  why more  time was  not being                                                                    
provided. The  appropriation was sizable at  $65 million. It                                                                    
appeared the request was less  because of the money received                                                                    
from the  Alaska Comprehensive Health  Insurance Association                                                                    
(ACHIA) program. He reiterated  his hesitancy to support the                                                                    
bill  because  of the  process.  He  would be  opposing  the                                                                    
legislation.                                                                                                                    
                                                                                                                                
Representative Wilson  was concerned  with the  quickness of                                                                    
the  process.  One  of  her  concerns had  to  do  with  the                                                                    
Department  of Corrections  portion.  She  had received  the                                                                    
numbers regarding  population management. She was  aware the                                                                    
department  had  a  payroll  date  to  meet  and  would  not                                                                    
otherwise   meet  it.   She   mentioned   the  $10   million                                                                    
supplemental  request  from  the   prior  year  and  another                                                                    
anticipated. She thought it equated  to a significant amount                                                                    
of money going out without  a discussion about what could be                                                                    
done  to  save  money.   She  was  fine  with  fast-tracking                                                                    
anything  as long  as she  could  explain the  legislature's                                                                    
actions to her constituents.  She would be objecting because                                                                    
she did not agree with some  of the items and because of the                                                                    
advanced pace of the bill.                                                                                                      
                                                                                                                                
Representative Wilson MAINTAINED her OBJECTION.                                                                                 
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Gara, Grenn, Guttenberg,  Kawasaki, Ortiz, Foster,                                                                    
Seaton                                                                                                                          
OPPOSED: Wilson, Pruitt, Thompson, Neuman                                                                                       
                                                                                                                                
The MOTION PASSED (7/4).                                                                                                        
                                                                                                                                
CSHB 321(FIN)  was REPORTED out  of committee with  four "do                                                                    
pass"    recommendations,    three    "no    recommendation"                                                                    
recommendations, and four "amend" recommendations.                                                                              
                                                                                                                                
4:12:45 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
4:14:05 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Seaton  indicated that the subcommittee  report and                                                                    
amendments  for   the  Office  of  the   Governor  would  be                                                                    
addressed on the following day's agenda.                                                                                        
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
4:14:48 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 4:14 p.m.                                                                                          

Document Name Date/Time Subjects
Dr.Wenran Jiang information.pdf HFIN 2/22/2018 1:30:00 PM
HFIN Presentation
Wenran Jiang Alaska PPT Feb 22 2018.pdf HFIN 2/22/2018 1:30:00 PM
HB 321 DOC Supplemental Response.pdf HFIN 2/22/2018 1:30:00 PM
HB 321